Alpen Co.,Ltd.

In addition to the economic slowdown and stagnant personal consumption, the competitive environment is intensifying due to new entrants from other industries, the rise of internet shops, and the expansion of DtoC by national brand manufacturers. If the market contraction caused by population decline proceeds faster than the Group anticipates, it could lead to a relative decline in business competitiveness and affect performance. As countermeasures, the Group is strengthening the specialization of "Sports Depo" and "Golf 5," expanding "Alpen Outdoors/Mountains," and negotiating reductions in procurement prices.

Since the Group's main products are seasonal items such as golf, winter, and outdoor goods, abnormal weather events such as prolonged heat waves, mild winters, snow shortages, and torrential rain occur repeatedly, leading to poor sales and declining store profitability. If abnormal weather beyond expectations or a large-scale natural disaster (major earthquake, typhoon, etc.) occurs, it could have a material impact on performance. The Group works to mitigate the impact by changing product mix, improving the precision of procurement inventory control, and flexibly adjusting marketing plans.

There is a risk that profitability may decline if expected sales cannot be secured, due to the increased burden of pre-opening labor costs, advertising expenses, and depreciation associated with capital expenditure at the time of new store openings. At the time of store closures, in addition to losses on disposal of store fixtures, there is a possibility that a temporary loss on store cancellation may arise if a sublease tenant cannot be secured. In addition, since opening stores with sales floor area exceeding 1,000 square meters is subject to regulation under the Large-Scale Retail Store Location Act, store opening plans may be changed or delayed.

Since the Group's main products are highly hobby-oriented items such as golf clubs and ski/snowboard equipment, its business structure is highly susceptible to changes in consumer preferences. If the Group fails to respond to changes in preferences and cannot implement appropriate merchandising policies, it could affect performance through inventory obsolescence and declining sales. The Group seeks to stimulate demand by improving the precision of product planning and developing and supplying private brand (PB) products aligned with sales trends.

For the Group, which operates approximately 400 stores, the specialization and sales capability of staff as a sports specialty retailer are important factors in improving performance, making it essential to secure a large number of employees and part-time workers. If sufficient human resources cannot be secured, it could lead to a decline in service quality and disruptions to store operations, affecting performance. Disclosure of specific countermeasures in the securities report is limited, making this a risk that requires continuous monitoring.

The Group utilizes a wide range of information systems and networks, including in-store POS systems, its own e-commerce site, product ordering, and inventory management. If failures or cyberattacks occur affecting these systems, business operations could be disrupted, potentially affecting performance. Although sufficient security measures and failure countermeasures have been implemented, there remains a risk that unexpected events cannot be fully addressed. System dependence is expected to increase further as the Group expands its e-commerce site operations.

Head office functions are concentrated in Nagoya City, Aichi Prefecture, and if head office functions are halted due to a large-scale earthquake, typhoon, fire, power outage, or communication network failure, it could cause significant disruption to business operations nationwide. In addition, both national brand products and private brand products depend on numerous suppliers, and disruption or confusion in the supply chain due to a large-scale natural disaster or global spread of infectious disease could affect performance. The impact could be significant if the risk of concentrated head office functions and supply chain risk materialize in combination.

To ensure stable fund procurement, the Group has entered into commitment line agreements with financial institutions, but these agreements include certain financial covenants, and there is a risk that if these are breached, the Group could lose the benefit of the grace period and be required to repay the loan in a lump sum. Given the nature of the business, the ratio of tangible fixed assets to total assets is relatively high and is expected to rise further with new store openings, so a decline in the profitability of store facilities or a fall in land prices could result in losses. The Group has been working to improve its financial condition through the sale and disposal of fixed assets and the application of impairment accounting in prior years.

For the purpose of procuring price-competitive products, the Group imports some products directly from overseas or indirectly through the Japanese subsidiaries of overseas manufacturers, and fluctuations in exchange rates affect procurement costs. Although hedges such as forward exchange contracts are implemented, sharp exchange rate fluctuations could increase procurement costs and affect performance. In an environment where the yen continues to depreciate, there is a risk that cost increases not fully covered by hedges could squeeze profits.

The Group holds personal information of internet mail-order customers and Alpen Group Members, among others, and if an information leak occurs, it could lead to a decline in credibility and affect performance. In addition, if a defect leading to a large-scale recall occurs in private brand products manufactured at domestic or overseas factories, costs exceeding the coverage limit of product liability insurance could arise, risking a decline in credibility. The Group addresses these risks through establishing personal information protection regulations, employee training, thorough quality control, and various insurance policies, but the risk remains.