KOBE BUSSAN CO.,LTD.

The Group handles approximately 7,080 product items, requiring management of food safety, allergy information, and origin information. While the Group has established a Quality Assurance Department and built a system for physicochemical and microbiological testing at its in-house quality control laboratory, unexpected quality problems could damage the brand and adversely affect operating results. In particular, problems arising from produce, meat, fresh fish, alcoholic beverages, and other products procured by FC member stores through channels other than the Company carry the risk of degrading the overall image of the Gyomu Super brand.

If import restrictions are imposed due to disease outbreaks such as avian influenza, BSE, or swine fever, or due to country risks in foreign nations (deteriorating political and economic conditions, war, terrorism, natural disasters, etc.), it may become difficult to promptly secure substitute products. In addition, if rising energy costs, crop price fluctuations due to poor weather, sharp exchange rate movements, and import delays caused by container shortages occur simultaneously, procurement prices could fluctuate significantly, potentially leading to higher selling prices or stockouts at stores. Because imported products offering a price advantage are not easily replaced with domestic products, this could affect the fundamental competitiveness of the business.

The Group imports products from countries around the world, settling transactions primarily in US dollars and euros. Although the Group implements timely risk hedging measures such as foreign exchange hedges, sharp exchange rate fluctuations could raise procurement costs and affect operating results. Given the characteristics of a business model highly dependent on imports, a weaker yen could be a particular factor squeezing profitability.

As of the end of October 2025, the Group had interest-bearing debt (excluding lease liabilities) of ¥30,134 million, which it utilizes for business expansion through investments such as M&A. While existing long-term borrowings are procured at fixed interest rates to hedge interest rate fluctuation risk, if interest rates rise rapidly and substantially in the future, or depending on interest rate conditions at the time of refinancing fixed-rate borrowings, an increase in funding costs could adversely affect operating results.

Factors that could stall the FC strategy include sluggish growth in existing-store sales dampening franchisees' willingness to open new stores, declining competitiveness of handled products, and delays in introducing new products. In addition, if a major FC contractor operating multiple stores scales back its Gyomu Super business due to a change in management policy or other reasons, this could directly affect the Group's operating results. Furthermore, future store openings may face limitations on available candidate sites, posing a risk of shrinking mid- to long-term growth potential.

The proportion of Private Brand (PB) Products in the Group's gross profit is at a high level, making its earnings structure heavily dependent on PB product sales trends. If PB product sales decline for any reason, this could materially affect operating results through a decline in gross profit margin. Maintaining the competitiveness of PB products requires continuous product development capability and strong guidance over partner factories.

The Group's receiving bases for imported products are concentrated in four locations: Kobe, Yokohama, Sendai, and Fukuoka, and its in-house distribution center is also located adjacent to the Port of Kobe. If a port is damaged by an earthquake or other natural disaster, emergency receiving arrangements at nearby ports would be required, resulting in increased costs such as overland transport and arranging alternative warehouses. Since a halt in logistics functions would directly affect product supply to Gyomu Super stores nationwide, this poses a significant business continuity risk.

The Group has implemented redundancy for hardware, software, backups, power supplies, and communication lines, as well as mutual data management across two locations; however, if an unexpected system outage occurs due to a disaster or other cause, business functions could be temporarily suspended. As countermeasures against cyberattacks such as unauthorized access, the Group has strengthened its measures under the guidance and cooperation of an external security specialist firm, and also conducts targeted-attack email training and information security training for employees; nevertheless, an unexpected cyberattack or system failure could affect operating results.

The Group has established local subsidiaries in China, Egypt, Myanmar, and Vietnam to conduct business, and also supplies products to other countries and regions. If unexpected risks arise, such as deteriorating political and economic conditions, worsening security, social unrest due to war or strikes, or changes to or tightening of laws and regulations in any country or region, local operations could be restricted, adversely affecting operating results. Particular attention is required regarding business continuity risk in politically unstable regions such as Myanmar and Egypt.

As its business expands, the Group recognizes the recruitment and development of management personnel, overseas personnel, and personnel to create new businesses as an important management challenge. While the Human Resources Development Department and General Affairs Department are leading efforts on work-style reform, improving the workplace environment, and enhancing employee satisfaction, failure to secure and develop the necessary personnel could delay new business development and overseas business expansion, thereby affecting operating results.