HIRAKI CO.,LTD.

The ratio of imports from China to total import transactions is high at 93.4%, and China's political situation, economic environment, and yuan exchange rate fluctuations directly affect procurement costs and the supply system. For footwear, due to China's advantages in technology and material procurement, migration to alternative production locations has not progressed, resulting in limited risk diversification. As countermeasures, the company is working on the full resumption of on-site guidance and the development of new contracted manufacturers, but this has not resolved the structural dependency.

Import transactions for original products are settled in US dollars, and a weakening yen puts pressure on earnings through higher procurement costs. The sharp depreciation of the yen since April 2022 has actually had an impact, and while the company seeks to stabilize costs through forward exchange contracts for the coming year and the setting of internal benchmark rates, there is a possibility that responses may not keep pace during periods of sharp exchange rate fluctuation. The company continues to implement cost reductions to maintain the gross profit margin of original products and to conduct timely foreign exchange transactions.

As of the end of FY2026 (ending March 2026), the balance of interest-bearing debt stood at ¥6,559 million, representing a high ratio of 45.5% of consolidated total assets. The environment has shifted from the low interest rate conditions of recent years to a rising interest rate phase, creating a risk of increased interest expenses on new financing associated with future store openings, capital investment, and refinancing. The company has set a reduction in interest-bearing debt as a goal in its medium-term management plan, and as a basic policy is working to improve its financial position through long-term fixed-rate financing.

With a large number of SKUs centered on shoes and footwear, the structure is prone to unsold seasonal items and off-size inventory, and if sales fall short of forecasts, this can result in long-term inventory stagnation and write-downs. The company has improved sales forecast accuracy through its big data analysis system, achieved inventory visibility through item-by-item management, and implemented timely price changes, but in the event of a sharp decline in sales, write-downs based on internal regulations could impact business results. The company strives to maintain appropriate inventory levels by leveraging its diverse sales network across Mail Order Business, Store Retail Business, and Wholesale Business.

The company holds customer information in each of its Mail Order Business, Store Retail Business, and Wholesale Business operations, and if an external leak or violation of the Personal Information Protection Act occurs, this could result in a loss of social credibility and liability for damages. Measures have been taken including obtaining and renewing Privacy Mark certification (certification number: 20000485 (09)), establishing a Personal Information Protection Committee, and introducing and updating security software and firewalls, but continued response to new cyber threats is required.

For original products based on the motto of "good products at the lowest prices anywhere," if unforeseeable safety issues arise, this could lead to sales suspension and recall costs, as well as a decline in brand credibility that could impact business results. The company has established a Quality Control Department under the direct supervision of the President and Executive Officer, and conducts technical guidance to contracted production factories, in-house inspections, and inspections by external testing organizations; however, given the nature of overseas contracted production, continuous efforts are required to ensure thorough quality control.