MatsukiyoCocokara&Co.

Competition is intensifying not only with rival drugstores but also with supermarkets, convenience stores, discount stores, and e-commerce companies, which may affect business plans and performance. As countermeasures, the Group is implementing various sales promotion measures, strengthening product lineups including PB products, developing diverse store formats, and promoting digital marketing.

If the number of foreign visitors to Japan declines due to political and economic conditions in various countries, natural disasters, epidemics, or other events, inbound demand may fall, potentially affecting business plans and performance. The Group positions inbound demand as an important source of revenue, and demand fluctuations caused by external factors such as travel restrictions carry the risk of directly leading to a decline in sales.

The Group is subject to a wide range of laws and regulations, including permits and licenses such as retail pharmaceutical business permits and pharmacy opening licenses under the Act on Securing Quality, Efficacy and Safety of Pharmaceuticals, Medical Devices and Other Products, various designations under the Long-Term Care Insurance Act, and store opening restrictions under the Large-Scale Retail Store Location Act. Amendments to laws and regulations or unforeseen penalties or litigation may increase compliance costs, damage social credibility, and affect store opening policy.

Under the Act on Securing Quality, Efficacy and Safety of Pharmaceuticals, Medical Devices and Other Products and the Pharmacists Act, the management of pharmacies and stores and dispensing operations are legally required to be staffed by pharmacists and registered sales clerks of pharmaceuticals. If the Group is unable to secure sufficient numbers of such personnel, this will directly affect store development and business performance. The Group strives to secure a stable workforce by improving employment conditions and the working environment and through proactive recruitment activities.

The prices of prescription drugs and dispensing fees that make up sales in the dispensing business are set by law, and changes in the external environment such as revisions to the drug price standard or dispensing fees, or fluctuations in the rate of separation of prescribing and dispensing, may affect business plans and performance. The Group is responding by supporting the transition to "Specialized Medical Institution Collaborative Pharmacies" and expanding the number of "Community-based Comprehensive Care Model" locations.

The Group holds vast amounts of membership information and personal information related to dispensing, and if information is leaked due to unauthorized external access, computer virus attacks, or malicious acts or negligence by insiders, this could result in claims for damages and a decline in social credibility, affecting business performance. In addition, failures in information systems or logistics systems could cause store operations and important business operations and services to be suspended.

The Group holds tangible and intangible assets, including operating assets such as stores and goodwill and intangible assets arising from the business integration with Cocokara Fine in October 2021, and impairment losses may need to be recognized due to deterioration in store profitability or changes in the business environment. In addition, valuation losses may arise on financial assets such as securities held by the Group due to fluctuations in market value, affecting operating results and financial position.

The occurrence of natural disasters such as major earthquakes or typhoons, significant weather abnormalities, or outbreaks of unknown viral infectious diseases may lead to a decline in customer traffic and sales, as well as physical damage to stores and the suspension of sales, distribution, and procurement activities. In the event of an epidemic spread, the Group may take measures such as shortening business hours or limiting the number of operating stores. The Group supports the TCFD recommendations and manages climate change risk by incorporating it into its risk assessment.

A surge in crude oil and energy prices due to instability in the Middle East, and the resulting increase in raw material and logistics costs, may cause fluctuations in procurement prices and other costs, affecting business plans and performance. Disruptions to the supply chain and a global economic downturn could hinder procurement and sales activities. Although the Group is taking measures such as securing inventory, it may not be able to completely avoid the impact if the situation worsens.

The Group operates overseas businesses primarily in the East Asia region, and changes in political and economic conditions, sentiment toward Japan, labor environments, legal regulations, or the occurrence of labor disputes, large-scale demonstrations, terrorist acts, natural disasters, or epidemics may affect business plans and performance. These changes in the external environment are factors beyond the Group's control and constitute a risk to business continuity.