Treasure Factory Co.,LTD.

Unlike new products, adjusting procurement volumes for used goods is difficult, and the emergence of competitors and the spread of smartphone-based peer-to-peer trading apps may cause increases in purchase/procurement prices or shortages in procurement volume. Although consolidated merchandise purchases in FY2025 (ended February 2025) increased 21.2% year on year and progressed favorably, if stable procurement of merchandise is impeded, it could lead to deterioration in existing store performance or delays in the ramp-up of new store openings. The Group addresses this through diversification of procurement channels, including in-store purchasing, on-site purchasing, home-delivery purchasing, and wholesale procurement.

The sales composition ratio of fashion accessories, including branded goods, watches, and precious metals, accounted for 21.9% on a consolidated basis in FY2025 (ended February 2025), and there is a risk that counterfeit goods may be brought in as purchased items. If a major issue related to counterfeit goods occurs, it could affect performance through a decline in trust in the stores. The Group works to prevent the inflow of counterfeit goods by joining private organizations aimed at eliminating counterfeit products, establishing an in-house specialized department, and developing authenticity-determination manuals and information-sharing systems.

The company plans to open 30–35 new stores in FY2026 (ending February 2026), but if suitable properties cannot be secured at the desired timing or terms due to competition for store sites with other retailers or a decrease in available properties reflecting economic conditions, the store opening plan may be delayed, affecting performance. In addition, if a newly opened store's performance stagnates or profitability deteriorates leading to closure, or if a lease is terminated at the landlord's discretion, impairment losses or store closure losses may occur. In FY2025 (ended February 2025), the company recorded impairment losses of ¥156 million for stores with declining profitability.

The Group's basic policy is to open stores under a leasing arrangement, and the balance of deposits and guarantee money as of the end of FY2025 (ended February 2025) reached ¥2,654 million (12.7% of total assets). There is a risk that some or all of this may become unrecoverable due to circumstances on the landlord's side, and there is also a risk that, depending on contract terms, a portion may not be refunded in the case of early termination initiated by the company. The balance tends to increase as the number of stores expands, resulting in a significant impact on finances.

The Group procures part of its store-opening funds through borrowings from financial institutions, and the balance of interest-bearing debt as of the end of FY2025 (ended February 2025) accounted for ¥5,622 million (27.0% of total assets). Since current long-term borrowings are procured at fixed interest rates, the company is not affected by interest rate fluctuations for a certain period; however, if borrowing rates rise due to economic conditions at the time of future new borrowings, this could increase funding costs and affect performance.

The merchandise handled by the Group falls under the category of "secondhand articles" as defined by the Secondhand Articles Business Act (Kobutsu Eigyo Ho), requiring business permits from the public safety commissions of each prefecture. Violation of the rules stipulated in this act could result in revocation of the business license or suspension of business, which could have a material impact on business continuity. In addition, if purchased merchandise turns out to be stolen or lost property, there is an obligation to return it free of charge if within one year of the theft or loss, creating a risk of loss.

In addition to obtaining customers' personal information at the time of purchase as required under the Secondhand Articles Business Act and other regulations, the Group also holds personal information of customers and job applicants obtained through its website, creating a risk of information leakage. If personal information were to be leaked, it could affect performance through loss of social credibility and the incurrence of significant expenses for follow-up responses. The Group is working to strengthen its management systems through the development of internal regulations, employee training, the establishment of a specialized systems infrastructure department, and measures to prevent unauthorized access.

As the number of stores expands, securing and developing human resources has become a key management challenge. The company hired 220 employees in FY2025 (ended February 2025), including new graduates and mid-career hires, and plans to hire 240 employees in FY2026 (ending February 2026). If sufficient personnel cannot be secured due to hiring trends in other industries, or if personnel development does not proceed as planned in line with the store opening plan, this could hinder store expansion and affect performance. The company is responding by increasing staff in its recruitment and training department and strengthening the promotion of part-time and temporary staff to full employee status.

The Group has executed a total of seven M&A transactions to date and intends to continue actively considering M&A for expansion into new regions and businesses and for strengthening existing businesses. If transactions do not proceed as expected due to significant changes in the external environment, loss of key personnel, or conflicts of interest between the parties involved, this could result in contingent liabilities, the discovery of unrecognized liabilities, or impairment of goodwill due to deterioration in the acquired company's performance, potentially affecting operating results and financial condition. Although the company conducts investigation and analysis of the target business and financial condition prior to execution, there is a risk that due diligence constraints may prevent sufficiently thorough investigation.

Of the 293 stores in total as of the end of FY2025 (ended February 2025), 185 stores are concentrated in the Greater Tokyo area. If natural disasters such as earthquakes, storms and floods, extreme heat, heavy snowfall, or volcanic eruptions occur, physical and human damage could force a significant scaling back of operations. Furthermore, disruptions to lifelines such as electricity, fuel, communications, transportation, and water supply, or evacuation orders or advisories from government authorities, could make it difficult to continue business operations. Given the high concentration of stores in the Greater Tokyo area, the impact on performance in the event of a large-scale disaster is particularly significant.