Saibo Co., Ltd.

The Group operates in market-sensitive products, and its performance may be significantly affected by price competition with competitors and exchange rate fluctuations. In particular, textile products are produced on a consignment basis mainly in China, and intensifying price competition due to low-cost local production directly affects sales. Because the ratio of imports from South Korea, China, and other countries is high, sharp yen depreciation or appreciation affects procurement costs and profitability.

Although the Group strengthens technical guidance and inspection guidance in Japan and other Asian countries to thoroughly manage quality, there is no guarantee that the occurrence of defective products can be completely eliminated. Although the Group has product liability insurance, there is a possibility that the final compensation amount may not be sufficiently covered. In addition to adverse effects on business performance and financial condition, the occurrence of defective products also carries the risk of damaging the Group's social reputation.

The Group conducts consignment production of textile products in South Korea, China, and other Asian countries, and is exposed to unforeseen changes in laws and regulations, unfavorable changes in tax systems, and political risks. If large-scale natural disasters, fires or other accidents, or social disruption caused by terrorism, war, or infectious diseases occur, the production system may be suspended or significantly restricted. If any of these events materializes, it may adversely affect the Group's business performance and financial condition.

Transactions with AEON Mall Co., Ltd. accounted for a high proportion of 35.2% (30.2% in the same period of the previous year) of consolidated net sales for the fiscal year under review, and if the transaction status changes due to a change in the company's business strategy or otherwise, it may have a material impact on the Group's business performance and financial condition. In addition, the Group has received a large amount of security deposits from the company in connection with the leasing of large-scale commercial facilities, and there is a risk that the Group's holding funds could decrease substantially if repayment of the deposits becomes necessary due to contract cancellation. The rising trend in the degree of dependence compared to the previous year also warrants close attention.

If the market prices of tangible fixed assets such as land and buildings held by the Group decline significantly, or if profitability declines due to the cancellation of lease agreements or other factors, it may become necessary to recognize impairment losses or record additional depreciation expenses (accelerated depreciation). Recording these amounts directly affects the Group's business performance and financial condition. The impact could be significant when fluctuations in real estate market conditions or the risk of major tenants withdrawing materializes.

If the market prices of investment securities such as stocks held by the Group decline significantly, valuation losses may arise, adversely affecting business performance and financial condition. A general decline in the stock market or deterioration in the business performance of specific holdings could be factors leading to the recognition of valuation losses. Depending on the scale of securities held, the impact on finances could be correspondingly significant.

Although the Group manages balances and due dates for each business partner and regularly assesses credit status based on its credit management regulations, customers with a weak management base may see their business condition deteriorate rapidly due to changes in economic conditions. Should such a situation occur, it may become necessary to record allowances for doubtful accounts, and there is also a risk of recording valuation losses on inventory assets purchased for such business partners if new sales channels cannot be found. Because allowances for doubtful accounts are recorded based on estimates, there is a possibility of divergence from actual bad debt losses.

Although the Group strives to prevent violations of laws and regulations and information leaks through compliance education for officers and employees, unforeseen circumstances may give rise to disputes or litigation with business partners, officers and employees, or third parties. Depending on the content of the litigation and the amount of damages, this may directly affect business performance and financial condition, and a decline in corporate image and credibility due to reputational damage may adversely affect overall business activities.