KAITORI OKOKU CO., LTD.

Deterioration in economic conditions, an increase in competing buyback operators, the rapid growth of flea market apps, changes in customer sentiment, and fluctuations in precious metal and bullion prices could hinder the stable procurement of merchandise. Secondhand goods have a higher gross profit margin than new goods and serve as the company's source of profit, but if shortages of secondhand goods are supplemented with purchases of new goods, there is a risk that the gross profit margin will decline. The company strives to secure merchandise through diverse channels including in-store, home delivery, events, and on-site buying services.

New entrants targeting the company's product categories, such as branded apparel, trading cards, and used video games, are increasing, and competition in secondhand goods purchasing is intensifying, compounded by the spread of internet-based buying and selling. Intensified competition may make it difficult to secure popular items and cause fluctuations in purchase price levels, potentially affecting the company's business performance. The emergence of comprehensive resale retailers modeled on the company's business format is also anticipated.

Since purchase prices for secondhand goods are not predetermined by a distribution price, store staff with specialized knowledge are essential for authenticity checks and offering appropriate purchase prices. If the securing and training of store staff does not proceed as planned, store opening plans may be constrained, and mass resignation of experienced staff within a short period would directly affect business performance. The company positions the development of staff expertise as an important management issue.

Counterfeit goods of famous brands circulate worldwide in categories such as apparel, watches, bags, and figures, and given the nature of handling secondhand goods, the risk of trouble related to counterfeit goods is always present. If a major incident occurs, it could damage confidence in the company and affect business performance. The company has implemented measures such as developing store staff's authenticity-checking capabilities, re-checking items before store display, and completely disposing of mistakenly purchased counterfeit goods.

Of the 69 total locations, 49 are concentrated in the Tokai region (Aichi, Gifu, Mie, and Shizuoka prefectures), creating risks associated with regional concentration, such as sluggish sales growth in the event of a sharp economic decline in the region, and the impact on sales activities from large-scale disasters such as major earthquakes. This structure makes regional economic conditions and natural disasters likely to directly affect overall business performance.

The company finances new store openings through borrowings from financial institutions, and at the end of the fiscal year under review, the balance of interest-bearing debt reached ¥1,342 million, accounting for 25.7% of total assets. As financing is currently mainly procured through long-term borrowings at fixed interest rates, the company is not affected by interest rate fluctuations for a certain period; however, if unforeseen external factors make financing difficult and borrowing rates rise, this could affect business performance through increased financial expenses and other factors.

The company has obtained a secondhand goods dealer license from the prefectural Public Safety Commission and operates in compliance with the Secondhand Article Dealer Act. Should the company violate the regulations set forth under this act, it could face penalties such as revocation of its business license or suspension of operations, which could have a serious impact on business continuity. The company has established a legal compliance system through thorough management and retention of secondhand goods ledgers, development of internal manuals, and internal training.

The company applies impairment accounting to each store, and if a store's operating income deteriorates without prospects for short-term recovery, an impairment loss may be recognized, potentially affecting business performance and financial condition. In the fiscal year ended February 2025, the company opened 18 new stores (including through business transfers), and as the number of stores expands, the assets subject to impairment risk also increase.

The company obtains customers' personal information at the time of purchase transactions and membership applications based on the Secondhand Article Dealer Act and other regulations. Should an information leak occur, it could result in a loss of social credibility and significant expenses for post-incident response, potentially affecting business performance. While no cases believed to constitute personal information leakage have occurred to date, the company is strengthening personal information management through the development of internal manuals and internal training.

Fashion items, the company's core product category (accounting for 41.7% of sales in the fiscal year under review), include highly seasonal merchandise, and sales trends may be affected by weather fluctuations such as cool summers or warm winters. In addition, a global outbreak of infectious disease could shrink corporate economic activity and significantly affect the company's business performance. The high dependence on sales of specific product categories creates a structure in which changes in the external environment are likely to directly affect business performance.