NEXTAGE Co., Ltd.

Large-format stores require locations along major arterial roads with large plots of land, which may make it difficult to secure suitable properties. Delays in store opening plans could hinder the realization of medium- to long-term growth strategy and affect the pace of sales expansion. As a countermeasure, the company deploys store development personnel nationwide and identifies candidate sites from diverse sources including leisure facilities and other industries.

Continuous recruitment of personnel is necessary to support business expansion, but there is a risk that the company may fail to secure the desired personnel amid intensifying competition for talent, or may experience personnel outflow due to turnover. This risk could undermine the core business policy of providing highly satisfying customer service. The company aims to reduce turnover by shortening recruitment lead times to increase hiring numbers and by establishing a uniform working environment based on group-wide common store manuals.

Approximately 30% of retail vehicles are sourced from auto auction venues, and if the number of vehicles listed at auto auctions decreases due to changes in market conditions, the company may be unable to secure quality inventory. A shortage of inventory directly leads to a decline in units sold, affecting business performance. As countermeasures, the company is promoting expansion of direct purchases from users and expanding business-to-business procurement with rental car companies and others.

Store operating expenses such as opening costs and advertising expenses may increase, and if expense control is inadequate, profitability could deteriorate. The ratio of SG&A expenses to sales is positioned as a key indicator, and its deterioration directly affects business performance. The company is promoting fixed cost reduction through indirect cost cuts and operational efficiency improvements, as well as cost reduction through systemization.

The domestic used car and new car markets are affected by fluctuations in the domestic economy and consumer purchasing sentiment, and an economic downturn could lead to a decrease in units sold. In addition, a decline in auto auction market prices could result in recording valuation losses on inventory, worsening profit margins. The company addresses this through continuous expansion of lifetime transactions with customers and prevention of stagnant inventory through inventory turnover management.

The expansion of mobility services and changes in consumer awareness may lead to a decrease in units sold or fluctuations in selling prices for used and new cars. If these changes progress significantly, the market valuation of the products and services provided by the group could fundamentally change, materially affecting business results and financial condition. The company continuously monitors consumer values and preferences, thoroughly implements appropriate procurement and pricing, and evaluates the appropriateness of management strategy.

If personal information such as seal registration certificates, resident registers, and copies of driver's licenses obtained during vehicle ownership transfer procedures is leaked externally, it could lead to a decline in corporate trust, occurrence of fraud, damage compensation claims, and other impacts on business performance and financial condition. The company has built a control structure including raising officer and employee awareness through ongoing training, conducting operations based on personal information protection regulations, and restricting system access privileges.

The used vehicle purchase and sales business is subject to regulation under the Secondhand Articles Business Act and operates under permits from the public safety commissions of each prefecture. If insufficient response to legal amendments or operational mistakes results in disciplinary action from regulatory authorities, revocation of business permits could have a material impact on business performance and financial condition. The company has established internal systems for confirming procedures for police station notifications under internal regulations and for gathering information on legal amendments, and as of now, no violations have occurred.

Since store opening funds are primarily raised through borrowings from banks and other financial institutions, rising interest rates due to changes in financial conditions could increase interest payments, affecting business performance and financial condition. Continuous fundraising is essential to realize the growth strategy, and deterioration in the fundraising environment poses a risk that could also spill over into store opening plans. The company maintains high creditworthiness through stable performance and a solid financial position, and makes fundraising decisions after comprehensively considering store opening plans, funding needs, and operating cash flow.

Increased natural disasters associated with rising temperatures could damage stores and vehicles, while increased energy costs and growing demand for EVs and other electrified vehicles amid the transition to a low-carbon economy could change the business environment. If these factors act in combination, they could materially affect business results and financial condition. The company is proceeding with reviews of its BCP, cost reduction through installation of solar panels at stores and energy conservation, and addressing demand changes by leveraging EV sales and maintenance know-how developed through its imported car authorized dealer business.