JOYFUL HONDA CO.,LTD.

In the areas where the Company operates stores, numerous competitors handling similar products exist, and competition is expected to intensify due to new store openings, entry from different business formats, and digital strategies by other companies. This could significantly impact business performance and financial condition through decreases in customer traffic and sales. As countermeasures, the Company is working on reviewing sales floor zoning, attracting attractive tenants, improving customer service skills, building an active store opening framework, and strengthening human resources through improved working conditions.

The Company is subject to legal regulations such as the "Large-Scale Retail Store Location Act," "City Planning Act," and "Building Standards Act." There is a risk that legal amendments or changes in regulations by prefectural governments could lengthen the development period for new store openings or make renovation of existing stores difficult. This could constrain the execution of growth strategies and significantly impact business performance and financial condition. As a countermeasure, the Company grasps the status of legal regulations when opening stores or undertaking large-scale renovations, and formulates realistic store opening plans after thorough consultation with relevant administrative agencies.

As the Company handles a large number of seasonal products such as heating and cooling equipment, outdoor goods, and gardening products, significant fluctuations in customer traffic and demand may occur due to weather changes such as cool summers, warm winters, prolonged rain, extreme heat, and severe cold, which could significantly impact business performance and financial condition. There is also a risk that natural disasters such as localized heavy rain, large typhoons, or earthquakes could cause serious disruption to business activities. As countermeasures, the Company implements inventory management and sales promotion based on weather forecasts, maintains fire and earthquake insurance, has formulated a BCP manual, and has set up an overdraft credit line.

The spread of infectious diseases and epidemics, such as the coronavirus, could lead to deterioration in economic sentiment and the employment environment, which could significantly impact business performance and financial condition through decreased customer traffic. The Company complies with guidelines from the government and local authorities, and strives to maintain a safe purchasing environment that prioritizes the safety of customers and employees. In addition, to manage funds during the spread of infectious diseases, the Company has set up an overdraft credit line with its financial institutions to be used as BCP response funds.

When opening ultra-large stores with a sales floor area of approximately 50,000 sq.m and large stores of approximately 30,000 sq.m, the business investment amount per store is substantial, and it takes a considerable period of time to build brand recognition and secure stable sales in the area where the store is opened, which could significantly impact business performance and financial condition. As countermeasures, the Company conducts detailed business investment planning and verification of the impact on business performance, while also promoting store openings through redevelopment of vacant properties (ikinuki) requiring relatively low initial investment.

The Company applies the "Accounting Standard for Impairment of Fixed Assets," and if store profitability deteriorates due to changes in regional economic conditions or if the market value of held assets declines significantly, impairment treatment may be implemented, which could significantly impact business performance and financial condition. As countermeasures, the Company strives to expand revenue and curb increases in expenses by moving away from homogenization with competitors, integrating the Home Center Business and the Renovation Business, and promoting carbon neutrality.

As the Company handles a wide variety of products, it is subject to legal regulations according to the characteristics and specifications of each product. Legal amendments may make it difficult to handle certain products or may increase management costs, which could result in insufficient product assortment and significantly impact business performance and financial condition. As a countermeasure, the Company thoroughly gathers information from relevant government agencies and business partners, and works to raise awareness of and ensure thorough compliance.

If product procurement becomes difficult due to disruptions in purchasing routes, or if purchase prices rise due to external factors such as fluctuations in raw material prices, exchange rate fluctuations, or overseas conditions, this could significantly impact business performance and financial condition. Imported products in particular are highly sensitive to foreign exchange risk and geopolitical risk. As a countermeasure, the Company strives to minimize disruptions to product procurement by securing multiple business partners and suppliers.

If a system failure occurs in core business systems for ordering, receiving inspection, purchasing, and sales due to network failures, computer viruses, natural disasters, human error, or if important information is leaked externally or services are largely suspended due to cyberattacks, unauthorized access, or inadequate management by outsourcing partners, this could lead to a loss of public trust and significantly impact business performance and financial condition. As countermeasures, the Company outsources servers for its main systems to data centers of major vendors to diversify risk, while also establishing an information security framework, providing employee training, and taking out cyber insurance.

If personal information is leaked from systems in which the Company is involved, this could lead to a decline in public trust and the occurrence of liability for damages, significantly impacting business performance and financial condition. As countermeasures, the Company thoroughly manages information based on its personal information protection regulations and provides education on personal information management to employees and part-time staff.