TOKYO BASE Co.,Ltd.

The Group offers apparel and fashion accessories specializing in cutting-edge TOKYO brands within Japan, targeting primarily fashion-conscious customers. If the Group is unable to respond to changes in customer preferences and lifestyles resulting from changes in lifestyle following the COVID-19 pandemic and intensifying competition from new market entrants, this may affect business performance. As countermeasures, the Group is promoting the strengthening of product capabilities, the development of new business formats, and the expansion of its customer base.

Due to the Group's policy of opening stores in top-tier commercial facilities at terminal stations, store openings are concentrated in facilities operated by specific corporate groups. If such facilities experience a decline in customer traffic or a change in management policy, this may result in decreased sales as well as the recognition of impairment losses on fixed assets, among other effects. As a countermeasure, the Group is mitigating this risk by not pursuing unreasonable expansion of store openings domestically, while also promoting store openings in major overseas cities with high customer-drawing power.

The majority of the Group's internet sales revenue depends on an online mall operated by a specific company, and fluctuations in the mall's customer-drawing power or changes in its management policy may force the Group to change its sales strategy. Excessive dependence carries the risk of undermining the stability of business performance. As a countermeasure, the Group is working to reduce this dependence by strengthening its own e-commerce operations.

Masato Tani, the founder and Representative Director and CEO, plays a critical role in the decision-making process, including determining the direction of business development and store opening strategy, including overseas expansion. If he becomes unable to perform his normal duties for any reason, this may have a material impact on business performance. As a countermeasure, the Group is working to reduce this dependence by building a systematic decision-making structure and recruiting and developing management personnel.

The Group conducts overseas operations in mainland China and Hong Kong, and if unexpected changes in laws and regulations, political or economic events, or social disruption due to terrorism, conflict, natural disasters, or the like occur, this may affect business performance. The greater the proportion of overseas sales, the greater the impact of this risk. As a countermeasure, the Group continues to gather information on various risks in the countries where it operates stores, monitoring developments and taking measures accordingly.

At the Group, store staff are also involved in product selection, and many specialized personnel such as merchandise planners and buyers are employed; advanced product knowledge and proposal capabilities constitute an important management resource. If the labor market becomes tight or key personnel leave for external opportunities, this may hinder business expansion plans and sales activities. As countermeasures, the Group is building a fair personnel evaluation system based on meritocracy and results, expanding its incentive programs, and enhancing its training programs, among other measures.

If inadequate inspection or product management leads to the sale of inappropriate products, or if a production subcontractor falsely represents the country of production, this could damage the brand image not only of the Group but also of supplier brands and the commercial facilities in which the Group operates stores, across a wide range of stakeholders. This may also result in the payment of damages or penalties to customers and business partners. As countermeasures, the Group is strengthening its inspection and product management systems and requesting production subcontractors to strictly comply with laws and regulations while enhancing management oversight.

The Group is promoting the launch of new business formats and overseas expansion with the aim of expanding its target customer base; however, if the initially expected results are not achieved, this may affect business performance. Investments in new business formats and new markets carry the risk of failing to be recovered, and prolonged unprofitability of businesses may become a financial burden. As a countermeasure, the Group is strengthening progress management of investment profitability based on business plans and making decisions to withdraw early from unprofitable businesses in accordance with internal standards.

Since all stores are located in urban areas and the majority of customers use public transportation, the occurrence of natural disasters such as earthquakes or fires, acts of terrorism or civil disturbance, unknown infectious diseases, or accidents or strikes affecting public transportation may reduce the number of store visitors and disrupt sales activities, thereby affecting business performance. In internet sales as well, deterioration of the e-commerce environment due to network outages or the like may affect business performance. As a countermeasure, the Group is working to strengthen its own e-commerce operations, direct in-store customers to e-commerce, and reinforce its infrastructure.

The Group holds personal information in the course of its business activities, and in the event of an information leak, this may affect business performance due to the occurrence of liability for damages or loss of trust. In addition, if the establishment of internal control systems fails to keep pace with rapid business expansion, this may make appropriate business operations difficult, potentially affecting the reliability of business performance and financial reporting. As countermeasures, the Group is thoroughly implementing measures to prevent personal information leaks and building an appropriate organizational structure and staffing in line with its expanding scale.