MINOYA CO.,LTD.

The Company positions the opening of new stores in front of train stations, at roadside locations, and in large shopping centers as a pillar of its growth strategy. However, there is a risk that planned store openings may not be realized as scheduled if properties meeting the Company's siting criteria cannot be found. Delays in store openings directly translate into lost sales expansion opportunities and could have a material impact on the Company's business results and financial condition. The Company seeks to manage this risk by establishing a minimum expected profitability threshold as a criterion for store opening decisions.

The Company holds substantial fixed assets, including property and equipment related to its stores. If actual profitability diverges from the profitability projected at the time of store opening, the book value of fixed assets may become unrecoverable through future cash flows. In such cases, impairment accounting under the "Accounting Standard for Impairment of Fixed Assets" and a review of store opening plans would be required, which could have a material impact on business results and financial condition. The Company has recorded impairment losses in the past, and this is recognized as an ongoing risk going forward.

Many confectionery products are subject to sales fluctuations depending on weather and temperature trends, with roadside stores in particular experiencing significant impacts on customer foot traffic. In addition to the risk of quality deterioration and inventory disposal of candy, chocolate, and other products due to prolonged extreme heat and humidity, there are also concerns over difficulty securing sufficient volumes and increased emergency procurement costs due to poor harvests of raw materials such as potatoes and cacao. If unexpected adverse weather occurs, it could have a material impact on business results and financial condition through both sales and procurement cost channels.

Although COVID-19 was reclassified to Category V in May 2023, there remains a risk that the emergence of new variant strains or the outbreak of new infectious diseases could result in lost procurement negotiation opportunities, disruption of logistics networks, and shortened operating hours or temporary store closures due to employee infections. Changes in consumption trends and reduced purchasing intent could also lead to lower sales, potentially having a material impact on business results and financial condition. The Company has not disclosed specific countermeasures at this time, and its dependence on the external environment remains high.

Securing and training part-time and temporary staff to support the Company's multi-store expansion is a key challenge, and there is a risk that securing the planned number of personnel may become difficult due to the declining working-age population and changes in employment patterns. In addition, if part-time and temporary wages rise more than anticipated in order to secure the necessary workforce, this could have a material impact on business results and financial condition through increased selling, general and administrative expenses. The Company continuously recruits and provides on-the-job training to develop staff capable of immediate contribution, but vulnerability to changes in the external environment remains.

Prices of agricultural products such as flour and sugar are affected by domestic and international commodity market conditions, directly impacting the Company's confectionery procurement prices. In addition, rising crude oil prices push up logistics costs, packaging materials, and confectionery container prices, further increasing procurement costs. If such cost increases cannot be passed on to selling prices, this could affect business results and financial condition through reduced profit margins.

The Company outsources delivery operations from four logistics centers to external delivery contractors. However, there is a risk that logistics costs, including delivery fees and labor costs, will continually increase due to rising crude oil prices, the aging of delivery contractor workforces, and worsening labor shortages. Combined with increased shipment volumes accompanying new store openings, this could disrupt stable supply and affect business results and financial condition. Given the Company's structural dependence on outsourcing, securing cost negotiation leverage and alternative means remains a challenge.

In addition to legal regulations related to store operations, such as the Containers and Packaging Recycling Law and building equipment regulations, there is a risk that tax reforms such as consumption tax rate increases could adversely affect personal consumption and business activities. Furthermore, if expanded social insurance coverage for part-time and temporary employees or significant minimum wage increases occur due to revisions to the social insurance system, this could substantially increase labor cost burdens and affect business results and financial condition. While the Company strives to comply with laws and regulations, the direction of regulatory tightening is an external factor, and increased compliance costs are unavoidable.

While the Company currently recognizes no direct competitors among specialty confectionery retailers, competitive risk could materialize if major supermarkets or drugstores enter the market with confectionery specialty store formats. In addition, if supermarkets or discount stores in the vicinity continuously sell products handled by the Company at lower prices, this could reduce price competitiveness and affect business results and financial condition.

The Company depends on communication networks and computer systems for a wide range of operations, including sales management, inventory management, and attendance management, and manages its main servers at an external data center. In the event of a system failure, network failure, or cyberattack, there is a risk of leakage of personal information or confidential information belonging to customers or business partners, as well as destruction or falsification of critical data, potentially resulting in reputational damage and affecting business results and financial condition. Although the Company has taken redundancy measures through the use of an external data center, complete protection against cyber risk remains difficult.