BLUE ZONES HOLDINGS CO., LTD.

With market contraction due to the declining birthrate and aging population and the acceleration of "bipolarization of consumption" expected, the Group as a whole is addressing pricing through the strengthening of "price consciousness" at Yaoko and Sendo, as well as through the opening of discount-format stores (Ave and Foucot). However, if the Group is slow to respond to changes in consumption trends, this may adversely affect its business, financial condition, and operating results.

The Group is exposed to competition from a wide range of formats, including supermarkets, GMS, drugstores, convenience stores, specialty stores, and e-commerce. The Group operates in a single segment, the Supermarket Business, which is dependent on domestic demand. If the Group companies fail to achieve autonomous growth and are unable to strengthen their competitiveness, this may adversely affect the Group's business, financial condition, and operating results.

The supermarket business is labor-intensive, and a significant decline in the working-age population is expected, which poses a risk of difficulty in securing human resources. In addition, labor costs are expected to increase over the medium to long term due to rising social security costs and increases in the minimum wage. Although the Group is working to reduce store-level workloads through "Kaizen" and the use of IT systems, if these measures do not proceed as planned, this may adversely affect the Group's business, financial condition, and operating results.

With the penetration of digital devices, online transactions such as e-commerce have grown significantly in Japan as well, and Yaoko is proceeding with active investment in the information systems field, including the expansion of its online supermarket and the renewal of its core systems. However, if technology advances beyond expectations and the Group's response fails to keep pace, this may adversely affect its business, financial condition, and operating results.

Although the Group formulates sales plans for seasonal products, there is a risk that unexpected climate changes could result in decreased sales or excess inventory. As part of its response to environmental issues, the Group is engaged in initiatives such as promoting the use of reusable bags, reducing food loss, promoting recycling, and utilizing renewable energy. However, if the Group is slow to respond to decarbonization and recycling requirements, this may adversely affect its business.

The Group handles a wide range of products, from fresh food to dry and processed foods and daily delivered foods, and has established a quality control system covering traceability, ingredient labeling, sanitation management, and thorough implementation of the "5S" methodology. However, if a food poisoning incident or other food safety incident occurs, in addition to an adverse effect on the Group's business, financial condition, and operating results, this could significantly damage its social credibility and brand image.

The Group holds substantial fixed assets, including tangible fixed assets related to stores, and records impairment losses when actual sales significantly diverge from the sales forecasts made at the time of the store-opening decision. The Group recorded impairment losses of ¥2,517 million in FY2024 (ended March 2024) and ¥2,019 million in FY2025 (ended March 2025), and may record impairment losses in the future as well, which may adversely affect its financial condition and operating results.

The Group operates community-based commercial facilities centered on its own supermarkets, with drugstores, household goods stores, apparel companies, and other tenants. If tenants withdraw or rent reductions occur due to an economic downturn, this may adversely affect the Group's business, financial condition, and operating results.

The Group's diverse operations, including product procurement, ordering, and sales, depend on communication networks and computer systems. If a system failure occurs due to equipment damage from a natural disaster or accident, unauthorized intrusion by a computer virus, or an error by an employee, this may adversely affect the Group's business, financial condition, and operating results.

The Group holds a large amount of personal information, including Yaoko Card membership information, and has implemented protective measures based on the Act on the Protection of Personal Information, including the appointment of an information management officer and the establishment of internal rules. However, if customer information is leaked due to a computer system malfunction or criminal activity, in addition to an adverse effect on the Group's business, financial condition, and operating results, this could significantly damage its social credibility and brand image.