Japan Eyewear Holdings Co., Ltd.

Major raw materials such as acetate, celluloid, and titanium are commodity products, and while the basic policy is to pass on price increases to product prices, a delay in pass-through may occur in the event of a sharp price surge. If pass-through is delayed or becomes impossible, this could affect the Group's business results and financial condition. The Group's basic policy is to reflect such changes in product prices, but there are limits to its ability to respond to rapid price fluctuations.

In the event of a pandemic such as COVID-19, there is a risk of suspension of operations at production facilities and stores. In addition, inbound sales have expanded to account for ¥897 million to ¥1,034 million per quarter and over 26% to 29% of total sales in FY2026 (ending January 2026), meaning a decrease in foreign visitors to Japan or a delayed recovery would have a significant impact on business results. Changes in the external environment, such as fluctuations in international conditions, natural disasters, and reputational damage, are also risk factors affecting inbound demand.

The Group qualifies as a personal information handling business operator that handles customers' personal information in the course of its business activities, and is subject to regulation under the Act on the Protection of Personal Information. While internal management systems have been established, employees have been informed, and measures to prevent leaks have been implemented, if personal information were to leak externally, this could affect business results and financial condition due to a decline in sales resulting from loss of trust.

The Group utilizes computer systems and communication networks to conduct business processing, and faces risks of system downtime or loss/leakage of important data due to natural disasters, computer viruses, unauthorized external intrusion, and other causes. While maintenance and protective measures as well as internal management systems such as employee training and access control have been strengthened, an unexpected system failure or information leak could disrupt core business activities and lead to a loss of social trust.

As of the end of the fiscal year under review, goodwill of ¥14,332 million and trademark rights (an intangible asset) of ¥5,897 million were recorded, together accounting for 50.7% of total assets. Under IFRS, both assets are not amortized, and impairment testing is conducted annually and whenever there are indications of impairment. If business profitability declines and an impairment loss is recognized, this could have a material impact on the Group's financial condition and operating results.

There is no clear legal provision as to whether assisting with vision measurement at the time of eyewear sales constitutes a medical practice, and while the Company has determined that it does not constitute a medical practice, a change in laws or interpretations classifying it as such would force a transformation of the business model. In addition, eyeglass lenses qualify as general medical devices under the Pharmaceutical and Medical Device Act, and if a change in medical device classification requires approval or certification that cannot be obtained, this could disrupt core business activities. Both risks are assessed as having a low likelihood of occurrence but a high impact if they occur.

The Group's continued success depends significantly on the ability and leadership of Representative Director and President Shinya Kaneko, who, as chief executive officer, leads the achievement of the medium-term management plan's targets. While an organizational management structure has been established through the setting of division of duties and the delegation of decision-making authority to executives, an unforeseen event affecting him or other members of management could disrupt the Group's overall activities.

Securing and developing talented human resources for business expansion is a key challenge, but labor costs could rise significantly due to intensified competition for talent resulting from a shrinking workforce, increased pressure for wage hikes, and revisions to labor-related laws. If internal talent development does not progress, or if there is an outflow of personnel or difficulty in recruitment, this could affect the Group's financial condition and operating results.

As of the end of January 2026, the interest-bearing debt ratio (long-term borrowings plus lease liabilities divided by total equity) stood at a high level of 85.8%. Some borrowings are subject to financial covenants, and a breach could result in loss of the right to repay in installments, requiring lump-sum repayment. A sharp fluctuation in interest rates or a breach of financial covenants could adversely affect the Group's financial condition, cash flow, and going-concern status.

Many of the Company's suppliers and subcontractors are concentrated in Sabae City, Fukui Prefecture, and if a disaster exceeding the Group's response capacity were to occur in this region, the loss of means to secure materials and subcontractors' manufacturing capacity could disrupt business operations. While efforts are made to build good relationships with suppliers, the diversification of this geographic concentration risk is limited.