Global Style Co.,Ltd.

The Company relies on direct and indirect imports from Italy for the majority of its fabric procurement, and the majority of direct import transactions are denominated in euros. Although the Company works to mitigate the impact of exchange rate fluctuations through forward exchange contracts, sudden short-term shifts in exchange rates may still affect purchase costs. In addition, rising labor costs and other expenses in China, the Company's primary production outsourcing destination, could also be a factor pushing up product purchase costs.

Because raw material procurement plans are executed approximately six months in advance based on an assessment of demand trends, the Company constantly faces the risk of a divergence between forecasted and actual demand. If this divergence becomes significant, it may adversely affect the business and results of operations through, among other things, a decline in raw material inventory turnover. The Company continuously works to analyze the causes of such divergence and improve forecast accuracy.

In the made-to-order suit market, competition in both price and product lineup has intensified due to an increase in new market entrants in addition to existing competitors such as department stores and specialty retailers. The Company seeks to differentiate itself through a broad product lineup, order customization options, store space design, and stylist-based customer service, but continued intensification of the competitive environment may affect the business and results of operations.

Structural changes such as the spread of remote work, changes in work-life balance, the entrenchment of Cool Biz and casual wear, and the declining birthrate and aging population could become factors in the long-term decline of demand for made-to-order suits. Domestic and overseas economic trends also directly affect net sales, giving rise to a compound risk. While the Company seeks to respond by offering products suited to changing lifestyles, there are limits to what can be done to address a fundamental decline in demand.

The Company outsources the sewing of some products overseas (mainly to China), and a deterioration in the political or economic situation in these regions, or the occurrence of unforeseen events, could disrupt production activities and logistics. If geopolitical risk at production bases materializes, it could affect the business and results of operations through delays or suspensions in product supply.

Selling made-to-order suits requires measurement skills and advanced product knowledge, and the Company conducts in-house training at training shops in its Osaka head office and Ginza. However, if the Company is unable to develop and recruit personnel as planned, this could lead to a decline in store sales capability. Although the Company conducts recruitment activities for both new graduates and mid-career hires, there is a risk that recruitment plans will not be achieved due to intensifying competition in the labor market.

Hiroshi Tajo, Representative Director and founder of the GS business, plays a critical role in decision-making regarding the direction of business development and store opening strategy, and there are concerns about the impact on business results should he become unable to perform his duties. While the Company has indicated a policy of reducing this dependence through strengthening its management organization and recruiting and developing management personnel, the degree of dependence remains high at present.

The Company holds a large volume of customers' personal information through the operation of its customer membership organizations, "GS Club" and "GS App Club," and through the contract documents issued each time a made-to-order suit is ordered. The Company strives to prevent leaks through the establishment of a "Customer Information Handling Manual" and management systems, but in the event of an external leak, damage to social credibility and potential compensation claims could affect the Company's financial position and results of operations.

The Company's advertising and sales promotion activities are subject to regulation under the Act against Unjustifiable Premiums and Misleading Representations, and any violation could result in corrective action orders or instructions to pay a surcharge. The application of the surcharge system could have a financial impact, and there are also concerns about customer attrition resulting from damage to brand image.

The Company applies impairment accounting standards for fixed assets by grouping assets on an individual store basis, and depending on future trends in store performance, the recognition of impairment losses could affect its business results. As of the end of the fiscal year under review, the Company operated 40 stores, and the emergence of unprofitable stores or deterioration in market conditions could be factors that heighten impairment risk.