Haruyama Holdings Inc.

Due to the nature of the Clothing Retail Business, there is a structural risk that net sales and ordinary profit will be skewed toward the lower half (October to March), when demand for bonus-season purchases and suits for new employees is concentrated. Over the past three fiscal years, the lower half's share of net sales has reached 60.5% to 61.8%, and the upper half has continued to record an ordinary loss. In FY2026 (ending March 2026), the full-year ordinary loss stood at ¥297,077 thousand, with the widening loss in the upper half pressuring overall performance.

For new store openings or floor space expansions exceeding 1,000 square meters, notification to prefectural governments and other authorities is mandatory under the Large-Scale Retail Store Location Act, requiring coordination with local residents and municipalities. Prolonged coordination may delay store opening timing or increase store opening costs. As of March 31, 2026, 10 of the 363 stores fall under the scale subject to this law.

The Company adopts a policy of closing unprofitable stores where performance improvement is not expected; during the fiscal year under review, 21 stores were closed (including 6 relocations). Renovation, closure, and relocation costs associated with scrap-and-build activities occur continuously and may affect performance. There is also a risk that fixed-term building lease agreements may not be renewed at the counterparty's discretion upon expiration.

For many store openings, the Company has provided funds to developers and landowners in the form of security deposits, guarantee deposits, and construction cooperation funds. If a recipient of such funds becomes insolvent or otherwise unable to pay, part or all of the funds provided may become unrecoverable. Should such non-recovery occur, it would have a direct adverse impact on the Group's financial condition.

Amid an anticipated medium- to long-term decline in suit demand driven by the declining birthrate and aging population, competition among industry players through multi-store expansion has intensified, both in pricing and in the development of functional products. The Group's policy is to offer high-quality, high-function products at valuable prices, but if it fails to adequately respond to customer needs, performance may be adversely affected. Economic fluctuations, exchange rate movements, competitor activity, changes in laws and regulations, disasters, and infectious diseases are also recognized as risk factors affecting the industry as a whole.

The Group applies impairment accounting standards for fixed assets and recorded an impairment loss of ¥355,000 thousand as an extraordinary loss in the fiscal year under review. Impairment assessments are conducted by grouping operating stores, leased assets, and idle assets on an individual property basis; depending on future performance trends at individual stores, additional impairment losses may occur and affect performance. This risk is particularly elevated during periods when the number of unprofitable stores increases.

In operating the Clothing Retail Business, the Group holds customers' personal information and confidential information; if a leak of such information were to occur, it could result in social accountability issues and affect performance. Based on guidelines from the Personal Information Protection Commission, the Group has established various internal committees centered on an Information Security Committee to implement measures to prevent leaks. However, it is difficult to completely eliminate the risk of information leakage due to cyberattacks or internal misconduct.