G-7 HOLDINGS Inc.

The franchise agreements for the Automotive-Related Business (Autobacs Seven) and the Gyomu Super Business (Kobe Bussan) include provisions allowing either party to terminate the contract with six months' notice (three months for Gyomu Super). At present, no factors impeding contract continuation have arisen, but if the contract were terminated, it could have a material impact on the business operations of both businesses. The company is working to maintain the current contracts, but no specific alternative measures have been disclosed.

In the core Automotive-Related Business, 34 of 71 stores are concentrated in Hyogo Prefecture, making further market share expansion in the prefecture difficult. The automotive accessories market is mature, and sales growth has been on a slowing trend due to prolonged weakness in personal consumption and competition with other companies in the same industry. As a countermeasure, the company has adopted a policy of business expansion through M&A of competitors, but the feasibility of this depends on market conditions.

In the Gyomu Super Business, due to the nature of franchise agreements that do not exclude competitive principles, competition with other companies' stores may arise in certain regions. Including the Meat Business, intensifying competition with other companies in the same industry could lead to a decline in the number of customers visiting stores and lower per-unit sales prices, potentially affecting the group's overall performance. The company's policy is to improve performance through a store opening strategy that takes into account market trends in each region.

In the Automotive-Related Business, sales of winter products such as winter tires and chains are concentrated in the second half of the fiscal year, resulting in a tendency for the group's overall operating income and ordinary income to be weighted toward the second half. If sales trends for winter products change due to progressing global warming, this could affect business performance and financial condition. No specific countermeasures for seasonal fluctuation risk have been disclosed.

The ratio of interest-bearing debt to total assets at the end of the consolidated fiscal year rose to 25.0% (19.9% at the end of the previous fiscal year), with working capital and capital expenditures being financed through long-term and short-term borrowings, among other means. If procurement interest rates fluctuate due to future changes in financial conditions, this could affect business performance and financial condition. At present, no large-scale capital expenditures are anticipated, and the company's policy is to conduct capital expenditures within the scope of available funds on hand.

If the market value of assets declines significantly or the profitability of a business deteriorates, the application of impairment accounting could result in impairment losses on fixed assets, affecting business performance and financial condition. Given the group's characteristic of operating numerous retail businesses, there is an inherent risk that deteriorating profitability at individual stores could trigger impairment. No specific impairment prevention measures or disclosure of the scale of assets subject to this risk have been made.

The company has established a local subsidiary for the Automotive-Related Business in Malaysia and is expanding Autobacs and Bike World stores there, with plans to accelerate expansion into other Southeast Asian countries going forward. There are risks such as difficulty in securing human resources due to differences in religion and culture, unforeseen changes in laws and regulations, and difficulty in obtaining permits and licenses for foreign-capital companies. If expenses increase beyond initial projections or the timing of expansion is delayed, this could affect business performance and financial condition. No specific hedging measures for overseas business risk have been disclosed.

Since the company operates retail stores mainly in the Kansai, Chubu, and Kanto regions, there is a risk that store operations could be disrupted for a considerable period due to natural disasters such as earthquakes and typhoons, or unforeseen accidents such as fires and power outages. Planned power supply suspensions are also recognized as a factor that could impede operations, potentially affecting business performance and financial condition. The specific content of the business continuity plan (BCP) has not been disclosed.

The prolonged Russia-Ukraine situation and Middle East situation, along with the resulting surge in energy and raw material prices and disruption of supply chains, could affect the group's business performance and financial condition. There is an inherent risk that rising procurement costs for food products and automotive accessories will squeeze profits, and there are concerns that the impact could expand if the situation continues over the long term. No specific risk mitigation measures have been disclosed.

In the Automotive-Related Business, 34 of 71 stores are concentrated in Hyogo Prefecture, and if a natural disaster, deterioration of the economic environment, or intensified competition occurs in this region, it could have a disproportionate impact on the group's overall performance. Market saturation due to regional concentration has already been recognized, and further market share expansion in Hyogo Prefecture is difficult. The company's policy is to achieve geographic diversification through M&A and expansion into Southeast Asia, but the current concentration risk remains ongoing.