Maruyoshi Center Inc.

Amid an overstored retail industry environment, the Company is exposed to competition from other companies in the same industry as well as from stores in different business formats. Although the impact of competition is factored into earnings forecasts, if competition intensifies beyond forecasts, it may adversely affect the Group's operating results. Given the business structure centered on supermarkets, risks of price competition and customer attrition continue to exist.

The food processing and manufacturing plants (Ayagami Business Office and Utazu Business Office) of the consolidated subsidiary Fresh Depot Co., Ltd. have obtained ISO9001 certification, and hygiene management and freshness control based on standards manuals are thoroughly implemented at supermarket and restaurant stores as well. However, should a hygiene management problem such as food poisoning occur, it could damage customer trust and have a material impact on operating results. Since the Group operates a combined business format spanning food retail, manufacturing, and dining, the scope of management is broad, which is noteworthy as a factor that disperses risk.

There is a risk that the outbreak of infectious diseases affecting livestock and poultry, such as avian influenza or BSE, could lead to supply disruptions of products and sharp increases in raw material prices. Furthermore, a decline in consumption due to spreading consumer anxiety is also anticipated, and such economic and social factors may compound to affect operating results. Given the nature of the supermarket business, which handles meat and livestock products, disease outbreaks at the place of origin directly affect procurement costs and sales volumes.

In connection with the point card service at supermarkets, the Company holds a large amount of customers' personal information. Although management is thoroughly conducted based on the "Act on the Protection of Personal Information," should information leakage occur due to an unforeseen accident or other cause, it may lead to a decline in social credibility and claims for damages, thereby affecting operating results. As a retailer with a point card membership base, continuous strengthening of the information management system is required.

The Group operates stores, processing plants, and distribution centers centered on supermarkets, and there is a risk that a large-scale natural disaster could cause building damage or significant disruption to business operations. In addition to harm to customers visiting stores and employees, if various information system facilities suffer severe damage, it could cause serious disruption to business operations, potentially having a substantial impact on operating results and financial condition. If distribution centers or processing facilities are damaged by a disaster, there are also concerns about repercussions throughout the entire product supply chain.

The spread of infectious diseases is expected to cause a decline in personal consumption, a decrease in the number of customers visiting stores, and delays in product supply, and depending on the situation, the Group may be forced to voluntarily restrict business activities or close store facilities. If infected persons occur at the head office, distribution centers, or stores, there is also a risk of direct disruption to business activities such as product supply and store operations. A decrease in the number of customers visiting stores near infected areas is also a factor that could affect operating results and financial condition.

Since some of the Group's operational systems depend on communication networks connecting PCs and computer systems, if a network disruption occurs due to a natural disaster, accident, or human factor, the business and operating results could be seriously affected. Unpredictable factors such as a power supply outage at a data center or a cloud service outage causing system downtime are also cited as factors that could affect operating results. Although appropriate security measures have been implemented, should a system failure occur due to a computer virus or hacking intrusion, it may have a substantial impact on operating results and financial condition.