Eco's Co.,Ltd.

In the chain development of food supermarkets, there is a possibility that store properties and other assets may become subject to impairment due to deterioration in store performance. In addition, when withdrawing from stores with no prospect of profitability, there is a risk of recognizing losses on disposal of fixed assets, and a risk that all or part of security deposits will not be returned. These constitute financial risks that directly affect the business performance of the Company Group.

There is a risk that foreign matter contamination, microbial contamination, labeling errors, inadequate allergen management, or quality deterioration due to improper temperature control may occur at each stage from raw material procurement through manufacturing, distribution, and sales. Should a food-related incident or health hazard occur, administrative guidance, product recalls, damages claims, reputational damage, and other consequences could have a material impact on business performance and social credibility. As countermeasures, the Company has established a hygiene management system based on HACCP, conducts employee education, and performs regular quality and hygiene inspections and audits; however, it states that complete elimination of the risk is difficult.

Amid a declining working-age population in Japan due to population decline and the aging society with fewer children, there is a risk that securing human resources will become difficult in the labor-intensive supermarket business. If staffing does not proceed as planned, sales opportunities may be lost, and business performance may be affected by wage increases, rising social insurance costs, and increased investment in labor-saving measures. The Company is working to improve the working environment including wages, establish flexible work systems, and expand educational programs, but risk remains if productivity improvements do not progress.

Various information systems and communication networks are utilized in business operations and service provision, and in the event of failures or malfunctions, operational stagnation, delays in merchandise procurement, stockouts, and disruptions to settlement and various services may occur. System outages caused by failures at outsourced system providers, cyberattacks, human error, natural disasters, and the like also pose a risk that could affect business performance and social credibility. The Company has implemented measures such as system redundancy, regular backups, established failure response procedures, and enhanced security, but states that complete elimination of all risks is difficult.

Through distribution centers operated by logistics subsidiaries, the Company conducts scheduled bulk deliveries to all stores and resource recovery via reverse logistics, thereby establishing an efficient distribution system. However, in the event of unforeseen circumstances such as accidents within distribution centers or during transportation, delays in deliveries to stores may occur. The concentration of logistics functions creates a risk of becoming a single point of failure, which could affect business performance.

The Company handles personal information of customers, business partners, employees, and others in the course of business operations, and in the event of leakage, loss, damage, or unauthorized access, business performance may be affected through loss of social credibility, occurrence of liability for damages, administrative guidance, or sanctions. The Company has implemented technical security management measures such as establishing internal regulations, employee education, access restrictions, and malware countermeasures, but states that it is difficult to completely eliminate risks arising from increasingly sophisticated and elaborate cyberattacks or internal misconduct.

Stores, business offices, food factories, distribution networks, and other facilities may be affected by natural disasters such as earthquakes, typhoons, heavy rain, floods, tsunamis, and volcanic eruptions. In the event of a disaster, business activities could be significantly hindered by equipment damage, delays in raw material procurement, suspension of product shipments, disruption of the supply chain, as well as outages of electricity, water and sewage, and communication infrastructure, and disruption of transportation networks. This could also broadly affect business performance, including through a decline in the supply capacity of business partners.