Pan Pacific International Holdings Corporation

The Group directly imports a portion of its products from overseas, and when indirect imports are included, imported products account for a high proportion of products sold. In a yen depreciation scenario, there is a risk that actual procurement prices will rise and the gross profit margin will deteriorate. Although hedging measures such as foreign exchange forward contracts are implemented, complete avoidance of this risk is not guaranteed.

The Group positions M&A as one of its key strategies for business expansion and conducts detailed due diligence on target companies both in Japan and overseas. However, there is a risk that contingent liabilities or unrecognized liabilities may come to light after an M&A transaction is executed, which could have a material impact on the Group's financial position and operating results.

The Group calculates future cash flows of held assets and recognizes and measures impairment losses accordingly. However, as held fixed assets increase in line with aggressive store expansion, the recognition of impairment losses is anticipated. The recording of impairment losses could have a direct impact on business performance.

While the Group promotes aggressive new store openings, it also maintains a policy of withdrawing from unprofitable stores. If a store fails to secure the planned level of revenue after opening, and performance cannot be restored through efforts to expand sales or reduce selling, general and administrative expenses, losses associated with store withdrawal may occur, which could affect business performance.

As business scale expands, the proportion of products imported from various countries is increasing, exposing the Group to risks from changes in the political situation, economic environment, and tariff policies of exporting and importing countries. Logistics and distribution are outsourced to external providers, and there is a possibility that logistics could be disrupted due to deterioration in the business condition of such providers; however, the Group seeks to mitigate this risk by outsourcing to multiple providers.

Merchandise inventory is on an increasing trend company-wide in line with aggressive store openings. If dead stock arises due to unavoidable factors such as changes in consumer demand, abnormal weather, or demand skewed by seasonality, the disposal of inventory or the recording of valuation losses on merchandise could affect the Group's financial position and operating results. The Group seeks to mitigate this risk through real-time management via its POS system and core IT systems.

In response to risks such as system server and network failures, cyberattacks, virus intrusion, and unauthorized access, the Group has implemented measures including the establishment of information security regulations, backup systems, use of data centers, introduction of security systems, and employee training. However, if a system outage were to become prolonged due to an unforeseen event, it could affect business performance.

The Group is subject to a wide range of legal regulations, including the Large-Scale Retail Store Location Act for store openings, the Act against Unjustifiable Premiums and Misleading Representations and the Food Sanitation Act for product sales, the Antimonopoly Act and the Subcontract Act for procurement, and recycling-related laws. If laws are amended or their interpretation becomes stricter, management costs could increase, affecting the Group's financial position and operating results.

Because store operations consume large amounts of energy, there is a risk that substantial tightening of climate change-related laws and regulations or a rapid increase in societal demands could result in energy costs and countermeasure costs exceeding expectations. The Group discloses information based on scenario analysis in line with TCFD recommendations, and has established the "PPIH Group Decarbonization Targets," promoting energy conservation and the shift to renewable energy.

As store development expands from the Tokyo metropolitan area to nationwide areas and the number of subsidiaries increases, securing and developing the necessary personnel has become a management challenge. The Group conducts unique recruitment activities, such as utilizing recruitment agencies and eliminating resumes for new graduate hiring, but if it is unable to sufficiently secure and develop the necessary personnel, service quality could decline and business performance could stagnate.