NISHIMATSUYA CHAIN Co., Ltd.

The Company's core products, baby and children's clothing, are sensitive to temperature changes. In the event of adverse weather or abnormal climate conditions causing temperature trends that differ significantly from normal years, discrepancies may arise in sales volume plans, potentially affecting business results. The Company seeks to reduce this risk by thoroughly managing purchasing plans and seasonal inventory to curb excess inventory, and by building a product supply system responsive to sales conditions.

If the head office, stores, net centers, joint shipping centers, or domestic and overseas production sites and factories are damaged by natural disasters such as earthquakes, this could affect the product supply system and hinder the continuation of business activities. As countermeasures, the Company has established a system for setting up a response headquarters in the event of a disaster, and is working to diversify procurement sources by developing procurement routes outside China and to disperse distribution functions by establishing multiple logistics centers.

If an epidemic such as a novel influenza virus spreads around the head office, stores, net centers, joint shipping centers, or domestic and overseas production sites and factories, leading to an emergency such as distribution restrictions, this could affect the product supply system and sales and hinder business continuity. In addition to thorough infection prevention measures, dispersing head office workspaces, and implementing restrictions on movement within facilities, the Company is working during normal times to diversify and disperse domestic and overseas sourcing routes.

Since many of the products sold are manufactured overseas, exchange rate fluctuations affect import prices, and for independently developed imported products, exchange rate fluctuations directly impact business results. The Company hedges through forward exchange contracts based on its foreign exchange management regulations, but if rapid and significant exchange rate fluctuations continue, this could affect business results.

Baby and children's products are sold across a wide range of business formats, including specialty stores as well as department stores, mass merchandisers, home centers, and drugstores, and competition is intensifying. Depending on future competitive trends, this could affect business results. The Company seeks to differentiate itself from competitors and strengthen its competitiveness by promoting the development of private brand products that offer reasonable prices and quality.

Store openings in shopping centers (SCs) are subject to regulations such as the Large-Scale Retail Store Location Act, and if such regulations lead to significant changes in store opening plans, this could affect business results. In addition, if properties meeting the Company's strict store opening criteria cannot be secured, the planned number of new stores may need to be changed. The Company seeks to reduce this risk by actively promoting openings in vacated properties within existing SCs.

The Company opens stores mainly by leasing land and buildings, and provides funds such as construction cooperation money, security deposits, and guarantee deposits to landowners and developers. If all or part of these funds cannot be recovered due to the bankruptcy of the recipient or other reasons, this could affect business results. The Company seeks to reduce this risk by conducting credit checks prior to opening stores and gathering information periodically after opening.

If the development of necessary personnel does not proceed as planned, the Company may be unable to continue expanding its scale as planned in the future, which could affect business results. The Company seeks to reduce this risk by defining, in its employee education regulations, the seminars, training, and required job knowledge to be undertaken by position and department, and by implementing planned employee education accordingly.

The birthrate of newborns in Japan has been on a long-term declining trend, and if the birthrate declines further after the Company's market share has already expanded significantly, this could affect business results. While there are currently no signs of impact on business results, the Company is addressing the risk of market contraction by expanding the variety and sizes of products for upper elementary school children (school sizes) and enlarging stores to accommodate this.

Many of the products sold are manufactured in China due to production capacity and cost considerations. If China's political or economic environment changes rapidly, significant discrepancies may arise in product procurement plans, potentially affecting business results. The Company seeks to reduce this risk by developing and diversifying procurement routes outside China, such as in ASEAN countries.