UNITED ARROWS LTD.

Securing excellent talent in digital marketing and IT fields has become an important challenge in order to respond to the casualization of fashion and the shift of purchasing behavior online. Amid tightening labor supply and demand due to a declining working population and an increasingly active job transfer market, as well as rising labor costs, failure to achieve appropriate personnel allocation, recruitment, and development may affect the achievement of store opening plans and the long-term vision. As countermeasures, the Group is working on wage increases, improving evaluation systems, utilizing talent management systems, and expanding the educational framework such as support for attending business schools.

The Group procures products manufactured in various countries around the world denominated in foreign currencies, and a rise in procurement prices due to the progress of yen depreciation may affect business activities and performance. To avoid dependence on specific procurement countries, the Group is diversifying its production countries, and is also implementing measures such as adjusting trading terms with trading companies and setting appropriate product prices in light of exchange rate fluctuations.

The domestic apparel market is expected to gradually shrink over the long term due to the effects of the declining birthrate, aging population, and population decline, making it a challenge to move away from a business structure centered on the apparel business. While the Group aims to diversify into non-apparel fields, if it is unable to achieve an ideal business portfolio due to a shortage of talent and know-how or stagnation in new brand development, this may affect corporate value and performance. As countermeasures, the Group is promoting new business development through its Development Division, actively utilizing M&A and alliances, and prioritizing the allocation of management resources to growth areas.

Against the backdrop of a shrinking domestic apparel market, the Group has a policy of utilizing M&A and alliances to expand business scale, but if the expected synergies or profitability are not realized, this may adversely affect corporate value and performance. As countermeasures, the Group is working on formulating appropriate investment decision criteria and processes, acquiring M&A specialist personnel and establishing a dedicated department, utilizing external partners, and accumulating PMI know-how.

With group companies in Japan and overseas, if consistency cannot be ensured between the business strategies of each company and the Group's overall management strategy, or if governance and monitoring do not function properly due to differences in laws, regulations, and business practices in overseas markets, this may affect corporate value. As countermeasures, the Group has established a management framework based on the "Affiliated Company Management Regulations," dispatches directors and auditors to subsidiaries, and conducts internal audits of major subsidiaries by the Internal Audit Office.

As the Group expands store openings and product procurement in Taiwan, China, and the ASEAN region, instability in the political and economic situations of relevant countries and regions, or the occurrence of conflicts, may disrupt employee safety, store operations, and product procurement, thereby affecting performance. In addition, rising energy prices and transportation costs due to geopolitical risks such as instability in the Middle East are also factors affecting performance. As countermeasures, the Group is strengthening information gathering and market research, diversifying production locations, formulating and disseminating BCPs, and developing manuals for responding to overseas emergencies.

With domestic stores concentrated in major metropolitan areas and headquarters functions and logistics bases concentrated in the greater Tokyo metropolitan area, if a large-scale natural disaster such as a major earthquake occurs, there is a risk of damage to store facilities, suspension of operations, paralysis of headquarters functions, and disruption of the supply chain. Failure to respond swiftly and appropriately may affect business activities and performance. As countermeasures, the Group is working on formulating BCPs and emergency response manuals, establishing and building a crisis management framework, and conducting training exercises with relevant departments.

As the Group handles a large amount of personal information, including 1.6 million active members of "UA Club," if confidential information is leaked due to cyberattacks, computer viruses, or management errors by employees or contractors, this may affect strategy and performance through damage to brand image and costs arising from legal liability claims. As countermeasures, the Group is collaborating with security specialist companies, developing information security regulations and policies, conducting information security training and targeted phishing email drills for all employees, and establishing an information security subcommittee.

As the logistics network, information systems, and EC site operations play a fundamental role in business with the promotion of OMO, if it becomes difficult to maintain these due to cyberattacks or system failures, this may affect performance through disruption of product supply. As countermeasures, the Group is promoting redundant configurations for information systems and EC sites in cloud environments, developing and reviewing BCPs, and distributing operations across multiple locations.