YAKUODO HOLDINGS Co.,Ltd.

The Group requires permits, registrations, and notifications from each prefecture in order to sell pharmaceuticals and other products, and permits based on relevant laws are also required for food, alcoholic beverages, and other items. Future amendments to these laws could affect business results. As a countermeasure, the Group continues to maintain and manage various licenses and permits, but the content and timing of legal amendments are external factors that are difficult to predict.

The establishment of the registered distributor system under the 2009 amendment to the former Pharmaceutical Affairs Act, and the liberalization of internet sales under the 2014 amendment, have lowered barriers for entry into pharmaceutical sales by companies in other industries. If sales regulations are further eased in the future and liberalization of sales at general retail stores progresses, competition may intensify further, potentially affecting the Group's business results. The expertise and store network cultivated as a drugstore specialist serve as differentiating factors, but there is a risk that this competitive advantage could diminish depending on the progress of deregulation.

Stores with a floor area exceeding 1,000㎡ are required to submit notifications to prefectural governors and other authorities under the "Large-Scale Retail Store Location Act," with living environment factors such as traffic, noise, and waste subject to review. New store openings and expansions of existing stores may be subject to this law or regulations of local governments, and if the store opening policy cannot be implemented as planned, it may affect business expansion.

As of February 28, 2025, the Group operates 403 drugstores (including 3 stores with attached dispensing services and 1 dispensing-only pharmacy) across the six Tohoku prefectures, and the increase in store count contributes significantly to business scale and profit expansion. If store openings cannot proceed as planned due to contingent factors such as legal restrictions, competitor store openings, or changes in economic conditions, this may affect the foundation of the growth strategy. Because store opening areas are concentrated in the six Tohoku prefectures, the structure is also susceptible to regional economic trends.

Since the enforcement of the amended Pharmaceutical Affairs Act in 2009, the placement of pharmacists and registered distributors has been required for the sale of pharmaceuticals, and securing these qualified personnel is a prerequisite for business operations. The Group is actively promoting in-house training of registered distributors, but if it is unable to secure qualified personnel as planned, this may hinder new store openings and the operation of existing stores, potentially affecting business results.

The Group holds customers' personal information in connection with store and dispensing operations, and if an information leak occurs, it may damage trust and result in claims for damages, affecting financial position and business results. As a countermeasure, the Group has established regulations for handling customer information and thoroughly implements information management training for employees, but costs for developing customer information protection systems may increase in the future.

The six Tohoku prefectures, where the Group's stores are located, are exposed to risks from natural disasters such as major earthquakes and typhoons, and store facilities may be damaged in the event of a disaster. Additionally, if sales activities or distribution channels are disrupted by a disaster, this may affect business results. Because store opening areas are concentrated in the Tohoku region, the structure is such that regional disaster risk has a relatively large impact on overall business results.

The Group applies impairment accounting treating each store as an independent cash-generating unit, and makes timely judgments regarding indications of impairment. If profitability declines significantly due to sudden changes in the external environment or other factors, the Group may recognize impairment losses, which could affect business results and financial position. As the number of stores increases and the balance of fixed assets expands, the absolute amount of impairment risk also tends to increase.