SHOBIDO Corporation

Approximately 60% of consolidated net sales for the fiscal year ended September 2025 were derived from transactions with the top 20 customers, resulting in a high degree of sales dependence on specific customers. If transactions with major customers are reduced or discontinued for any reason, this could materially affect business performance. The Group has intentionally concentrated transactions with leading companies from the standpoint of improving sales efficiency, and this policy itself constitutes a structural risk.

In the fiscal year ended September 2025, the ratio of foreign currency-denominated purchases and imported materials to total purchases reached 51.8%, of which 92.5% were settled in US dollars, meaning that fluctuations in the yen-dollar exchange rate directly affect business performance. Although the Group seeks to mitigate this risk through forward exchange contracts and other means, hedging is not complete against sudden and substantial exchange rate fluctuations. Since more than half of purchasing costs are denominated in foreign currency, there is a risk that yen depreciation could lead to a significant increase in purchasing costs.

In-house planned products are, in principle, purchased outright from suppliers and are difficult to return, meaning that sales trends directly affect inventory levels. If consumer preferences and demand change abruptly, responses such as price markdowns or disposal of products may become necessary, potentially pressuring business performance. The Group is continually working to optimize inventory levels, but the risk of excess inventory arising from demand forecast errors is structurally inherent.

The Group handles a wide range of character merchandise as a source of differentiation, but there is a risk that business performance may fluctuate due to changes in character popularity trends. If the Group is unable to obtain licensing rights for popular characters from rights holders, or if existing licensing agreements are terminated through non-renewal, cancellation, or otherwise, business performance may be affected. Although the Group seeks to respond flexibly to changing trends by diversifying the characters it uses, the structure of dependence on rights holders' intentions remains unchanged.

If quality or safety issues arise with products handled by the Group, such as cosmetics and cosmetic sundries, product liability and damages costs as well as defective product recall costs may temporarily arise. Furthermore, there is a risk that a decline in social credibility could lead to a medium- to long-term deterioration in business performance. The Group has established its own quality control standards and conducts ongoing guidance, including on-site inspections of supplier manufacturers, but risks inherent in the outsourced production structure cannot be entirely eliminated.

Fluctuations in raw material prices for cosmetics, cosmetic sundries, Contact Lens Related products, fashion accessories, and other products directly affect purchasing prices and logistics costs. A sudden surge in costs could affect business performance, and if such increases are difficult to pass on to selling prices, this could lead to a decline in profit margins. The Group continually works to improve efficiency through development of domestic and overseas supplier manufacturers and review of its logistics systems, but there are limits to how it can respond to sudden fluctuations.

The Group does not own production facilities and outsources production to cooperating factories in Japan and overseas. For in-house planned products manufactured overseas, changes in the domestic political and economic conditions of the producing country, changes in laws and regulations, significant exchange rate fluctuations, natural disasters, and other factors may affect business performance. If dependence on a specific producing country is high, the materialization of risk in that country could spread to the entire supply structure. As the Group has adopted a fabless business model, the stable operation of production outsourcing partners is a precondition for business continuity.

If confidential information, including personal information, is leaked due to cyberattacks or negligence by related parties, this could damage the Group's credibility and affect business performance. The Group has implemented measures such as strict information management based on internal regulations, regular information security awareness activities for all employees, submission of written pledges regarding information management, and regular backups of business data, but complete defense against increasingly sophisticated cyber threats is difficult.

If circumstances arise that violate various regulations related to products handled by the Group, such as cosmetics and cosmetic sundries, this could affect business performance through the incurrence of new response costs, revisions to product planning, increases in purchasing prices, and other factors. The Group exercises the utmost care to prevent regulatory violations, but there is a risk that response costs could increase due to amendments to laws and regulations or the introduction of new regulations.

The Group has multiple sales and logistics bases in the Tokyo and Osaka metropolitan areas, and if a large-scale disaster such as an earthquake or typhoon occurs, damage to business facilities or system failures could disrupt business operations and affect performance. Each business site has implemented measures against power outages and other disruptions, but depending on the extent of damage, the impact could exceed the scope of these measures. In particular, a large-scale disaster in the Tokyo or Osaka metropolitan areas, where major bases are concentrated, carries the risk of leading to a widespread halt in logistics functions.