TSUKAMOTO CORPORATION CO., LTD.

There is a risk that planned revenue may not be secured due to sluggish personal consumption caused by fluctuations in domestic economic conditions, competition with other companies in the same industry, and rapid changes in consumer needs. In particular, apparel and textile-related products are susceptible to fashion trends, and there is a possibility of poor sales performance and a decline in product value. The Company is working on continuous monitoring of market trends and reviewing its product lineup.

Along with the shrinking trend of the Wasou (Japanese Clothing) industry as a whole, the scale of the Group's Wasou (Japanese Clothing) Business has also contracted, resulting in continued losses. If withdrawal from unprofitable events and the shift to non-event-based business is delayed, this could have a significant impact on business results and financial position. The Group aims to return to a profitable trend through efficient management via cost reductions and improved productivity through the effective utilization of management resources.

If difficulties arise in collecting receivables due to unexpected bankruptcy of customers, this could adversely affect business results and financial position. The Company has established a system in which the Audit Office reports the latest credit information to the Managing Directors' Committee, and also mitigates credit loss risk by subscribing to trade credit insurance. However, these measures may not completely avoid unforeseen circumstances.

The Company owns leased real estate in Tokyo and earns rental income from it, but a deterioration in leasing conditions due to intensifying competition, fluctuations in land prices, disasters such as earthquakes, or a worsening of the regional economy could affect business results and financial position. Since real estate market conditions and regional economic trends are directly linked to earnings, this is an area that requires continuous monitoring.

If impairment losses arise on held fixed assets due to a significant deterioration in the business environment leading to reduced profitability or a decline in market prices, this could adversely affect business results. The Company applies impairment accounting, which inherently carries the risk that additional losses may need to be recognized depending on future changes in the business environment.

In overseas production and procurement activities, there is a risk of increased procurement costs due to fluctuations in exchange rates and changes in the value of local currencies. The Company strives to mitigate exchange rate fluctuation risk through hedging transactions utilizing derivatives such as forward foreign exchange contracts, but complete avoidance is difficult. In addition, the Company is also working to strengthen its quality control system in order to prevent product accidents caused by troubles in production management.

If the Company is unable to secure young and specialized personnel, resulting in disruption to business continuity, this could affect business results and financial position. The Company strives to secure personnel through active visits to domestic universities, holding job seminars, and expanding mid-career hiring, but there is a possibility that constraints on successor development may arise due to an imbalance in the age composition of employees.

There is a risk of increased interest burden due to interest rate fluctuations relative to the balance of interest-bearing debt. The Company seeks to mitigate this risk by actively working to reduce interest-bearing debt, but depending on interest rate trends, this could have a material impact on business results and financial position.

If the turnover period of each item fluctuates due to trends in market fashion or deteriorating demand caused by competing products, additional losses may need to be recognized due to the expansion of inventory valuation losses. The Company adopts a method of writing down book value based on declining profitability and writing down to net realizable value, but there is a risk that the Company may be slow to respond to sudden changes in the demand environment.

Natural disasters such as earthquakes and floods, sudden fires or accidents, and the outbreak of epidemics such as novel influenza or COVID-19 may force the interruption of business activities, resulting in delays in procuring purchased goods and a significant decrease in collectible amounts due to sluggish sales. The Group has positioned this risk as a particularly critical risk, and has established a business continuity system through the adoption of telework, work-from-home arrangements, staggered commuting hours, and flextime work systems.