TOKYO SOIR CO.,LTD.

Department stores and mass merchandisers, which account for a large portion of the Formal Wear Business's sales, are on a declining trend, and sales floor reductions due to withdrawal from unprofitable stores directly impact sales. Deterioration of trading terms or unilateral termination of business relationships resulting from management integration among large retailers could also adversely affect performance. As countermeasures, the Company is working to increase the retail business's share of sales through expansion of the directly-operated store "Forme Forma" and strengthening of EC operations, as well as expanding its business domain through strengthening the Lifestyle Business.

In sub-license agreements with major brands, if the counterparty unilaterally terminates contract renewal upon expiration of the contract term, it could significantly impact the Group's performance. Since product development leveraging brand strength forms part of the business foundation, loss of such contracts could deal a serious blow to both sales and earnings. The annual securities report does not describe specific countermeasures.

A portion of products is manufactured in Vietnam, China, and other locations, where risks exist such as exchange rate fluctuations, unexpected changes in laws and regulations, rising sewing labor costs and raw material prices, and impacts on technical guidance and imports due to unforeseen disease outbreaks. If these risks materialize, they could adversely affect performance through increased manufacturing costs and supply disruptions. As a countermeasure, the Company is diversifying production countries across ASEAN nations and maintaining a certain volume of domestic production.

In the Formal Wear Business, the Company has obtained QTEC certification for inspection technicians and authorization to use the SIF mark, striving to maintain high quality; however, if a product liability incident occurs, it could damage the corporate image and affect performance. As countermeasures, the Company conducts standards compliance checks at the raw material and merchandise procurement stages, as well as product checks by sales staff at stores.

Recognizing the establishment of a new revenue structure as an important challenge, the Company is engaged in new business development and store openings in new fields; however, there is a possibility that initial plans may not be achieved due to changes in market conditions. Although market research is conducted, failure to achieve plans could adversely affect performance. As countermeasures, the Company formulates and executes business plans and conducts regular progress monitoring.

Unfavorable weather and unpredictable weather conditions caused by large-scale climate change in recent years may result in lost sales opportunities. While the impact of seasonal weather irregularities was previously minor, the risk to performance is increasing as climate change intensifies. The annual securities report does not describe specific countermeasures.

The Company's distribution center, the Merchandise Center, is concentrated in Kawasaki City, Kanagawa Prefecture, and if the facility is damaged by a large-scale natural disaster, it could significantly impact management through disruption of business activities. Even without direct damage, disruption to the distribution network could have a serious adverse effect. As a countermeasure, the Company outsources logistics functions for some products to external warehouses to diversify its distribution centers.

The Company has appointed an information management officer for handling personal information and manages operations based on internal regulations; however, if information leakage occurs due to an unforeseen incident, it could lead to a decline in social credibility and costs such as damages, affecting performance. As countermeasures, in addition to building firewalls and installing anti-virus software, the Company periodically issues alerts to raise employees' security literacy.

The Company has entered into a term loan agreement of ¥800 million with four partner banks for the construction cost of a rental apartment building, which is subject to financial covenants related to decreases in net assets and recording of ordinary losses. If these covenants are breached and repayment of the borrowings is demanded, it could significantly impact the Group's financial condition. The annual securities report does not describe specific countermeasures.

The spread of COVID-19 has had a significant impact on the Group's performance in the past, and although the disease has been reclassified to Category V, if a new type of infectious disease becomes widespread again and the market stagnates, it could affect performance. Given the business characteristic of dependence on ceremonial occasion demand (formal wear for weddings and funerals), restrictions on going out and gatherings pose a risk directly linked to sales. The annual securities report does not describe specific countermeasures.