KIMURATAN CORPORATION

Fluctuations in the domestic Japanese economy, sluggish personal consumption, and deterioration in the income environment could reduce demand for the Group, leading to lower sales and deteriorating profit margins. During economic downturns, the fundraising environment also becomes more difficult, making it a challenge to secure a stable financial base. This is a broad risk spanning both the Kids' Clothing and Real Estate business segments.

Fluctuations in the real estate market due to compound factors such as interest rate levels, economic trends, construction material prices, and investor sentiment could manifest in the Resale Business (Renovation & Resale) and Leasing Business as declining sales profit margins due to falling real estate prices, liquidity risk, and impairment losses recognized due to unrealized losses. Since the Real Estate Business is a pillar of earnings for the Company, this has a significant direct impact on business performance.

In the renovation and remodeling work of the Resale Business (Renovation & Resale), soaring prices of building materials such as imported lumber, steel, and concrete, rising labor costs due to a shortage of skilled workers, and lost opportunities from construction delays could put pressure on the profit plan. There is also concern that increased cost burdens, when the scope of renovation expands beyond initial expectations, may affect the profit plan.

Intensifying competition in real estate procurement is making it difficult to access high-quality income-generating properties and attractively priced used housing. This could lead to declining profit margins due to rising acquisition prices and long-term holding risk from acquiring properties at high prices, potentially adversely affecting the profitability of the Resale Business (Renovation & Resale).

Rising labor wages and labor shortages in China, a key production base, affect manufacturing costs and delivery times. In addition, geopolitical risks such as stricter regulations by the Chinese government and US-China trade friction, as well as cost increases due to exchange rate fluctuations, are factors that could reduce profit margins. If these lead to supply chain disruptions or increased costs, they could cause deterioration in the performance of the Kids' Clothing business.

The fashion market is subject to rapid trend changes, and competition with competitors, fast fashion brands, and overseas brands is intensifying. Misjudging market trends or delays in product planning could lead to poor sales performance and customer attrition, risking a decline in brand value and a decrease in sales and profits.

Foreign object contamination such as needles during the textile manufacturing process, the presence of harmful substances, and sewing defects directly affect customer safety and health, and could result in product recalls and damage claims. This risk could damage brand image and deal a serious blow to the reliability and competitiveness of the Kids' Clothing business.

The real estate industry is subject to a wide range of laws and regulations, including the City Planning Act, the Building Standards Act, and the Real Estate Specified Joint Enterprise Act. Amendments to these laws could increase compliance costs or force the cancellation or revision of new projects. Changes in the regulatory environment directly affect the business plans of the Resale Business (Renovation & Resale) and Leasing Business.

The Wearable Business utilizes a wide range of technical elements, including IoT technology, sensor control, communication functions, and software, giving rise to risks related to intellectual property rights such as patents, utility model rights, design rights, and copyrights. Infringement of third parties' intellectual property rights, or infringement of the Company's own rights by third parties, could affect business continuity and profitability.

Strict compliance with the Act on the Protection of Personal Information and other laws is required regarding the personal and health information handled by wearable devices. Tightening of regulations or a data leak incident could lead to legal sanctions and loss of social trust. This is positioned as a risk with a significant impact on the continuity of the Wearable Business.