GOLDWIN INC.

The Group has a high overseas production ratio and is affected by foreign exchange rate fluctuations in the procurement of products through both direct foreign-currency-denominated transactions and indirect transactions via trading companies and others. Although hedging measures such as forward exchange contracts have been implemented, unexpected currency fluctuations could adversely affect business performance through increased product procurement costs.

The raw materials used in the products manufactured and sold by the Group are exposed to the risk of fluctuations in resource prices, and unforeseen increases in resource prices could adversely affect business performance through increased raw material costs. There is a risk that the impact on overall procurement costs could be amplified when combined with foreign exchange rate fluctuation risk.

The Group has production and sales bases overseas, and legal amendments, tightened regulations, trade friction, political, social, or economic turmoil, conflicts, terrorism, or other events occurring in the countries and regions where it operates could adversely affect its business performance and financial condition. Continuous responses to geopolitical risks are required in order to maintain the global supply chain.

The products handled are highly susceptible to changes in personal consumption trends and consumer preferences due to economic fluctuations, and for products aimed at specific seasons, weather conditions such as unseasonable weather and temperature fluctuations significantly affect sales. A decline in the accuracy of demand forecasting could lead to excess or insufficient inventory, potentially resulting in deteriorated profitability.

The spread of infectious diseases may cause changes in consumer sentiment and affect the supply chain, potentially resulting in declines in net sales and profit margins, reduced production capacity, excess or insufficient inventory, and increased costs. If the impact becomes prolonged, there is a risk that the adverse effect on business performance and financial condition could become more severe.

The Group holds customers' personal information through mail-order sales, and if personal information is leaked due to unforeseen circumstances such as external hacking, there are concerns that loss of trust could lead to decreased sales and the incurrence of damages compensation costs. Although the Group is working to strengthen its internal management structure and raise awareness of information management, complete prevention cannot be guaranteed given the increasing sophistication of cyberattacks.

There is a possibility that the recovery of invested amounts may not be expected for held fixed assets due to declining profitability of the assets, and if impairment treatment becomes necessary, this would adversely affect business performance. As the Group proceeds with the expansion of its store network and investment in overseas bases, deterioration in the business environment could become a factor that increases impairment risk.

Although production and procurement are conducted in accordance with quality control standards, the absence of defects cannot be guaranteed for all products, and product liability claims could arise. While the Group has taken out insurance to prepare for such compensation risk, a decline in social reputation resulting from a product liability issue could adversely affect business performance.

The Group owns numerous intellectual property rights, including trademark rights, and the occurrence of infringement incidents could adversely affect product development and damage brand image. Infringement litigation related to intellectual property rights can require considerable time and expense to resolve, and could adversely affect financial condition and business results.

Human resources form the foundation of management, and if their acquisition and development do not proceed as planned, or if an appropriate workforce cannot be secured due to demographic changes, business execution could be hindered. In addition, the costs of responding to amendments to various labor laws and social insurance-related regulations, as well as rising personnel expenses, could adversely affect business performance.