KING Co., Ltd.

Key risks include a slowdown in personal consumption due to economic fluctuations, competition with other companies, rapid changes in fashion trends, and prolonged unusual weather such as cool summers or warm winters. The Apparel Business is highly susceptible to the external environment, and if unexpected changes occur, sales may decline, potentially affecting business performance and financial condition. As countermeasures, the Group is working on mid-period additional planning and the development of production systems.

The majority of product manufacturing is outsourced to China, and there is a risk that product procurement may be disrupted by export restrictions imposed by the Chinese government, import restrictions imposed by the Japanese government, changes in China's economic conditions, or the occurrence of disasters. If these risks materialize, stable product supply may become difficult, potentially affecting business performance and financial condition. The Group is working to strengthen its production management system through closer cooperation with suppliers.

There is a risk that malfunctions in computer systems or communication networks caused by natural disasters or accidents, or the shutdown of information systems due to computer viruses, could cause delays in business operations. In addition, if unauthorized external intrusion results in the leakage or loss of internal databases, this could lead to a decline in social credibility, potentially affecting business performance and financial condition. The Group is working to build security measures for its information systems and to strengthen its management structure.

As a business operator, the Company is subject to various legal regulations, and failure to appropriately respond to changes in various laws and regulations could affect business performance and financial condition. The Group has established a "Compliance Basic Policy (Charter of Corporate Behavior)" and the "King Group Code of Conduct" to thoroughly ensure compliance with laws and its articles of incorporation. At present, there are said to be no legal regulations that directly regulate the Apparel Business itself.

Deferred tax assets are recorded based on a reasonable estimate of future taxable income after determining recoverability, but there is a risk that deferred tax assets may decrease if there are significant changes in estimates of future taxable income or changes in tax systems such as tax reforms. A decrease in deferred tax assets could directly affect the business performance and financial condition of the Group.

There is a risk that an impairment loss on fixed assets may be recorded if the fair value of owned land, buildings, etc. declines significantly, if business losses continue, or if it is determined that all or part of the book value cannot be recovered due to a decline in business profitability. Recording an impairment loss could affect the business performance and financial condition of the Group.

If an event such as an earthquake or other natural disaster, or an accident such as a fire, causes significant impact on business locations, this could disrupt business continuity and affect business performance and financial condition. The Group has established a response headquarters to prepare for unforeseen circumstances and has developed a system for rapid response and prevention of damage escalation, but there are limits to being fully prepared for large-scale disasters.