YAMATOINTERNATIONALINC.

The core brand "Crocodile" group accounts for 88.0% of the Company's consolidated net sales in the current fiscal year, indicating an extremely high degree of dependence on a specific brand. Should sales trends for this brand deteriorate, it would have a direct and material impact on the overall performance of the Group. The Group is working to reduce this dependence by actively pursuing the development of new business formats and brands.

As the Group primarily targets the adult demographic and the outdoor category, the impact of fashion trends is relatively limited; however, sluggish personal consumption due to economic fluctuations, the actions of competitors, and changes in consumer preferences may affect performance. Changes in the competitive environment in the apparel market can affect both net sales and profit margins.

For brands targeting younger customers who are sensitive to fashion trends, there are concerns that the declining birthrate will reduce the customer base, while brands targeting other age groups are also expected to see a future contraction in their customer base due to the aging population. There is a risk that the domestic market's demand base will shrink over the medium to long term, which could affect the growth potential of the Group as a whole.

Abnormal weather conditions such as a cool summer or warm winter, as well as natural disasters such as typhoons and earthquakes, directly depress apparel sales. In particular, unseasonable weather or abnormal weather during the winter season, when the proportion of sales is high, has a significant impact on performance, and the highly seasonal nature of the product mix amplifies this risk.

If an infectious disease such as COVID-19 or a novel strain of influenza spreads domestically, part of the business may be disrupted due to reduced store operating hours or temporary closures, which, combined with a decline in consumption, could worsen performance. As the sales structure is centered on directly operated stores, the impact of store closures tends to directly affect net sales.

Directly operated stores are generally established under lease agreements, requiring the deposit of security deposits/guarantee money and initial investment costs for interior and exterior fixtures at the time of opening, in addition to ongoing fixed costs such as personnel expenses and rent. The inability to recover security deposits/guarantee money due to a lessor's bankruptcy, requests to vacate from shopping centers or general merchandise stores (GMS), or delays in store opening plans may affect performance.

The proportion of imports from Asian countries, centered on China, is high in procurement, creating a risk that costs will rise due to fluctuations in exchange rates. In addition, factory operations and product imports may become difficult due to political instability such as terrorism or war, natural disasters, or infectious diseases such as SARS, which could threaten the stability of the product supply system.

Although a management system based on strict quality standards has been established, should a quality-related problem or a product liability incident occur, it could damage the corporate or brand image and result in claims for damages, thereby affecting performance. Damage to brand value could also lead to a long-term decline in net sales.

The Group holds a large amount of personal information through retail and self-managed sales floors, mail order sales, and other channels. While a management system has been established and utmost care is taken, should a leak of information occur due to criminal activity or a management-related issue, it could result in a loss of social trust and claims for damages from individuals. With the expansion of digital sales channels, the volume and importance of the personal information held tends to increase.

Although the Group ensures strict compliance with the Act against Unjustifiable Premiums and Misleading Representations, the Antimonopoly Act, the Subcontract Act, the Act on the Protection of Personal Information, and other laws, there may be cases requiring compensation for damages due to legal violations or responses to legal amendments. In addition, should tax reforms such as an increase in the consumption tax be implemented, demand for apparel could decline due to sluggish personal consumption, thereby affecting performance.