NAGAHORI CORPORATION

In the Jewelry Business, which accounts for approximately 99% of net sales, intense inter-company competition continues. Rising prices, Russia's invasion of Ukraine, and geopolitical risks such as the situation in the Middle East may affect demand for jewelry products. The Group strives to secure a competitive advantage through a wide range of sales formats, including wholesale to department stores, directly managed retail stores, and OEM production, as well as in-house brand development.

Jewelry is a discretionary product heavily influenced by personal consumption trends, and changes in the external economic environment or customer preferences may affect business performance in the short term. The Group enhances its ability to respond to demand fluctuations by offering jewelry that matches various age groups. The Group is working to increase sales and secure profits by leveraging synergies across its overall business.

Jewelry sales require a certain level of selling expenses, including advertising expenses, event venue and mannequin costs, and royalties for licensed brands, and there is a risk that profit margins may decline if a gap arises with net sales. The Group strives to maintain an appropriate balance between selling expenses and net sales, and works to achieve efficient SG&A spending.

Given the business structure centered on the wholesale business, if bad debts arise due to deterioration in the creditworthiness of business partners, it may have a direct adverse impact on earnings. The Group strives to reduce bad debt risk by increasing transaction diversification and thoroughly managing credit control.

The Group's import and export transactions (diamonds, colored stones, etc.) amount to approximately ¥4.8 billion and are conducted in US dollars and euros, so fluctuations in foreign exchange rates may affect business performance and financial condition. The Group strives to respond flexibly to market fluctuations through appropriate inventory and procurement management.

Bullion prices for gold, platinum, and other metals fluctuate under the influence of international market conditions, directly affecting procurement costs and product prices, and may therefore have a certain impact on the Group's business performance and financial condition. In the most recent fiscal year, a significant surge in bullion prices contributed positively to performance, but there remains a risk of a future reversal in prices. The Group addresses market fluctuation risk through appropriate inventory and procurement management.

The ratio of interest-bearing debt to total assets has trended upward, at 39.0% in FY2024 (ended March 2024), 39.9% in FY2025 (ended March 2025), and 44.1% in FY2026 (ending March 2026), with the balance of interest-bearing debt reaching ¥13,710 million. In a rising interest rate environment, this may adversely affect operating results through increased financial costs. The Group raises funds through a combination of equity capital and bank borrowings, but the increasing reliance indicates a growing financial risk.