KISOJI CO.,LTD.

Demand for the mainstay product "Shabu-shabu" is concentrated in the winter season, causing net sales and operating income to be skewed toward the second half of the fiscal year. Based on results for the most recent five fiscal years, the first-half share of net sales has remained at only 40-45%, and the company has continuously recorded operating losses in the first half (a loss of ¥93 million in the first half of FY2026 (ending March 2026)). This tendency toward second-half dependence is expected to continue, and there is a risk that deterioration in first-half performance could affect full-year results.

The Shabu-shabu / Japanese Cuisine "Kisoji" business format accounted for 79.5% of cumulative net sales in FY2026 (ending March 2026), indicating an extremely high degree of dependence on a specific business format. If sales of the mainstay format decline significantly due to unforeseen circumstances such as food safety issues, changes in consumer preferences, or intensifying competition, it would be difficult to compensate through other business formats. Because diversification across business formats is limited, the risk associated with a single business format is structurally linked directly to overall business performance.

The balance of tangible fixed assets as of March 31, 2026 reached ¥16,626 million (34.3% of total assets), with investment in store buildings accounting for the majority of these assets. If the operating environment surrounding store locations changes significantly and business performance deteriorates, recovery of invested funds may become difficult, creating a risk of impairment losses or store withdrawal costs. The high fixed cost burden may lead to financial vulnerability during periods of business deterioration.

As the basic policy is to open stores on leased premises, the balance of lease deposits, guarantee money, and construction cooperation funds as of March 31, 2026 amounted to ¥3,939 million (8.1% of total assets). If the depositary experiences financial failure or a lease agreement is terminated early, part or all of these amounts may become unrecoverable, potentially affecting business performance. Although contractual provisions stipulate refund or offset upon expiration of the contract term, counterparty risk cannot be entirely eliminated.

Meat, vegetables, and seafood account for more than 50% of raw material purchase amounts, resulting in a high degree of dependence on these perishable ingredients. If extensive and prolonged procurement disruptions occur due to abnormal weather, large-scale disasters, food safety issues, or similar events, this could lead to sharp increases in procurement costs or suspension of product offerings, significantly affecting business performance. The ability to secure alternative sourcing and manage inventory effectively will be critical to business continuity.

The restaurant industry has low barriers to entry and attracts many new entrants, and the ongoing trend toward lower prices has been reducing average customer spending. Within Japan, the market is saturated due to the declining birthrate and aging population, requiring responses to diversifying and changing consumer needs. While the company is promoting thorough QSC (Quality, Service, Cleanliness) management along with productivity improvements and cost efficiency, further intensification of competition could impede business activities and growth, potentially affecting business performance.

Although the company's policy is to expand its business scale through planned store openings, it may be unable to secure suitable sites due to changes in the competitive landscape or circumstances involving landowners. In addition, delays in securing construction contractors or obtaining building materials could slow progress on store opening plans, affecting growth potential. In an environment of rising construction costs and continuing material shortages, increases in store opening costs are also a concern.

The company is subject to various legal regulations, including the Food Sanitation Act and the Food Recycling Act, and the establishment, revision, or abolition of such regulations could affect business costs and operations. If a serious hygiene issue such as food poisoning or contamination by foreign matter occurs, the company could face a business suspension order or prohibition, resulting in serious impact on business performance. New expenses may also arise from capital investment or packaging material changes required to comply with the Food Recycling Act.

Along with active store expansion, securing, developing, and retaining personnel with knowledge and experience in the restaurant industry has become a key challenge. Revisions to recruitment hourly wages to secure part-time workers have raised wage rates, contributing to a rise in total labor costs. If the pace of hiring fails to keep up with the pace of store openings over an extended period, this could affect business performance through a decline in the quality of store operations or delays in store opening plans.

The store network is concentrated in the major metropolitan areas of Kanto, Tokai, Kansai, and Kitakyushu, so if a natural disaster such as an earthquake or typhoon, or an epidemic, occurs, damage to employees or facilities could cause partial or total suspension of operations. If business performance fails to recover even after substantial expenditures to repair damaged facilities, additional impairment losses or store withdrawal costs could be incurred. The geographic concentration of stores creates a structure that heightens business continuity risk in the event of a disaster.