Laox Holdings CO.,LTD.

The Group operates stores and facilities including e-commerce, product supply, and local procurement in Asia, centered on China. If political and social instability, economic deterioration, changes in laws and policies, foreign exchange rate fluctuations, or deterioration in sentiment toward Japan occur, this may lead to reduced demand for products offered and a significant decline in inbound tourists visiting Japan. Given the high dependence on the Overseas Business, the impact on business performance and financial condition would be significant. While the Group has indicated a policy of striving to avoid such occurrences and respond when they arise, specific details of countermeasures have not been disclosed.

If an infectious disease spreads, this may result in operating restrictions at directly-managed stores and commercial facilities, a decline in demand from inbound foreign tourists, and sluggish consumption due to voluntary restraint from going out. If the impact is prolonged, there is a risk of a significant impact on the Group's business performance and financial condition. In particular, given the Group's business structure that depends on inbound demand, travel restrictions and consumption suppression caused by infectious diseases are a material risk directly linked to sales.

Shaddy Co., Ltd. generates approximately 50% of its annual net sales during the four-month period comprising the Chugen season (June-July) and Seibo season (November-December), while Barneys Japan Co., Ltd. also has a sales structure concentrated in the heavy apparel selling season from October to December, reflecting seasonal fluctuation. If a large-scale natural disaster or unprecedented weather change occurs during these peak periods, it may have a significant impact on the Group's business performance. Because the materialization of risk during periods of concentrated sales greatly affects overall annual performance, this represents a structural vulnerability to the Group's overall earnings stability.

Shaddy Co., Ltd. uses raw materials such as paper pulp in procuring materials for catalogs and flyers, and if raw material market prices rise beyond expectations due to global demand and crude oil price trends, procurement costs may increase, potentially having a significant impact on business performance and financial condition. In addition, given the business characteristic of shipping gift products, there is also a risk that rising fuel prices could increase transportation costs and squeeze profitability. While the Group continues efforts toward stable procurement and cost reduction, there are limits to its ability to respond to global market price fluctuations.

The Group holds business locations such as stores and distribution centers both in Japan and overseas, and if impairment losses are recognized and measured as a result of deterioration in future cash flows or other factors, impairment losses on fixed assets may be recorded. The recording of impairment losses may have a significant impact on business performance and financial condition, and in particular, the risk of simultaneous occurrence at multiple locations cannot be denied during a downturn in the business environment. While the Group acquires assets based on expectations of future value creation, details of countermeasures for changes in the business environment have not been disclosed.

For private brand products and apparel, changes in consumer demand, the occurrence of country risk, unprecedented weather changes, and unforeseen events can have a significant impact on sales, potentially having a significant impact on business performance. In particular, highly seasonal apparel and made-to-order private brand products carry the risk that inaccurate demand forecasts directly lead to excess inventory and valuation losses. The Group strives to mitigate inventory risk through thorough management of sales trends and inventory quantities, as well as by strengthening sales promotions and events.

While the Group's information systems are stored at a highly robust external data center and other disaster prevention measures have been implemented, if core functions suffer devastating damage due to a large-scale natural disaster or external hacking attack, this may result in an inability to ship or delays, reducing sales during the recovery period. Furthermore, if the costs of repairing or replacing facility functions exceed the coverage amount of insurance, a large amount of funds may be required, potentially having a significant impact on business performance and financial condition. As sales channels including the e-commerce business expand, dependence on systems is increasing, making business continuity risk in the event of a failure a material concern.

The Group holds a large amount of personal information, including that of members, in connection with product sales at stores and via e-commerce, and if unexpected information leakage occurs due to computer system trouble or other causes, this may result in a loss of social trust and a significant impact on business performance. The Group has established internal management systems and manages information strictly, and has also set up a "Risk Management and Compliance Committee" and a "Group Internal Audit Office" to conduct compliance audits. As the volume of personal information held increases with the expansion of the e-commerce business, ongoing response to cyberattack risk is required.

The Group may conduct M&A, organizational restructuring, alliances, divestitures, and other transactions for the purpose of expanding and strengthening its businesses. While thorough investigation and consideration of target companies is conducted, contingent liabilities or unforeseen problems may arise after the completion of M&A transactions. If such problems materialize, this may have a significant impact on the Group's business performance and financial condition. As the Group pursues a strategy of diversifying and expanding its group businesses, it also carries risks related to increasingly complex integration processes and the valuation of assets such as goodwill.

At the Group, the knowledge and experience of officers and key employees, including the Representative Director, play an important role in group management and business execution, constituting an important management resource. If these officers and employees resign or retire for any reason and it becomes difficult to recruit successors, this may have a significant impact on business performance and financial condition. In group management with a diversified business portfolio, the departure of key personnel with specialized expertise poses a risk to business continuity, making the development of succession planning and securing of human resources a challenge.