KOMERI CO.,LTD.

Due to regulations under laws and ordinances such as the City Planning Act and the Act on the Measures for the Retail Business of Specified Large-Scale Stores, or coordination with residents and local governments, there is a possibility that stores cannot be opened as planned, or that construction costs and other store opening costs may increase. Population decline due to the declining birthrate and aging population may lead to a shrinking market size in areas where stores are located and rising labor costs, and if store closures occur, this could affect business performance and financial condition. As countermeasures, the Company is promoting the development of stores with low break-even points, store openings tailored to small trading areas, and revitalization through renovation of existing stores and human resource development.

Since the Company handles many highly seasonal products, including gardening and agricultural products, unusual weather such as a cool summer or warm winter may slow product movement, resulting in decreased sales, reduced profit margins due to price changes, and excess inventory. In addition, when natural disasters occur, risks linked to disruptions in the distribution network may arise. As countermeasures, the Company strengthens product appeal, adjusts the timing of product rollout, and adjusts inventory, while also promoting decarbonization efforts such as reducing CO₂ emissions.

Natural disasters, power outages, fires, war, terrorism, computer viruses, requests to refrain from movement due to the spread of infectious diseases, and other factors may cause disruptions to logistics or continuous failures in information systems. The situation in the Middle East and lockdowns overseas may also affect procurement of products, including Private Brand Products, and this could result in decreased sales, shutdown of cash register systems, data loss, and recovery costs. The Company addresses this through the development of a nationwide distribution network and the establishment of a low-cost operation system.

If infectious diseases such as novel coronavirus or influenza spread, business performance may be affected by store closures, shortened business hours, and other measures. As countermeasures, the Company develops an environment that prioritizes employee safety, hygiene, and health, while also expanding contactless services such as strengthening e-commerce, hold-for-pickup services, and delivery drop-off, and promoting self-service sales in conjunction with DX of store operations. The Company strives to build a system that can continue operations even during the spread of infectious diseases.

In addition to the trend toward larger stores among home center companies, competition is intensifying beyond the boundaries of industries and business formats, and business performance may be affected by large-scale store openings by competitors within trading areas. As countermeasures, the Company is pursuing dominant area strategies through multi-store expansion, renovation of existing stores and introduction of highly productive shelf allocation, and promotion of low-cost operations. Furthermore, through investment in human resource education such as e-learning and the Meister system, the Company aims to improve employees' sales and customer service capabilities and become the top choice within trading areas.

The Company holds and manages customer and business partner data as well as business data such as sales and procurement, and there is a possibility that information leakage could occur due to criminal acts or computer system failures. Should such an event occur, it could result in a decline in social credibility and liability for damages arising from the information leakage, which could affect business performance. As countermeasures, the Company regularly holds Information Security Committee meetings and Information Security study sessions to share information, provide education and guidance, and build an appropriate security system.

Since the Company imports products from overseas, if foreign exchange rates or crude oil market prices fluctuate more than expected, this could disrupt the procurement of imported products, and business performance may be affected by an increase in the cost of goods ratio and operating costs. Based on the Foreign Exchange Risk Management Regulations, the Foreign Exchange Risk Management Committee is convened, and the impact of exchange rate fluctuations is mitigated through the use of forward exchange contracts, currency swap transactions, and currency option transactions. During the fiscal year under review, the Foreign Exchange Risk Management Committee met once and worked to regularly reduce risk.