SHIMAMURA CO., Ltd.

Demand fluctuations for seasonal products caused by extreme weather, and damage to stores and logistics networks caused by natural disasters, may affect business performance. The Company implements measures such as product policies less susceptible to weather, region-specific responses, and agile sales promotions, while also ensuring business continuity through periodic review of its BCP (Business Continuity Plan).

The progression of domestic population decline and the declining birthrate/aging population raises concerns about a shrinking customer base and declining sales in existing trading areas. As countermeasures, the Company is pursuing expansion of regional market share through line robbing (expanding product assortment) and relocation (store relocation).

Political instability in producing countries and conflicts occurring around the world pose the risk of undermining the stability of merchandise procurement, leading to increased procurement costs or supply disruptions. The Company is working to reduce dependence on specific regions by diversifying and decentralizing producing countries and suppliers.

Sudden exchange rate fluctuations, such as extreme yen depreciation, and surges in energy and raw material prices pose a risk of squeezing profitability through rising procurement costs. The Company seeks to mitigate this impact through the use of forward foreign exchange contracts for procurement by the Trading Department, stable production through fabric contracts and sewing line contracts, energy-saving measures, and review of producing countries.

Intentional threats such as cyber attacks and unauthorized access, if resulting in leakage of customer information or system outages, could have a significant impact on business continuity and corporate trust. The Company has established a system to minimize damage and enable rapid recovery in the event of an incident, through strengthened security and regular BCP training.

Insufficient new store openings and the decline in existing stores due to expiration of store lease contracts pose a risk directly linked to a shrinking sales scale. The Company seeks to maintain and expand its store network through promoting store openings in urban areas, strengthening relocation in suburban areas, and maintaining favorable relationships with existing store owners.

A delayed response to rapid changes in consumer preferences and market needs may result in unsold inventory and lost sales opportunities, adversely affecting business performance. The Company promotes product development utilizing customer management systems and SNS analysis tools, working to swiftly grasp demand trends and reflect them in product policy.

Rising delivery costs, distribution center capacity overruns, and equipment failures or aging pose the risk of reduced logistics efficiency and additional costs. The Company is promoting stabilization and efficiency of its logistics infrastructure through a modal shift in its own logistics operations, use of direct logistics, opening of new distribution centers, and renovation and repair of existing centers.

Labor and personnel shortages, as well as delays in developing successors, pose a risk of deteriorating the quality of store operations and management. The Company seeks to secure human resources sustainably and strengthen organizational capability through more flexible employee recruitment, improvements to personnel and labor systems, enhanced training programs, promotion of women's active participation, and operation of successor development curricula.

A delayed response to environmental issues (reducing GHG emissions, promoting recycling), social issues (respect for human rights in the supply chain, reducing harassment, promoting diversity), and governance issues (compliance with the Corporate Governance Code) increases business risk through lower evaluations from investors and consumers and stricter regulations. The Company promotes concrete measures for each issue while enhancing information disclosure.