Kintetsu Department Store Co.,Ltd.

The Department Store Business is significantly affected by an environment of accelerating change, including population decline in regional and suburban areas, economic and consumption trends, intensifying competition in the retail industry, changes in consumer behavior and lifestyles, the advance of digitalization, sluggish clothing and apparel sales, and fluctuations in inbound demand. These environmental changes may adversely affect business performance and financial condition. As countermeasures, the Company is promoting store structure reform and cost structure reform, while also working to build a new business model based on the medium-term management plan.

If credibility is damaged with respect to the quality of products manufactured and sold or the safety of food products, this may adversely affect business performance and financial condition, including a decrease in net sales. In credit sales transactions with corporate customers, including through the External Sales Business, there is also a risk of failure to collect accounts receivable due to the bankruptcy of business partners. As countermeasures, the Company regularly confirms compliance with relevant laws and regulations and conducts quality and hygiene management checks, and thoroughly manages credit for credit sales transactions.

The Company is subject to a wide range of laws and regulations, including the Large-Scale Retail Store Location Act, the Antimonopoly Act and the Subcontract Act, the Act against Unjustifiable Premiums and Misleading Representations, the JAS Act, the Food Sanitation Act, the Product Liability Act (PL Act), and environmental and recycling-related laws and regulations. Any violation of these could lead to a loss of social credibility and restrictions on corporate activities. The Company constantly monitors trends in the enactment and revision of relevant laws and regulations, and thoroughly disseminates compliance awareness internally through consultation with retained legal counsel and employee training.

Initiatives in new businesses that go beyond the conventional framework involve many uncertain factors, and changes in the business environment or market needs may make it difficult to establish such businesses, potentially adversely affecting business performance and financial condition. There is also a risk that insufficient prior confirmation of laws and regulations could result in a loss of social credibility and restrictions on corporate activities. The Compliance Promotion Headquarters takes the lead in identifying and evaluating anticipated risks in advance and strengthening the response framework.

Many of the Company's major stores and business offices are located in areas designated for intensified countermeasures against the Tonankai and Nankai earthquakes. In the event of a large-scale earthquake, both direct and indirect serious impacts are anticipated, including severe damage to stores and the incurrence of restoration costs, disruption to merchandise procurement due to damage suffered by suppliers, and a chilling effect on consumer sentiment. In the case of a large-scale fire as well, liability for damages and damage to merchandise and buildings could arise. The Company addresses these risks through the installation of emergency earthquake warning receivers, the development of crisis management manuals, the taking out of non-life insurance, and the formulation of a business continuity plan (BCP).

The Company operates numerous information systems, including POS systems, accounting systems, merchandise ordering systems, and customer information management systems. If a system failure occurs due to a natural disaster, employee error, computer virus infection, or other cause, this could significantly disrupt business operations and adversely affect business performance and financial condition. The Company has implemented measures such as dual power sources, the establishment of backup systems, and unauthorized access prevention programs.

The Company holds personal information on a large number of individuals, including External Sales Business customers, gift customers, and Tomonokai (Membership Savings Club) members. If such information were to be leaked externally, this could lead to a loss of social credibility and adversely affect business performance and financial condition. In addition to formulating a personal information protection policy, developing internal regulations, enhancing the security of information systems, and strengthening employee training, the Company has taken out insurance to prepare for the impact on business performance.

The Company procures funds mainly through borrowings from financial institutions. If concerns arise regarding the medium- to long-term management plan due to a deteriorating consumption environment or intensifying competition, or if interest rates fluctuate sharply, this could adversely affect business performance, financial condition, and fund procurement. In addition to procuring a certain amount of funds at long-term fixed interest rates, the Company is working to build relationships of trust with its correspondent financial institutions, to research fund procurement methods other than bank transactions, and to practice stable and efficient cash management.

Under its long-term strategy toward 2030, the Company has set forth an ESG policy of "standing alongside the community and thriving together with the community." However, delays in these initiatives pose risks such as a loss of credibility among stakeholders, delayed response to climate change risks, and increased tax burdens due to carbon tax regulations. As countermeasures, the Company promotes ESG initiatives and discloses its progress.

As business activities are highly dependent on human resources, competition for talent is intensifying due to the declining working-age population and increasing labor mobility. If the Company is unable to secure, as planned, personnel with the skills necessary for business development that extends beyond the conventional department store framework, this could adversely affect business performance and financial condition. The Company respects the diversity of its employees and promotes recruitment and development initiatives aimed at enhancing human capital value, based on its human resource development policy.