MARUI GROUP CO.,LTD.

Sluggish personal consumption due to economic fluctuations, rising prices, higher interest rates, and population decline, together with the expansion of the EC market and the rise of the sharing economy, are expected to reduce store foot traffic, transaction volume, and credit card usage. The diversification of payment methods driven by the advance of cashless payments is also intensifying competition, which could lead to a decline in customers and fee income. As countermeasures, the Group is introducing experience-based and non-merchandise tenants, creating event-filled stores, expanding EPOS Card Gold and Platinum membership, and promoting main-card status through the Rent Guarantee Service business.

Regarding card-related operating receivables (installment receivables and operating loans receivable), which constitute a significant portion of the Group's total assets, deterioration in economic conditions or changes in relevant laws could lead to an increase in payment delays and uncollected receivables, potentially causing a sharp rise in credit losses and allowances. In addition, although a provision for losses on interest repayment has been recorded in relation to the repayment of Card Cashing interest, there is a risk that additional expenses could arise if the provision proves insufficient to cover future repayment claims. As a countermeasure, the Group maintains a low credit loss ratio through ongoing credit management based on usage frequency, usage amount, and payment history.

As the FinTech business grows, operating receivables are expected to increase, and the Group recognizes that funding risk will gradually rise as the amount of financing expands. In the event of turmoil in financial markets or a deterioration in business performance or creditworthiness, difficulties in borrowing from financial institutions or issuing corporate bonds could arise, significantly affecting cash flow. As countermeasures, the Group maintains interest-bearing debt at approximately 90% of operating receivables, diversifies indirect and direct financing, levels out repayment and redemption amounts, enters into commitment line agreements, and maintains a fixed interest rate ratio to ensure financial soundness.

In co-creation investments in unlisted companies, contingent or unrecognized liabilities that could not be identified during pre-investment due diligence, deterioration in the investee's business performance, changes in business policy, or a cooling of the stock market due to international conflicts or financial crises could prevent the expected results from being achieved, potentially resulting in impairment losses. In addition, held listed shares are also subject to price fluctuations depending on stock market trends. As a countermeasure, since FY2024 (ending March 2024), the Group has changed its policy to keep initial investment amounts small and make additional investments only once the likelihood of an IPO increases, thereby seeking to curb impairment risk.

If system errors caused by hardware or software defects, or system delays, service outages, website tampering, etc. caused by external cyberattacks or unauthorized access occur, the Group's financial condition and business performance could be affected. The increase in new attack methods driven by technological innovation, including generative AI, is also recognized as an emerging risk. As countermeasures, the Group implements system redundancy, regular system replacement, vulnerability testing, risk assessments through external consulting, and prior security checks when using cloud services.

The Group holds a large amount of personal information, including EPOS Card member data, and if information leakage or unauthorized use occurs, it could damage the Group's social credibility and give rise to liability for damages, affecting business performance. The risk of information leakage is also increasing due to the growing sophistication of cyberattacks such as ransomware and the potential for decryption using AI and quantum technologies. As countermeasures, the Group has established the

If a large-scale earthquake, wind or flood damage, or act of terrorism occurs at stores mainly in the Tokyo metropolitan area or at business locations nationwide, the resulting disruption of social infrastructure could force the suspension of business activities, affecting the Group's financial condition and business performance. As countermeasures, the Group has introduced an employee safety confirmation system, formulated disaster response manuals, implemented earthquake resistance measures for buildings, facilities, and systems (including data backup), conducted various drills and stockpiled supplies, and established a system to set up a Group Disaster Response Headquarters in the event of an earthquake or similar disaster.

Damage to stores and facilities caused by typhoons, heavy rains, and other flood-related events, as well as increased costs resulting from stricter regulations such as the introduction of a carbon tax, could affect the Group's financial condition and business performance. The Group positions appropriate response to climate change risk and the capture of growth opportunities as an important issue through its response to TCFD, and the ESG Committee manages climate change risk.

If an infectious disease outbreak occurs in areas where business locations are situated, or if measures such as requests to refrain from going out are implemented, store closures and other effects could impact the Group's financial condition and business performance. There is also a risk that business continuity could become difficult due to an increase in the number of infected employees. As countermeasures, the Group has established a business continuity framework through the use of telework, shift-based operation and office dispersion at call centers and distribution centers, and thorough infection prevention measures.

Due to the declining birthrate, aging population, and shrinking working-age population, intensifying competition for talent, including specialized personnel, the outflow of existing employees, and a potential future shortage of management personnel could affect the evolution and continuity of the business. As countermeasures, the Group is promoting human capital investment through Group-certified projects and the next-generation management training program (Co-Creation Management School: CMA), new graduate recruitment utilizing long-term internships, and active recruitment of digital talent through Marui United Co., Ltd., established in 2024.