Saikaya Department Store Co.,Ltd.

The Group operates stores concentrated in an almost identical region comprising Kawasaki, Yokosuka, and Fujisawa, creating a risk that store operations as a whole would be simultaneously affected in the event of a natural disaster or accident. In particular, in the event of a large-scale disaster such as a fire or earthquake, in addition to damages owed to victims, severe damage to buildings, stored merchandise, and held assets could occur. The lack of a diversification effect due to this geographic concentration constitutes a risk factor specific to the Company.

There is a risk that economic conditions such as weather conditions, economic trends, and consumer trends, as well as social conditions such as disease and civil unrest, could directly affect the performance of the department store business. In addition, intensified competition from new entrants from the same or different industries into the same trading area could have a significant impact on business and financial condition. Given the characteristics of the department store business model, sensitivity to these changes in the external environment is high.

In the course of selling various products and services, including clothing, personal accessories, sundries, and food products, there is a risk that the sale of defective products or an outbreak of food poisoning could give rise to product liability damages. Furthermore, a compound adverse impact on business and financial condition is anticipated, including business suspension under public regulations and a decline in sales due to loss of social trust. The structure of the department store business, which handles merchandise from numerous vendors across many categories, broadens the scope of management and heightens this risk.

The Company is required to comply with a wide range of laws and regulations, including the Large-Scale Retail Store Location Act, the Antimonopoly Act, the Subcontract Act, labor laws, and environmental/recycling-related laws such as the Energy Conservation Act. In the event of a violation, adverse effects on business and financial condition may arise, including public business restrictions, increased related costs, and a decline in sales due to loss of social trust. Although the Company conducts its business activities with due attention to legal compliance, the diversity of regulations increases the complexity of compliance management.

The Group holds a large amount of customer personal information, and there is a risk of information leakage due to crime or accident. In the event of a leak, adverse effects on business and financial condition are expected, including damages, incidental costs, and a decline in sales due to loss of social trust. As countermeasures, the Company has established internal management regulations, organized a management structure, appointed an information management officer, and conducted thorough internal training, but these measures cannot completely eliminate the risk.

Various computer systems are centrally managed at an outsourced data center, and there is a risk that business operations could be significantly hindered if a natural disaster or accident exceeding expectations causes facility damage, system outages, or disruption of communication lines. Although the data center has implemented safety measures such as earthquake-resistant design, redundant communication lines, backup power generators, and intrusion prevention, it may not be able to fully respond to unforeseen events. The centralized management structure of the system inherently carries the risk of becoming a single point of failure.

On March 31, 2010, the Company issued a total of 1,483,036 Class A preferred shares, which were transferred from The Bank of Yokohama, Ltd. to AFC-HD AMS Life Science Co., Ltd. on March 25, 2022. These Class A preferred shares carry a conversion right into common shares exercisable from March 1, 2014 onward, and if conversion is exercised in the future, dilution of existing common shareholders' equity interests and an adverse effect on stock price formation may occur. The timing and scale of conversion are left to the holder's discretion, representing a risk that the Company cannot control.

The Group leases some real estate to conduct its business and is entrusted with tenant operation and management services, and there is a risk that changes to or termination of these lease and outsourcing contracts could adversely affect business and financial condition. Since the continuation of contracts also depends on the intentions of the counterparty, the Group is exposed to uncertainty that it cannot unilaterally control. In particular, changes to contracts relating to major stores could pose a risk directly linked to business continuity.

Infectious diseases occurring domestically and internationally suppress consumer behavior and dampen consumer sentiment, and are considered the most significant risk for the department store business. When an infectious disease outbreak occurs, a combination of factors—shrinking consumer demand, delays in merchandise procurement due to supply chain disruption, restrictions on employee work arrangements (such as working from home or shift work), and temporary closures or reduced business hours—may significantly disrupt business activities. The risk exists that the compound occurrence of these factors could magnify the adverse impact on business and financial condition.