IZUTSUYA CO., LTD.

The Group operates primarily in the Kita-Kyushu and Yamaguchi region, and is affected by regional climate conditions, economic trends, and consumption trends, as well as the entry of new large-scale commercial facilities and regional redevelopment projects. Deterioration of the regional economy or intensified competition directly affects business performance. As countermeasures, the Group is strengthening earnings power through renovation of sales floors at its flagship stores (Honten and Yamaguchi stores), and is promoting improvements in merchandising, sales capability, and service quality by leveraging the department store's editorial (curation) capabilities.

The Company (Izutsuya on a standalone basis) accounts for a large proportion of the consolidated Group's business performance, resulting in a structure in which the standalone performance of the Company has a major impact on the Group as a whole. There is a risk that deterioration in standalone performance could directly affect Group performance. As countermeasures, the Group is pursuing region-focused sales measures and working to improve profitability by leveraging its regional store network.

If consumer concerns about food safety increase or non-conforming products are sold, this could result in costs arising from public regulation, liability for damages, and a decline in sales due to loss of consumer trust. As countermeasures, the Group conducts a weekly "Food Inspection Day" to thoroughly check expiration/best-by dates and allergen labeling, and has established a "Voluntary Hygiene Management Manual" based on HACCP to strengthen food hygiene management.

If a natural disaster, data center accident, or failure of communication lines or power supply occurs, this could disrupt operations and affect Group performance. As countermeasures, the Group has built redundancy into its systems, and has established an in-house information systems department to prevent external attacks and to respond promptly to various types of failures.

If customer information is leaked externally due to an unforeseen accident or incident, this could lead to a loss of social trust and affect Group performance. As countermeasures, the Group thoroughly enforces rules for locked storage of customer ledgers and various slips, conducts regular audits, imposes strict access restrictions on rooms where electronically stored information is accessed, and implements security measures such as installing the latest antivirus software and minimizing the number of email accounts.

If information leakage or an information system failure occurs due to external computer viruses or cyberattacks, this could seriously affect store operations and Group performance. As countermeasures, the Group restricts access to non-business-related websites, and regularly conducts internal alerts and "email training" for employees as measures against virus-laden emails.

The Group is subject to various laws and regulations, including the Act against Unjustifiable Premiums and Misleading Representations, the Antimonopoly Act, the Subcontract Act, and the Large-Scale Retail Store Location Act, and failure to comply with these could affect Group performance. As countermeasures, the Group conducts employee education through compliance training and has established an internal reporting hotline to prevent legal violations and enable early detection.

Since the department store business is conducted through physical stores, if a store or other business site suffers major damage due to an unforeseen disaster or accident such as fire, earthquake, flood, or typhoon, this could affect Group performance. As countermeasures, the Group conducts regular inspections of facilities, equipment, and disaster prevention supplies, and conducts various evacuation drills, while also formulating a Business Continuity Plan (BCP) to establish a system for early resumption of business.

If the value of held assets declines or business profitability deteriorates, impairment losses may occur and affect Group performance. As countermeasures, the Group thoroughly examines investment value and recoverability before making investments, and conducts regular performance evaluations after investment, working to make early improvements if actual results deviate from plans.

The Group records deferred tax assets against deductible temporary differences and tax loss carryforwards; however, if actual taxable income differs from estimates, it may become necessary to reduce all or part of the deferred tax assets, which could affect the Group's financial position and business results. As countermeasures, the Group carefully examines recoverability and strives to record deferred tax assets within a reasonable range.