IZUMI CO., LTD.

In the Retail Business and Retail-Related Business, the Group handles a wide range of personal information and information assets belonging to customers and business partners. Increasingly diverse and sophisticated cyberattacks or system failures could result in information leakage or business disruption. In fact, a system failure occurred due to a cyberattack in February 2024, and the potential for damage compensation obligations and increased security response costs may affect the Group's financial position and operating results. As recurrence prevention measures, the Group has established a CISO position, built multilayered security defenses, and set up a centralized management framework for security and IT strategy across the Group.

As the Group sells a wide range of food products including fresh food, processed food, and daily deli items, the occurrence of food safety incidents such as food poisoning, foreign object contamination, or mislabeling could damage customer trust and have a material impact on business performance and financial condition. The Group implements hygiene management in line with HACCP, thorough food labeling practices, and regular microbiological testing of in-store prepared foods, while strengthening the organizational structure responsible for quality control and product labeling.

The risk of disruption to social infrastructure and business activities is rising due to climate change-driven intensification of heavy rains, floods, and typhoons, as well as sudden major earthquakes. In the event of a disaster, there is a possibility of loss of regional and social trust and damage to brand value. As countermeasures, the Group has established action principles of "ensuring the safety of life," "cooperating in ensuring safety for local communities," and "continuing critical operations," and has implemented a safety confirmation system and a framework for establishing disaster response headquarters.

Due to the tightening of labor supply and demand from the declining birthrate and aging population, as well as changes in personnel and labor-related laws and regulations, there is a risk that recruitment and training plans may not proceed as scheduled. If the Group is unable to secure and develop the human resources necessary for sustainable growth, this may affect its financial position and operating results. As countermeasures, the Group is promoting the development of an environment where employees with diverse backgrounds can choose flexible working arrangements, and providing opportunities to thrive according to individual motivation and ability.

The Group conducts M&A as part of its growth strategy, and such acquisitions may generate goodwill and intangible assets, increasing amortization expenses. If the anticipated profits and benefits are not achieved, there is a risk of impairment of goodwill, intangible assets, or share acquisition costs, the emergence of contingent or unrecognized liabilities, or the discovery of compliance issues, any of which could affect the Group's financial position and operating results. The Group strives to mitigate these risks by conducting detailed due diligence.

The Group holds substantial fixed assets, including property, plant and equipment and goodwill. If recoverable amounts decline significantly due to divergence between investment plans and actual results or a decline in store profitability, impairment losses may be required, which could affect the Group's financial position and operating results. In applying impairment accounting, the Group manages cash flows on a per-store basis and conducts profitability management by individual store.

The Group operates numerous business sites primarily in the Chugoku, Shikoku, and Kyushu regions. If a large-scale natural disaster exceeding expectations were to occur, wide-ranging and multifaceted impacts—such as damage to buildings and equipment, infrastructure outages, information system failures, and supply chain disruptions—could make it difficult to continue business operations. The Group addresses this by formulating business continuity plans (BCP) at each business site and establishing a business continuity management (BCM) framework.

As the Group's core business is the sale of goods and services to general consumers, fluctuations in weather, economic conditions, personal consumption trends, and competitive conditions with other retailers could lead to reduced profitability at existing and newly opened stores or losses from store closures. In addition, fluctuations in interest rates, foreign exchange rates, and stock prices may affect the Group's financial position and operating results, driven by factors such as capital investment funded by interest-bearing debt, handling of imported goods, and holdings of securities outside the Group.

There is a risk that violations of various legal regulations—such as the Antimonopoly Act, consumer protection laws, environmental and recycling-related laws, and the Personal Information Protection Act—or amendments to laws such as the Large-Scale Retail Store Location Act, the City Planning Act, and the Building Standards Act, could make it difficult to open new stores or renovate existing stores, or could increase compliance costs. If an unexpected violation of laws and regulations occurs, it could result in regulatory restrictions on business activities, increased costs, and loss of customer trust, potentially affecting the Group's financial position and operating results. The Group is working to establish a framework for compliance with various laws and regulations.