K'S HOLDINGS CORPORATION

Since sales of seasonal products such as air conditioners and heaters are significantly affected by summer and winter weather conditions, climate variability that is beyond the control of the sales side directly impacts business performance. Unlike other product categories, substitute factors such as new product effects are limited, making the risk from climate variability relatively high. While sales plans are formulated through market research and analysis of sales trends, the Company has no means of avoiding climate change itself.

Aggressive store development in unopened areas and densely populated areas may require time to build a customer base, and initial investment per store tends to be large. If the trading area situation changes significantly due to new store openings by competitors or changes in road/transportation access, a gap may arise between the initial plan and actual results, potentially expanding the impact on overall business performance. In addition, impairment losses on fixed assets may be recorded due to future uncertain changes in economic conditions, which could affect the financial position.

Competition exists not only with home appliance mass retailers but also with brick-and-mortar companies and internet retailers handling similar products, and further intensification of competition could affect business performance and financial position. As differentiation measures, the Company is strengthening human resource development for customer service and after-sales service, enhancing its own e-commerce site, and expanding sales channels such as opening stores on mall-type e-commerce sites, but there remains a risk of being unable to fully respond to changes in the competitive environment. In particular, price competition may intensify further due to the expansion of online sales.

Since the Group operates exclusively within Japan, changes in domestic economic policy, business conditions, and personal consumption directly affect business performance and financial position. Economic fluctuations in areas where stores are located also affect sales, so concentrated store openings in specific regions may lead to concentrated risk. In a downturn of the domestic economy, demand for replacement of home appliances may be suppressed, creating a risk of decreased sales.

The Company is subject to a wide range of legal regulations, including the Large-Scale Retail Store Location Act, regulations related to the Antimonopoly Act, the Act against Unjustifiable Premiums and Misleading Representations, the Act against Delay in Payment of Subcontract Proceeds, and the Act on Recycling of Specified Kinds of Home Appliances. The enactment of new laws, tightening of regulations, or measures and legal procedures by regulatory authorities could affect business performance and financial position. In particular, stricter transaction regulations for large-scale retailers could directly constrain purchasing conditions and sales activities.

If stores are damaged by large-scale natural disasters such as earthquakes or typhoons, or if store closures, decreased customer visits, or product supply shortages occur due to the spread of infectious diseases, sales declines could affect business performance and financial position. The Company implements disaster prevention measures such as store development referencing hazard maps, seismic reinforcement, and installation of hand sanitizers, but complete avoidance of large-scale disasters is not possible. Since numerous stores are operated nationwide, there is a risk that multiple stores could be affected simultaneously in the event of a wide-area disaster.

The Company holds a large amount of personal information through the issuance of Anshin Passport and the operation of internet mail-order sales, and if information leakage or unauthorized use occurs, it could affect business performance and financial position through damage compensation and loss of customer trust. While measures are being taken through the development of internal management systems and the establishment of security systems, complete prevention is difficult due to the increasing sophistication of cyberattacks and other factors. As the customer base expands and the volume of personal information held increases, the risk in the event of a leak also expands.

The Company leases a large number of land and buildings, and has provided deposits, guarantee money, and long-term loans based on contracts, so if the lessor's economic situation deteriorates, some or all of these amounts may become uncollectible. Although protective measures such as collateral arrangements have been taken, there is a risk that such protective measures will not function sufficiently in the event of the lessor's bankruptcy or similar circumstances. Since numerous stores are operated under lease arrangements, the impact on the financial position if uncollectible amounts accumulate cannot be ignored.

For the purpose of strengthening and expanding operations or specializing in the sale of home appliances, the Company may undertake organizational restructuring, M&A, alliances, or divestitures, and if unforeseen problems arise, business performance and financial position could be affected. Although sufficient investigation and analysis are conducted before proceeding, there is a risk of latent liabilities or integration costs that cannot be fully identified through due diligence. If the integration process of personnel, systems, and culture following an M&A does not proceed as expected, the anticipated synergies may not be realized.

Product supply from business partners may be temporarily disrupted or delayed due to factory damage, production stoppages, lockdowns of production sites, or logistics network disruptions caused by natural disasters or the spread of infectious diseases. If a serious and prolonged product shortage occurs across an entire specific product category, it could affect business performance and financial position through the loss of sales opportunities. While the Company formulates purchasing plans with an eye to the future, there are limits to its ability to respond to disruptions in global supply chains.