YAMADA HOLDINGS CO., LTD.

With stores and distribution centers deployed across all 47 prefectures, a large-scale disaster such as a Nankai Trough megaquake, a Tokyo Metropolitan earthquake, severe torrential rain, or linear precipitation bands could damage store and distribution facilities and core systems, disrupt product distribution networks, and cause widespread, compounded business interruptions. Delays in restoration and recovery could lead to lost sales opportunities and recovery costs, affecting business performance and financial condition. In response, the Company regularly reviews and revises its disaster response manuals, operates widely distributed and backed-up core systems, has concluded disaster prevention agreements with local governments, and conducts regular disaster response drills.

The Company holds a large volume of personal and confidential information, including data on over 31.25 million Yamada Digital members, and operates numerous business systems such as core systems, POS systems, and e-commerce sites. Amid a marked recent increase in ransomware attacks targeting domestic retail and distribution businesses, the threat environment has intensified significantly. Cyberattacks, unauthorized access, internal misconduct, or supply chain-related incidents could result in personal information leaks, store operation suspensions, reputational damage, and claims for damages, which could materially affect business performance and financial condition. In response, the Company is pursuing ISO27001 certification, establishing a CSIRT, implementing endpoint threat detection, maintaining offline backups, strengthening supply chain security, and developing generative AI usage guidelines.

Physical risks include damage to business sites, disruption of distribution networks, and lost sales opportunities due to more severe typhoons and heavy rain, while transition risks include increased store operating costs from stricter decarbonization regulations, the introduction of carbon pricing systems, and rising energy costs. In addition, seasonal products such as air conditioners and heating equipment are heavily influenced by weather conditions, and climate change is making demand forecasting increasingly difficult. In response, the Company has unified hazard map management across all stores and strengthened its BCP, and has set a target of reducing Scope 1 and 2 CO2 emissions by 42% in FY2031 (ending March 2031) compared to FY2021 (ending March 2021) through high-efficiency air conditioning, LED lighting, and self-consumption solar panel installations.

The Company is subject to a wide range of laws and regulations, including the Large-Scale Retail Store Location Act, the Antimonopoly Act, the Act against Unjustifiable Premiums and Misleading Representations, the Home Appliance Recycling Act, the Construction Business Act, and the Insurance Business Act. Legal amendments or stricter regulatory interpretation could result in increased business costs, decreased demand, or delays in store opening plans. As the "Kurashi Marugoto" strategy expands, the number of business areas requiring new permits and licenses is increasing, and revocation, non-renewal, or delays in obtaining such permits and licenses could also affect business performance and financial condition. In response, the Company continuously monitors regulatory developments and, through coordination between the legal department and relevant business divisions, maintains internal systems, revises regulations, and provides employee training.

The Company relies on the domestic market for the majority of its sales, and economic factors such as price increases, real wage trends, rising interest rates, and exchange rate fluctuations affect business performance through increases in cost of sales and operating expenses and changes in consumer purchasing behavior. In addition to structural changes such as the declining birthrate, aging population, population decline, and the shift to a digital society, interior goods, furniture, and household items that depend on imports from Asian countries are susceptible to geopolitical risk, and the housing business is strongly affected by trends in interest rates, land prices, and housing tax policy. In response, the Company is pursuing forward exchange contracts, supply chain optimization, reduction of interest-bearing debt through asset sales, acquisition of a cross-generational customer base through the "Kurashi Marugoto" strategy, and expanded sales of energy-efficient, high-value-added housing.

Under the "Medium-Term Management Plan for FY2026 (ending March 2026) to FY2030 (ending March 2030)," the Company is promoting store development and reform centered on LIFE SELECT, but faces competition with other companies in securing well-located properties, potential impacts of new store openings on existing store profitability, and increases in facility and personnel costs. In a rising interest rate environment, the cost of raising substantial funds may increase, and delays in securing properties could result in changes to or postponement of store opening plans. In response, the Company maintains a careful decision-making structure through the Board of Directors and management meetings, comprehensively considering trade area population and competitive conditions, flexibly utilizes scrap-and-build and business format conversion, and diversifies funding methods to maintain financial soundness.

The home appliance retail industry faces multifaceted competition from large-scale mass retailers, general supermarkets, e-commerce platforms, and others. As the domestic home appliance sales market matures and commoditizes, securing profitability through traditional price competition alone is becoming increasingly difficult. If purchasing competition and inter-store competition intensify due to new entrants or M&A/alliances among competitors, the Company may be forced to lower sales prices, which could affect its business performance and financial condition. In response, the Company is promoting one-stop proposals through its "Kurashi Marugoto" (comprehensive lifestyle) strategy centered on "LIFE SELECT," expanding private brand/SPA products, and advancing an omnichannel (physical store × online) e-commerce approach leveraging its digital membership base of over 31.25 million members.

Due to population decline and changes in the labor market environment, if the Company is unable to secure and retain personnel with the proposal capabilities and expertise needed to drive the "Kurashi Marugoto" strategy as planned, it may become difficult to maintain customer touchpoints and proposal capabilities, potentially leading to a decline in customer satisfaction. If cross-organizational personnel deployment and career development mechanisms do not function sufficiently, talent development and deployment in line with business expansion may not proceed, affecting growth and value creation. In response, the Company is implementing personnel system reforms, clarifying cross-organizational career development, strengthening talent development, and identifying and addressing organizational issues through engagement surveys.

After executing organizational restructuring, M&A, alliances, or asset sales aimed at strengthening its business, the Company may face unexpected issues such as the emergence of contingent liabilities, failure to achieve expected synergies, impairment losses on goodwill, or deterioration in the profitability of acquired businesses, which could affect business performance and financial condition through the recognition of extraordinary losses. Asset sales also carry the risk that the sale price or timing may diverge from expectations. In response, the Company conducts multifaceted due diligence with careful deliberation by the Board of Directors, systematically promotes PMI, and has established a system for early identification and response through regular monitoring of investment recovery status and goodwill conditions.

The Company holds numerous fixed assets, including tangible fixed assets and goodwill, and impairment processing may become necessary due to deteriorating profitability of stores, closure of unprofitable stores, or significant declines in the market value of held assets. In particular, goodwill acquired through M&A carries the risk of substantial impairment losses if the performance of the acquired business deteriorates. In response, the Company has established a system for continuously monitoring the profitability of stores and works to avoid and reduce impairment risk by promptly implementing profit improvement measures, such as store renovations, for stores with declining profitability.