Nitori Holdings Co., Ltd.

Since approximately 90% of merchandise is developed and imported as private brand products, a sharp appreciation of the US dollar could raise procurement costs and adversely affect business performance and financial condition. As countermeasures, the company flexibly implements forward foreign exchange contracts, USD-denominated settlement at overseas subsidiaries, and hedging transactions based on its basic derivatives policy.

As the majority of merchandise sold is produced and imported from Asian countries including China, disruption of the supply chain due to large-scale natural disasters, changes in political conditions, strikes, etc. could cause logistics delays, employee evacuations, and other issues that adversely affect business performance. As countermeasures, the company is reviewing production countries, diversifying production locations, building a procurement structure with multiple suppliers, and establishing a system to consider switching to alternative products in the event of a crisis.

Although the company has established its own strict quality standards, unforeseen quality problems could lead to a decline in brand image, loss of social credibility resulting in reduced sales, and incurrence of countermeasure costs. The company addresses this through the establishment of a quality assurance organization, regular meetings of the planning/design evaluation committee and development technology evaluation committee to establish a preventive system, and enrollment in product liability insurance.

Cyberattacks (ransomware, unauthorized access, etc.), system failures, or management errors by employees or contractors could result in personal information leaks or system outages, adversely affecting business performance and financial condition through declining brand image, reduced sales, and investigation and recovery costs. The company has built an IT management framework including training based on its basic information security regulations, continuous strengthening of various security measures and monitoring systems, and duplication of core servers.

In addition to the risk that abnormal weather such as typhoons and heavy rainfall could cause prolonged stoppages in production, procurement, and logistics, poor sales of seasonal merchandise and declines in product value due to cool summers, warm winters, etc. could adversely affect business performance and financial condition. The company addresses this through setting greenhouse gas reduction targets aligned with the TCFD framework, promoting green logistics, expanding installation of solar power generation equipment, and making investments based on internal carbon pricing.

The company operates more than 830 stores domestically, as well as numerous stores, manufacturing plants, and distribution centers overseas (China, Taiwan, Southeast Asia, etc.). If facilities, inventory assets, or human resources are damaged by a large-scale natural disaster or serious accident such as a fire, this could adversely affect business performance and financial condition through disruption to operations and recovery costs. The company promotes comprehensive risk management through BCP formulation, monthly risk and compliance meetings, regular drills and stockpiling measures, and a continuous PDCA cycle.

Recruitment and development of human resources is important for securing a competitive advantage as a manufacturing-logistics-IT-retail business. If the company is unable to secure excellent personnel, or if management, including the Representative Director, becomes unable to perform their duties, this could adversely affect business performance and financial condition. The company is promoting measures such as improving the working environment to realize diverse work styles, developing candidates for future executive positions, and improving operational efficiency through the use of advanced technology.

A global outbreak of a new infectious disease could make business continuity difficult due to declining demand, supply chain disruption, and adverse effects on production activities, potentially causing serious adverse effects on business performance and financial condition. The company has implemented measures such as group-wide hygiene management recommendations, support for diverse work styles through IT infrastructure development, and sales measures including strengthening e-commerce, making stores contactless, and promoting OMO (online merges with offline).

In M&A and business alliances aimed at business expansion and enhancing corporate value, if the planned results are not achieved, this could adversely affect business performance and financial condition through impairment of goodwill or share acquisition costs, unforeseen business problems, and transaction-related expenses, potentially forcing a revision of the medium-term management plan. The company thoroughly conducts due diligence on target companies and examines the appropriateness of investment and acquisition prices at the Board of Directors and other bodies.

Compliance risks in products and services, labor and safety, and the overall supply chain cannot be completely avoided, and violations of various laws and regulations could adversely affect business performance and financial condition through declining brand image, reduced sales, and additional costs. The company is working to strengthen group governance through reviewing and disseminating the Nitori Group Code of Conduct, re-establishing labeling management systems and formulating labeling guidelines, providing compliance education to employees, and operating an internal whistleblowing system.