YELLOW HAT LTD.

The Group manufactures, wholesales, and retails car accessories and motorcycle accessories within Japan, and a deterioration in the Japanese economy or a downturn in personal consumption may adversely affect its business results and financial position. Its business is directly exposed to economic fluctuations arising from various external factors, and it has a structure highly dependent on domestic consumption trends.

Securing specialized personnel for customer service at retail stores and for pit technical departments handling vehicle inspections and maintenance is essential, but recruitment difficulties continue across the retail and service industries as a whole. Although measures such as expanding recruitment of foreign workers and older workers are being implemented, rising costs associated with securing personnel may adversely affect business results and financial position.

The Group handles products such as studless tires and tire chains, whose sales volumes are affected by weather conditions, and formulates purchasing and sales plans based on past weather patterns. However, if a decline in sales of seasonal products occurs due to abnormal weather, this may adversely affect business results and financial position.

The Group operates stores nationwide and has in the past been affected by natural disasters such as earthquakes and typhoons. While measures such as repairing signage and equipment and introducing reinforcement materials are being pursued, in the event of a large-scale disaster, damage to store facilities, suspension of operations, delays in product delivery, and other disruptions to business activities may adversely affect business results and financial position.

Even during outbreaks of serious infectious diseases such as COVID-19, the Group has endeavored to continue operations through thorough infection prevention measures, remote work, and the use of web conferencing. However, if temporary store closures occur or the impact of an infectious disease expands or persists beyond expectations, a decline in the number of store visitors may adversely affect business results and financial position.

The Group seeks to stabilize product procurement by diversifying suppliers and converting some products to private brands (PB). However, if procurement is disrupted due to a global shortage of resources or raw materials, or if procurement prices rise, this may adversely affect business results and financial position. Disruption to global supply chains is a direct risk factor.

In its aggressive nationwide store expansion, the Group is subject to regulations under laws such as the Large-Scale Retail Store Location Act, the City Planning Act, and the Building Standards Act, as well as regional ordinances. Changes to laws or regulations may make it difficult to open new stores as planned. In addition, prolonged efforts to secure store sites and rising construction material costs leading to increased store opening costs may adversely affect business results and financial position.

The Group holds tangible fixed assets related to its stores and applies accounting standards for impairment of fixed assets. If asset values decline in the future due to deteriorating store profitability, falling land prices, or other factors, impairment losses may occur, which may adversely affect business results and financial position.

As a business primarily engaged in retail, the Group holds a large amount of customers' personal information and takes thorough care in managing it. However, if information leakage occurs due to unforeseen unauthorized access or other causes, this may adversely affect business results and financial position.

The Group utilizes information systems and communication networks in business activities such as store operations and logistics, and strives to ensure stable system operation and strengthen security. However, if unexpected cyberattacks or system failures result in suspension of core operations or destruction or falsification of important data, this may adversely affect business results and financial position.