MAKIYA CO., LTD.

The Group operates many stores in the Tokai region, centered on Shizuoka Prefecture, and if a large-scale earthquake with its epicenter in the Tokai region, which has long been anticipated, were to occur, it could have a significant impact on the Group's financial position and business results. Some stores were constructed before 1981 and do not meet current seismic standards; while the Group is implementing measures such as seismic diagnosis, reinforcement work, and relocation, there is a risk that if a strong earthquake occurs before these measures are completed, damage or collapse of buildings and harm to persons, merchandise, and equipment could result.

If road traffic networks are paralyzed due to worsening weather such as typhoons or heavy snow, or large-scale natural disasters, delays or interruptions in merchandise deliveries to distribution centers may occur, resulting in non-delivery to individual stores. The Group aims to diversify risk through decentralizing distribution centers, developing partner vendors, and securing multiple distribution routes, but if a disaster exceeds the assumed scale, it may affect business results.

The Group operates multiple general discount stores, supermarkets, and other formats mainly in Shizuoka, Kanagawa, Saitama, and Yamanashi Prefectures, but competitor store openings near the Group's own stores may reduce sales and profits, and in some cases force store withdrawals. The Group collects information on competitor store openings, assesses their impact, and formulates countermeasures, but there is a risk that if the number or scale of competitor openings exceeds expectations, it could have a material impact on business results.

The Group applies accounting standards for impairment of fixed assets, and depending on store profitability and real estate value trends, it may be necessary to record impairment losses. In particular, the Espot large-format business tends to have larger fixed asset investment amounts compared to other business formats, so there is a risk that substantial impairment losses could be recorded, affecting business results.

On February 26, 2024, the Group acquired all shares of Usual Co., Ltd. and PEAKS&TREES Co., Ltd., recording goodwill as an intangible fixed asset. If changes in the business environment or other factors prevent the initially expected results from being achieved, it may become necessary to record an impairment loss on this goodwill, which could have a material impact on the Group's financial position and business results.

The prepared foods factory and meat processing center operated by MK Service Co., Ltd. supply products intensively to all supermarket stores and general discount stores, and if an accident, inability to procure raw materials, foreign matter contamination, or a decline in hygiene standards occurs, it could lead to a supply halt to all stores. In addition to costs from product recalls and disposal, there is a risk that deterioration of corporate credibility could hinder business operations; while the Group takes measures through thorough quality control, a large-scale or prolonged accident would have a material impact on business results.

The Group holds a large amount of information, including business information, personal information, and management information, and there is a risk of information leakage due to unforeseen circumstances or unauthorized acquisition or use by third parties. The Group strives for thorough information management through the establishment of internal regulations, employee training, and ongoing implementation of information management measures, but the costs of response and decline in corporate trust could affect business results.

The Group operates "Hard Off, Off House, Hobby Off," "Gyomu Super," "Daiso," and other formats under franchise agreements with Hard Off Corporation Co., Ltd., Kobe Bussan Co., Ltd. and others, and Daiso Industries Co., Ltd., but if events giving rise to contract termination clauses occur, it could affect business results. In addition, franchisor merchandising policies and business conditions could lead to a decline in customer visits or average spending per customer.

New store openings with sales floor area exceeding 1,000 square meters and expansions of existing stores are subject to regulation under the Large-Scale Retail Store Location Act, enforced in June 2000, requiring significant time and expense for new store openings. If regulations prevent store openings from proceeding as planned, it could affect the Group's business results.

An outbreak of an infectious disease such as influenza may cause a sharp increase in demand for related products, making it difficult to provide sufficient sales to customers or distribute products to employees. If a mass infection occurs among employees, continuation of business operations may become difficult; the Group plans to respond through stockpiling related products and materials and establishing an emergency response office, but if the spread of infection is rapid and large-scale, it could affect business results.