MINISTOP CO., LTD.

Earnings depend heavily on economic and consumption trends in Japan and Vietnam, and increasing medical expense and social insurance burdens due to aging populations could bring about significant changes in future consumption patterns. If personal consumption in Japan deteriorates or stagnates significantly, there are concerns about the impact on business performance and growth strategy. As countermeasures, the company is promoting two core competencies—"product development capability" and "management guidance capability (on-site capability)"—as part of its medium- to long-term strategy.

In addition to competition within the convenience store industry, the company is exposed to cross-format competition with drugstores, supermarkets, fast food chains, family restaurants, and prepared food retailers. The emergence of competitors that surpass the company in quality, price, or service, as well as increased cost burdens, could affect operating results. As countermeasures, the company is promoting the evolution of in-store processed fast food, starting with soft-serve ice cream, establishing a new combo store model, and expanding use of AEON Group products and original products.

The occurrence of food poisoning incidents or mislabeling of raw materials and food additives could lead to a decline in sales. In addition, if social hygiene issues such as avian influenza occur, regardless of whether the facts are true, there is a risk of loss of trust, sales decline, increased hygiene enhancement costs, and increased related capital expenditures. As countermeasures, the company is enhancing its inspection systems, including unannounced inspections of store kitchen environments by external inspection organizations and irregular audits of manufacturing plants.

If disruptions occur to procurement or distribution networks due to natural disasters such as earthquakes or computer viruses, this could result in damage or spoilage of products, lost business opportunities, and repair cost burdens. Additionally, the "2024 problem" (overtime work limit regulations for motor vehicle drivers) poses a risk that increased freight charges from shipping companies could pressure operating profit. As countermeasures, the company is promoting improved loading efficiency through mixed loading of ambient-temperature and frozen products in temperature-controlled trucks, and reducing delivery drivers' working hours through standardized store delivery rules.

Deteriorating franchisee earnings due to aging franchisees, lack of successors, emergence of competing stores, and changes in location conditions could lead to business discontinuation, affecting operating results through a reduction in the number of stores. There is also a risk that the number of new contract signings could decline due to the emergence of more attractive franchisors. As countermeasures, the company is expanding MINISTOP Partnership contract stores, in which franchisees and headquarters share business profits, and establishing an effective and efficient management guidance system.

If the balance of franchisee accounts receivable increases or the bad debt ratio rises due to deteriorating profitability from intensified competition, additional provisions for allowance for doubtful accounts may become necessary, potentially affecting operating results. Franchisee accounts receivable, being trade receivables from franchisees, inherently carry risks directly linked to franchisees' business conditions. As countermeasures, the company is working to improve sales through MINISTOP Partnership contracts and optimize expenses and investments jointly with franchisees and headquarters.

Store land and buildings are primarily leased, and the balance of lease deposits as of February 28, 2025 amounted to ¥10,807 million. If deposits become unrecoverable due to the bankruptcy of a lessor or similar circumstances, this could affect operating results. As countermeasures, a dedicated department continuously monitors lessors' asset conditions and implements necessary measures as needed.

The company has two overseas consolidated subsidiaries, and the translation of foreign currency-denominated financial statements into yen is affected by exchange rate fluctuations. Overseas transactions are similarly exposed to foreign exchange fluctuation risk. As a countermeasure, the company utilizes derivative transactions such as forward exchange contracts on foreign currency-denominated liabilities to mitigate foreign exchange fluctuation risk.

If customer personal information obtained through business activities is leaked for any reason, this could affect operating results through loss of trust and a decline in customer numbers. As countermeasures, the company complies with the Personal Information Protection Act and has obtained Privacy Mark certification, in addition to developing and revising internal regulations and privacy policies, and conducting company-wide employee training via e-learning once a year.

The company is subject to a wide range of legal regulations, including the Food Sanitation Act, the Food Recycling Act, the Antimonopoly Act, the Subcontract Act, the Personal Information Protection Act, the Energy Conservation Act, and the Act on Promotion of Global Warming Countermeasures. If administrative or judicial authorities render unfavorable decisions due to differences in legal interpretation, this could result in financial burdens such as additional taxes or damages, as well as damage to brand image. As countermeasures, a dedicated department continuously monitors trends in regulatory amendments and implements appropriate measures as necessary.