Takihyo Co., Ltd.

The apparel products handled by the Company are susceptible to changes in fashion trends, fluctuations in consumer sentiment due to economic conditions, and downward pressure on selling prices from intensifying competition. The Company addresses these factors by enhancing information-gathering and analytical capabilities to improve planning precision and by shortening production lead times; however, if it is unable to implement appropriate merchandising policies in response to trend changes that deviate from forecasts, this could adversely affect its business performance.

The Company has a high dependence on overseas products in its purchases, and settlements are conducted primarily in US dollars, meaning that exchange rate fluctuations directly affect procurement costs. Although the Company hedges risk by entering into forward foreign exchange contracts within the scope of actual demand on a quarterly basis, it may not be able to avoid an impact on its business performance in the event of unexpected and sharp currency fluctuations.

The Company has a high dependence on production in China and other Asian regions, and there is a risk that unexpected changes in laws and regulations, shifts in political systems or economic policies, terrorism, war, natural disasters, or the spread of infectious diseases could cause significant disruption to product procurement. If geopolitical or social risks in production areas materialize, securing alternative sources of supply may become difficult, potentially affecting business performance.

The Company tends to have a high dependence on sales to its major customers, and if transactions with such customers are interrupted or reduced due to changes in their management policies, the impact on business performance could be significant. While strengthening relationships with major customers and expanding new sales channels are pillars of the Company's sales policy, the risk of difficulty in continuing transactions due to unforeseen circumstances remains.

The Company holds accounts receivable from a wide range of customers, including retailers such as mass merchandisers, specialty stores, mail-order retailers, and department stores, as well as apparel wholesalers, and there is a risk that bad debt losses could arise from unexpected business failures among these customers. Although the Company strives to protect its receivables through thorough credit management based on internal regulations, deterioration in customers' financial condition could affect business performance.

Major products, including ladies' apparel, are highly seasonal, and there is a risk that sales of seasonal products could fall significantly short of plan due to adverse weather conditions such as cool summers or warm winters. Because weather is an external factor that is difficult to predict or control, this could lead to excess inventory and deteriorating profitability due to discounted sales.

Although the Company has established an internal security management system for the protection of personal information, if an unexpected external leak of information occurs, this could result in a decline in social credibility and the incurrence of liability for damages. An information leak could damage the Company's and its brands' image, and could also adversely affect trust relationships with customers and consumers.

The Company actively pursues business investments such as new business format development and brand development to enhance corporate value; however, if such business activities do not progress as planned due to changes in the market environment, recovering the investment may become difficult, potentially affecting business performance. Although the Company conducts sufficient prior research and investigation, the inherent uncertainties associated with new businesses cannot be eliminated.

Although the Company has established strict quality standards and management systems, if an unexpected quality-related incident occurs due to causes attributable to the Company or its suppliers, this could result in product liability claims, damage to the Company's and its brands' image, and liability for damages. In addition, if quality defects make it difficult to continue transactions with major customers, this could lead to a significant decline in net sales.

The Company conducts business under licenses granted by multiple companies, and if such agreements expire, are terminated, or undergo significant changes in terms, continuing sales of the relevant brands may become difficult, potentially affecting business performance. In product categories with high dependence on licensing, switching to alternative brands may require considerable time and cost, presenting a residual risk.