YAMAYA CORPORATION

The liquor retail business is subject to the Liquor Tax Act and related laws, while the restaurant business is subject to a wide range of regulations including the Food Sanitation Act, the Act on Control and Improvement of Amusement Business, and the Immigration Control and Refugee Recognition Act. If new enactments or amendments to these laws and regulations result in direct impacts on operations or additional compliance costs, this may affect the Group's business results and financial position. The Group continuously responds to various regulatory requirements, but the risk of changes in the regulatory environment is ever-present.

Securing and developing excellent personnel, along with the utilization of part-time, temporary, and foreign workers, is a key challenge for business expansion. If labor costs increase significantly due to intensifying recruitment competition amid a shrinking labor force, growing wage pressure accompanying economic recovery, or amendments to labor-related laws, or if the Group experiences an outflow of personnel or difficulty in hiring, this could affect its business and financial condition and results of operations. The Group is implementing various measures to utilize diverse human resources, but responding to structural changes in the labor market remains a challenge.

Risks such as information system failures caused by computer viruses or software/hardware malfunctions, and leaks of personal information, are increasing. Should such incidents occur, they could lead to reduced revenue due to reputational damage and unexpected costs such as damages, thereby affecting business activities. The Group regards information security and personal information protection as key management priorities and is working to maintain and manage systems and data through strengthened organizational structures and employee training.

The Group holds fixed assets such as interior fixtures and kitchen equipment, primarily at directly operated stores, and there is a risk that impairment losses may be recorded if store operating profit/loss deteriorates significantly. In addition, with respect to goodwill recorded through corporate acquisitions, if the assessed value declines significantly below book value, impairment losses may be recognized, potentially affecting business results and financial position. These assets have been increasing along with store network expansion, raising concerns about the financial impact during periods of deteriorating performance.

In strategic investment activities such as store openings in new and existing regions and M&A investments, the Group gathers information necessary for decision-making and makes reasonable judgments; however, if unforeseeable changes in the environment prevent the originally intended results from being achieved, this may affect business results and financial position. In particular, goodwill arising from M&A and integration costs can become a financial burden. The Group is working to streamline its investment decision-making process, but uncertainty in the external environment cannot be eliminated.

The Group's business is affected by economic fluctuations, competitor activity, changes in consumer preferences, weather factors, and other elements, and unforeseeable changes in these factors may affect business results and financial position. Both the liquor retail and restaurant segments are sensitive to consumers' disposable income and preference trends, and intensifying competition remains an ongoing risk factor. The Group continuously monitors market trends, but there are limits to its ability to respond to changes in the external environment.

The Group, either directly or through affiliated companies, imports and directly sells overseas luxury goods centered on alcoholic beverages, and unforeseen medium- to long-term exchange rate fluctuations may affect business results and financial position through increased procurement costs, among other factors. In a yen depreciation environment, rising import costs pose a risk of pressuring earnings, and if price pass-through is difficult, this could lead to a decline in profit margins. The Group is examining measures to address foreign exchange risk, but predicting medium- to long-term currency trends remains difficult.

If the financing environment deteriorates significantly due to financial market turmoil, changes in financial institutions' lending policies, or rising market interest rates, it may become difficult to raise funds flexibly, and financing costs may increase, potentially affecting the business and financial condition. The Group manages liquidity risk through the timely preparation and updating of funding plans by the Accounting Department and by maintaining cash on hand, and is considering diversifying direct and indirect fundraising methods, including bond issuance. However, the risk remains that the Group may respond belatedly in the event of a sudden change in the financial environment.

The Group has established enhanced food sanitation facilities and a consistent product management and inspection system that includes business partners; however, if incidents such as food poisoning or serious quality problems occur, this could affect business results and financial condition due to loss of trust in the brand and products and the incurrence of response costs. In addition, if a serious incident occurs involving handled products, product recalls or product liability claims may arise. The wide-ranging product lineup spanning both the restaurant and liquor retail segments broadens the scope of this risk.

If natural disasters such as major earthquakes, tsunamis, or wind, flood, and snow damage, or fires occur and cause physical damage to stores, logistics facilities, or information systems, sales activities and logistics/procurement activities may be disrupted, potentially affecting the Group's business, financial condition, and results of operations. The Group has implemented fire prevention and earthquake resistance measures at major facilities and strives to prevent business activity suspensions and disruptions in product supply, but there are limits to its ability to respond to disasters of a scale exceeding expectations. Cases in which nearby customers themselves are unable to visit stores are also a factor affecting business performance.