Investor Relations

The Group's business consists of three business segments: "Distribution and Retail Business," "Retail AI Business," and "Other Business.” In addition to "Risks common to the core Distribution and Retail Business segment and the Group," the risks assumed in each business area are described by segment.
The Group proactively discloses information that is considered important for investors' investment decisions, including external factors beyond the Group's control and items that are not necessarily considered highly likely to materialize as business risks. However, these risks do not cover all risks of the Group, and unforeseeable risks other than those described above may also exist. If such risks materialize, they may have a significant impact on the Group's business, operating results, financial position, and cash flow.
While it is the Group's policy to recognize the possibility of the occurrence of these risks and to make efforts to prevent their occurrence and to respond to them when they do occur, we believe that decisions regarding the Group's management situation and future business must be made after careful consideration of the matters described below.
Forward-looking statements in the text are based on the Group's judgment as of June 30, 2026.

Risks common to the core Distribution and Retail Business segment and the Group

(1) Expansion of business scale, including store expansion and store remodeling, and changes in the human resource recruitment and labor environment

The Group's business expansion could be affected in the event of intensified competition from competitors in the same or other industries, difficulty in securing land for store sites that match our strategy, or other changes in economic conditions surrounding our group, such as increases in real estate prices, construction costs, financing costs, or a decline in the domestic economy and personal consumption, the pace of store openings and renovations may slow and sales or profits from newly opened or renovated stores may fall below our projections.
In addition, our group is actively recruiting human resources, including part-time associates, and at the same time, we are implementing various training programs for new employees as well as for management positions. However, if the Group is unable to secure and train personnel to keep up with the pace of store expansion as planned due to intensifying competition to secure personnel as a result of the declining labor force, or if hourly wage rates rise due to tight labor supply and demand, the Group may incur higher-than-expected expenses or slow the pace of store openings and renovations.
If the Group's growth strategy cannot be implemented as expected due to these factors, the Group's business, financial conditions, and business performance may be affected.

(2) The impact of infectious disease outbreaks

If an infectious disease outbreak or epidemic occurs or expands on a scale that has a significant impact on economic activity in society, and infectious diseases spread at the group's stores, process centers, business partners, suppliers, or lodging facilities, or if economic activities are restricted to prevent the spread of infection, it may have an impact on our group's business, financial condition, and performance.

(3) Consumer demand, weather, seasonality, and other external factors affecting our business

Inevitable factors such as economic trends, consumption trends, and other economic conditions, changes in consumer demand, weather conditions, and seasonality may affect our group's business, financial conditions, and operating results.
Weather and seasonality risks include the possibility that a major earthquake, typhoon, tsunami, or other natural disaster, fire, or unexpected accident in the vicinity of our stores or facilities could cause physical damage to our stores and facilities or otherwise affect our suppliers or procurement and distribution network. In preparation for such events, the Group has established an internal information-sharing and management system to quickly share information in the event of unforeseen events, and has put in place a system capable of controlling the situation in a timely and appropriate manner.

In addition, the distribution and retail industry is greatly affected by changes in economic conditions and consumer demand, including domestic and international economic trends, consumption trends, price trends, fuel and energy price trends, and exchange rate trends. We strive to limit the impact of these changes through timely and appropriate pricing strategies, inventory management, and sales force enhancement. However, if these external factors were to change rapidly and we were unable to respond adequately, the sales and profitability of existing stores and our plans for new store openings and renovations could be affected, which could adversely affect our business, financial condition, and earnings.

(4) Increase in purchase prices, crude oil and raw material prices, etc.

The Distribution and Retail Business purchases some raw materials for PB products and ready meal production. These purchase prices may be affected by changes in supply and demand due to rising temperatures and weather conditions, etc. In addition, some raw materials are purchased in foreign currencies through overseas subsidiaries, which may be affected by exchange rate fluctuations. The Group strives to diversify its procurement so as not to be dependent on specific suppliers or regions. However, an unexpected rise in raw material procurement prices due to abnormal weather or other factors could affect the Group's business, financial conditions, and earnings.

In addition, soaring prices of crude oil and raw materials will also increase the purchase prices of petroleum products such as plastic bags, trays, and films used as packaging materials in the Distribution and Retail Business. Also, the rising cost of crude oil and other raw materials will increase store operating costs and logistics costs, as each store will be affected by higher utilities costs arising from higher energy prices and higher gasoline and other prices in the logistics aspect of the business. Furthermore, while demand for truck drivers has been rising in recent years due to the increase in home deliveries, the number of truck drivers is expected to decrease and the cap on working hours will be regulated social demands for improvements in working conditions for truck drivers, which may lead to higher labor costs for truck drivers, resulting in higher logistics costs. If we are unable to pass on these price fluctuations caused by the external environment to our customers to the appropriate degree and at the appropriate time, or if our group's competitiveness declines due to price pass-on to customers, our group's business, financial condition, and earnings could be adversely affected.

(5) Regulations by Laws

We are subject to various legal regulations, including the Act on the Measures by Large-Scale Retail Stores for Preservation of Living Environment, the Act against Unjustifiable Premiums and Misleading Representations, Food Sanitation Act, the Act against Delay in Payment of Subcontract Proceeds and environmental recycling law. Our group has subsidiaries and affiliates in China and Korea. In addition to being subject to local laws and regulations, overseas operations are also subject to political, economic, cultural, religious, customs, currency exchange, and other factors. The Group strives to comply with laws and regulations and to obtain permits and licenses.
However, there is a possibility that revisions or stricter interpretations of laws and regulations may restrict the execution of our main business activities, and that unexpected costs may be required to comply with laws and regulations. In addition to penalties such as surcharges, the Group's business, financial condition, and earnings could be affected by a loss of public trust in the Group in the event of a violation of laws and regulations.

(6) Act on the Protection of Personal Information

Our group holds and manages a large amount of personal information of our customers in the Distribution and Retail Business and other businesses operated by our group. However, in the event of an unforeseen event such as an external leak, compensation to the individual concerned and loss of the Group's social credibility could have impacts on the Group's business, financial condition and performance.

(7) Information Security and System Troubles

The Group regards information systems, including information, computers, and networks (hereinafter referred to as "information assets"), as its fourth most important asset, following "people, products, and money." To protect information assets as important assets, we have established the "Information Security Policy," and the Information Security Committee continuously analyzes and evaluates risks and manages information assets.
However, in the event of significant damage to facilities due to unexpected natural disasters or accidents, unauthorized intrusion of computer viruses, cyber attacks, or system failures caused by employee error affect the the Group's business or business partners, financial condition, and earnings could be affected due to damage to social credibility, etc. In such cases, the Group's business, financial conditions, and operating results may be affected.
In addition, the Group is expanding its use of AI technologies, including generative AI, with the aim of improving operational efficiency and creating new value for customers. The use of AI entails risks such as the leakage of personal or confidential information through training data or prompts, erroneous decision-making or customer interactions resulting from inaccuracies or biases in AI-generated information, and infringement of third-party intellectual property rights. The Group is developing internal guidelines for the use of AI and establishing a data governance framework for the acquisition, management, and utilization of data. However, if the Group is unable to adequately respond to the rapid advancement of AI-related technologies or changes in related laws, regulations, and guidelines in Japan and overseas, or if an unforeseen incident occurs, the Group's business, financial condition, and results of operations may be adversely affected due to reputational damage, liability for damages, or other consequences.

(8) Litigation and Reputation Risk

The Group conducts its business activities in compliance with laws and regulations, and is working to raise awareness of legal compliance within the Company by organizing the Group Risk Compliance Committee, etc. However, in the ordinary course of business, the Group is subject to various legal proceedings, such as lawsuits and other legal actions by third parties for violations of laws or inappropriate acts by employees, disputes over contracts, labor disputes, and compensation for damages, etc. Long-term and costly lawsuits or lawsuits with significant social impact could affect the Group's business, financial conditions, and operating results due to the financial burden as well as the deterioration of the Group's social reputation, including the deterioration of its corporate image.

(9) Impairment of Fixed Assets

The Group owns various fixed assets, including equipment and real estate used in its business. If the Group were required to recognize and measure impairment losses on fixed assets due to a decrease in future cash flows of owned assets or other factors, the Group's business, financial condition, and results of operations could be adversely affected.

(10) Food and Product Safety and Sanitation Management

The Group handles a wide range of products from fresh foods to processed foods and ready meals to meet the diverse needs of our customers, with our strength in foods, including fresh foods and prepared foods. The Company has established "Product Quality and Hygiene Control Regulations" and has built a management system centered on the quality control department in our Distribution and Retail Business. Each store and central kitchen conducts periodic inspections to ensure compliance with the regulations and that sanitary management is in place in accordance with the Food Sanitation Act, Food Labeling Act, HACCP, and quality management certification, and the Quality Control Department confirms the implementation status and provides guidance. In addition, the Internal Audit Office evaluates the cycle and effectiveness of store audits. The Company is taking various measures to provide safe, secure, and appropriate food to customers, including periodic inspections of compliance with the Food Sanitation Law by an external organization to ensure safety and hygiene management, and requiring employees in stores and production departments to take in-house qualification tests under a training program for hygiene management and compliance. However, in the unlikely event that inappropriate foods or products are offered or labeled, such as food poisoning, contamination by foreign substances, or errors in the labeling of origin or allergy information, or if inappropriate information about foods or products is spread via social media, etc., the Company will be subject to disciplinary action or measures by the authorities, and will also be required to refrain from sales, recall products, correct labeling, and take other measures and preventive measures. In addition, the Group may incur substantial costs for measures such as sales restraint, product recalls, labeling correction, and implementation of measures to prevent reoccurrence. As described above, our group is taking the utmost quality control measures through a management system based on mutual confirmation by each department and an employee training system. However, if any of these events were to occur, our group's business, financial conditions, and business performance could be affected.

(11) Impact of Competition

In Japan, the market is expected to shrink due to the declining birthrate and aging population, and the Group is exposed to fierce competition from other companies in the same industry as well as from competing supermarkets, general merchandise stores (GMS), drugstores, and other retail formats. In such a competitive environment, the Group is trying to differentiate itself from its competitors by using IT and AI to understand and analyze customer purchasing trends and by being highly price-competitive through low-cost operations and product enhancement. However, if competitors open more discount stores or intensify competition across industries and business categories, the Group's business, financial conditions, and earnings could be affected.

(12) Business expansion through M&A

The Group may pursue M&A as one means of expanding its business scale and diversifying its business portfolio. However, M&A transactions may require substantial funding and could temporarily affect the Group's financial condition and results of operations. In addition, if the acquired business does not develop as planned following the transaction or requires expenditures beyond initial expectations, the Group may not realize the anticipated benefits from such investments and financing activities.

In selecting acquisition targets, the Group conducts detailed due diligence, both in Japan and overseas, covering the target company's financial condition, contractual arrangements, business operations, and other relevant matters, in an effort to mitigate risks. However, if contingent liabilities or previously unrecognized liabilities are identified after an M&A transaction, or if other matters that could not have been reasonably anticipated prior to the acquisition come to light, such circumstances may adversely affect the Group's business, financial position, and results of operations.

(13) Interest-bearing debt

The Group has incurred significant borrowings from financial institutions to finance M&A transactions. If market interest rates rise significantly in the future, the floating-rate portion of interest on such borrowings may increase, resulting in higher interest expenses and potentially affecting the Group's results of operations. In addition, certain borrowings entered into with financial institutions are subject to financial covenants. If the Group's results of operations deteriorate and the Group breaches any such financial covenants, it may lose the benefit of the term of the loans, which could adversely affect the Group's business, financial condition, and results of operations.

(14) Impairment of goodwill

In connection with the acquisition of all shares of SEIYU Co., Ltd. in July 2025, the Group recognized a significant amount of goodwill, which represents a high proportion of total assets. The Group currently believes that the goodwill appropriately reflects the future earning potential of the business; however, if the Group's earning potential declines, an impairment loss on the goodwill will be recognized.

Going forward, the Group will implement various initiatives to maximize synergies and improve earning potential. However, if these initiatives or the integration process do not progress as expected and an impairment loss on the goodwill is recognized, such circumstances may adversely affect the Group's business, financial position, and results of operations.

(15) Liquidity of the Company's shares

Although the Company is striving to ensure the liquidity of the Company's shares, the ratio of shares in circulation as defined by the Tokyo Stock Exchange, Inc. is 26.4% as of June 30, 2026.
The Company intends to increase the liquidity of its shares through a combination of these measures, taking into consideration the procurement of growth capital through a public offering in line with its business plan, requests for partial sales to major shareholders and directors, and increases in the number of shares in circulation through the exercise of stock options. However, if for some reason the liquidity of the Company's shares declines from the time of listing, trading of the Company's shares in the market may stagnate, which may have an adverse effect on the supply-demand relationship for the Company's shares.

(16) Relationship with Major Shareholders

As of June 30, 2026, the majority of the Company's shares are held by Hisao Nagata, the founder and Chairman of the Company, and Hisao Nagata and his relatives' asset management company, THC Corporation and Heroic investment, Inc.

The interests held by such major shareholders in our business and other matters may differ from those of other shareholders, and depending on their ownership policies and voting policies, they may have a significant impact on the outcome of our shareholders' resolutions, which may affect our business performance and financial position, and results of operations.

Risks related to Retail AI Business

(1) Occurrence of prior investment and continued losses

The Group had been making upfront investments in the Retail AI Business, and the Retail AI Business had posted consecutive segment losses through the fiscal year ending June 30, 2024. This is due to development investments for new product development and improvement of existing products, personnel expenses, and acquisition of tangible fixed assets. On the other hand, the Distribution and Retail Business recorded stable positive cash flow from operating activities. Our management strategy also assumes that we will actively invest in the Retail AI Business as sales and profitability of the Distribution and Retail Business continue to grow and improve.
However, in the Retail AI Business, we are conducting various demonstration tests and developing new businesses, but there is no guarantee that productization and development will progress as planned, nor is there any guarantee that the dissemination and deployment of existing or to-be-developed products will also progress as planned. There is also no guarantee that we will be able to secure the engineers and other resources needed to develop these products. In addition, the retail tech market is characterized by rapid technological innovation, which may lead to higher-than-expected upfront investments for the growth of the Retail AI Business in the future. If we fail to achieve our business plan due to these factors or other risks described in "Business and Other Risks," we may not be able to generate stable earnings in the Retail AI Business and may not be able to recover invested funds, which may affect our business, financial condition, and earnings. In this case, the Group's business, financial conditions, and business performance may be affected.

(2) Regulations by Law

In the Retail AI Business, the Group is engaged in the business of manufacturing precision machinery and providing DX Solution services, and is therefore subject to various laws and regulations governing corporate activities, such as the Radio Act and the Act on the Protection of Personal Information. The Group believes that it is important to enhance its compliance system, and the department in charge of legal affairs plays a central role in checking the status of legal compliance and estimating the impact on business when laws are revised.
However, we cannot completely deny the possibility that our group's products and solutions may conflict with legal regulations in the future, and if future revisions of laws or changes in legal interpretations make it difficult for us to provide our group's products and solutions, we may be forced to make changes to our legal system. In addition, future revisions of laws and changes in legal interpretations may make it difficult to provide the Group's products and solutions, which may affect the Group's business, financial condition and performance.

(3) Hardware and software defects

In the Retail AI Business, the Group provides solutions and obtains data by installing IoT devices in retail stores. The Group has established a quality control system for both hardware and software and strives to ensure product safety and prevent service defects by making improvements and refinements as it implements the provision of products and solutions.
However, it is impossible to completely prevent these defects in the future, and in the unlikely event of a large-scale product defect or damage resulting from such defects, the Group's business, financial condition, and earnings could be affected.

(4) Competition

In the Retail AI Business, the Group conducts sales activities based on an "operation-driven" approach, and we recognize that we are among the world's top companies in terms of implementation and operational performance. On the other hand, there are many competitors in the retail tech market both in Japan and overseas. As the retail tech market grows in the future, if the technical level or prices of our products and solutions are inferior to those of competitors due to intensified competition with existing businesses or the entry of new businesses from other industries into the market, our business, financial conditions, and business performance may be affected. In this case, the Group's business, financial condition, and operating results may be affected.

(5) Risks Related to Global Situation and Supply Chain

In the Retail AI Business, the Group purchases IoT devices, including Skip Cart, from China. In the event of an impact on the supply chain due to significant infectious diseases domestically and internationally, trade friction between the U.S. and China, political or diplomatic issues between Japan and China, or deterioration of relations with such suppliers, procurement of IoT devices may be delayed or business opportunities may be reduced. In addition, the Group may face difficulties in procuring stable products and parts from partner factories due to tight global demand for semiconductors and other factors.
The Group is striving to build long-term relationships with cooperating factories in anticipation of future introduction plans, and is considering hedging risks such as the use of multiple procurement routes. However, if these risks materialize, the Group's business, financial condition, and earnings could be affected.

(6) Management of Intellectual Property Rights

In accordance with relevant laws and regulations, the Group strives to prevent infringement of copyrights, patents, and other intellectual property rights of other companies by conducting internal investigations and confirmations to ensure that the Group's activities do not infringe on the rights of other companies, and that the software used in the Group's operations does not infringe on the rights of other companies. In cases where it is difficult to make a judgment, the Company has a system in place to obtain opinions from patent attorneys and legal advisors. In addition, the Group strives to protect its intellectual property rights by filing patent applications for technologies that are important to the Group's business operations.
However, since it is difficult to completely ascertain the intellectual property rights of third parties related to the Group's business areas, there is a possibility that the Group may unintentionally infringe on the intellectual property rights of other companies. In such cases, we may be subject to claims for damages or injunctions on the grounds of patent or trademark infringement, or we may be required to pay compensation for the use of intellectual property rights, which may affect our group's business, financial conditions, and business performance. In addition, if our intellectual property rights are infringed by a third party, we may lose the superiority of our business model utilizing retail tech, and we may be required to take legal action, incur human and material costs, and otherwise impact our business, financial condition, and performance. In addition, the Group's business, financial condition, and operating results may be affected due to the need to take legal action and incur human and material costs.

Risks Related to Other Business

The Other Businesses segment is mainly engaged in the resort business, including inns and golf course management, and we are aware of the following risks in addition to the above-mentioned Group risks. However, we believe that these risks have a low impact on the group as a whole.

(1) Changes in Economic Trends

The resort business is greatly affected by economic trends, particularly trends in personal consumption. If events leading to economic uncertainty, such as a decrease in the number of travelers due to economic conditions, foreign exchange rates, weather, and seasonal factors, continue over the medium to long term, the Group's business, financial conditions, and operating results may be affected.

(2) Impact on the decline in the quality of services due to the decrease in the working population

The inn business is centered on the provision of labor-intensive services, and if the labor shortage continues over the medium to long term due to the recent decline in the working population caused by the falling birthrate and aging population, the Group's business, financial conditions, and operating results may be affected. In addition, although we are striving to differentiate ourselves from our competitors by educating our employees and providing added value in order to improve customer satisfaction and increase repeat business, a decline in the quality of services we provide may cause customers to leave our group, which may affect our business, financial condition, and operating results.