The Challenging Business Environment Driven by Labor Costs, the Burden of Higher Prices and Intensifying Competition

「The business environment surrounding our group is gradually recovering. Personal consumption has remained firm against a backdrop of improving employment and income conditions, including the spread of wage increases, as social and economic activity returns to normal. Inbound demand and the delivery market have also grown. However, the economic environment remains highly uncertain due to prolonged geopolitical risks, including the situation between Israel and Palestine and the situation between Russia and Ukraine, downside risks from the impact of U.S. trade policy, and persistently high energy and raw material prices.」

「During the interim consolidated accounting period (1 July 2025 to 31 December 2025), the Japanese economy was gradually recovering, with personal consumption remaining firm against a backdrop of improving employment and income conditions as social and economic activity normalized and wage increases spread. However, the economic environment remained highly uncertain due to prolonged geopolitical risks, including the situations in Israel and Palestine and Russia and Ukraine, downside risks from the impact of U.S. trade policy, and persistently high energy and raw material prices.」

「The recovery in customer traffic, personal consumption and inbound demand supported the food service business, where demand increased. However, uncertainty continued as the declining labor force associated with the declining birthrate and aging population, soaring raw material and energy prices, and inflation caused by the yen's rapid depreciation pushed up costs in the food service business. In addition, import restrictions imposed by countries importing Japanese seafood, stemming from the ALPS treated-water issue at the Fukushima Daiichi Nuclear Power Station, and the nationwide downward trend in catches have hindered the recovery of the seafood business.」

「As the spread of COVID-19 slowed, restrictions on economic and social activity were eased, and personal consumption and inbound demand provided support, resulting in signs of a temporary recovery. However, uncertainty about the outlook continued due to the declining working-age population associated with the declining birthrate and aging population, soaring raw material and energy prices, inflation caused by the yen's rapid depreciation, and the start of restrictions on seafood exports stemming from the treated-water issue at the Fukushima Daiichi Nuclear Power Station.」

「During the cumulative first-quarter consolidated period, the Japanese economy showed signs of a temporary recovery as restrictions on behavior associated with COVID-19 were eased. However, uncertainty about the outlook continued due to soaring raw material and energy prices resulting from the prolonged Russia-Ukraine situation, inflation caused by the yen's rapid depreciation, and the start of restrictions on seafood exports stemming from the treated-water issue at the Fukushima Daiichi Nuclear Power Station.」

「Consumer activity is recovering as restrictions on behavior have been eased and activity has increased, but the operating environment remains uncertain due to the impact of soaring raw material, labor and utility costs.」

「Uncertainty about the outlook remains due to a renewed spread of infections in the seventh wave, soaring raw material and energy prices following Russia's invasion of Ukraine, and continuing inflation caused by the yen's rapid depreciation. The food service industry also continues to face a challenging operating environment, as customer traffic declined due to the renewed spread of infections and soaring raw material and utility costs exerted additional pressure.」

「During the consolidated fiscal year (1 July 2021 to 30 June 2022), the Japanese economy showed signs of a temporary recovery due to various policies addressing COVID-19 and the spread of third-dose vaccinations. However, economic conditions were expected to remain uncertain amid concerns about a renewed spread of infections caused by the replacement of Omicron variants by BA.5, which is considered even more transmissible.」

「During the cumulative third-quarter consolidated period (1 July 2021 to 31 March 2022), the Japanese economy was expected to remain uncertain, despite the lifting of the declaration of a state of emergency and priority preventive measures implemented to prevent the spread of COVID-19 and the completion of third-dose vaccinations for more than half of the population, as concerns remained about a renewed spread of infections due to the replacement of Omicron variants by BA.2, which is considered even more transmissible.」

「In the food service industry, the declaration of a state of emergency and priority preventive measures, among other measures, led to temporary store closures, shortened business hours and refraining from serving alcoholic beverages, resulting in a substantial decline in customer traffic.」

「In the food service industry, temporary store closures, shortened business hours and requests to refrain from serving alcoholic beverages were required during the COVID-19 pandemic, resulting in a substantial decline in customer traffic. In particular, full-service izakaya restaurants in central urban and entertainment districts have continued to be forced to remain closed for extended periods, and the challenging operating environment continues.」

「During the cumulative second-quarter period (1 July 2020 to 31 December 2020), the Japanese economy remained stagnant and in an extremely challenging situation as the effects of the prolonged spread of COVID-19 continued. Due to the third wave of COVID-19, use of the government's Go To Travel and Go To Eat campaigns was restricted to prevent the spread of infection, limiting the recovery in personal consumption to a temporary one.」

「The food service industry continues to face a challenging operating environment, with customer traffic declining substantially due to requests from local governments to shorten business hours to prevent the spread of COVID-19 and customers' desire to avoid the so-called 3 Cs: closed spaces, crowded places and close-contact settings.」

「The environment surrounding the food service industry is expected to remain challenging, due to changes in customers' values, behavior and needs and growth in the prepared-food market, as well as requests from local governments since late February 2020 to suspend operations or shorten business hours to prevent the spread of COVID-19, resulting in a substantial decline in customer traffic.」

「The food service industry continues to face a challenging operating environment due to rising costs resulting from soaring labor costs, natural disasters including severe weather and successive typhoons, the consumption tax rate increase, and requests from national and local governments to refrain from going out in connection with the spread of COVID-19.」

「The food service industry continues to face challenging conditions due to rising costs resulting from persistently high raw material prices and soaring labor costs, natural disasters including severe weather and successive typhoons, and worsening consumer sentiment following the consumption tax rate increase implemented in October 2019.」

「In the food service industry, factors putting pressure on management include persistently high raw material prices, rising logistics costs, difficulty recruiting personnel and increased labor costs, and the operating environment remains more challenging than before.」

「Other factors putting pressure on management include persistently high raw material prices, rising logistics costs, difficulty recruiting personnel and increased labor costs, making the operating environment more challenging than before.」

「In the food service industry, customer needs are changing due to factors including young people drinking less alcohol, the growth of the prepared-food market and declining demand for banquet functions, while competition across industry and business-format boundaries is intensifying.」

「However, sales in the izakaya format operated primarily by the Company have remained below the previous year throughout the year. Given rising raw material and labor costs and intensifying competition without boundaries between industries and business formats, conditions remain challenging.」

「The food service industry continues to face challenging conditions due to soaring raw material and labor costs, as well as new competition without boundaries between industries and business formats.」

「In the food service industry, consumer values and needs relating to food are changing qualitatively and consumption patterns are diversifying, while new entrants are emerging in the market, creating a new competitive environment without boundaries between industries and business formats. In addition, persistently high raw material prices, rising logistics costs, difficulty recruiting personnel and rising labor costs are major factors putting pressure on management, and the operating environment is becoming increasingly challenging.」

「As consumer needs regarding time, place and occasion (TPO) in food services diversify and competition intensifies across industry and business-format boundaries, soaring raw material costs and difficulty securing personnel, together with rising cost ratios and labor costs, have become major factors putting pressure on management.」

「In the food-service industry, securing personnel has become more difficult and labor costs have increased due to the declining working-age population and improved employment conditions accompanying the economic recovery, in addition to soaring raw material costs. Competition across industry and business-format boundaries has also intensified amid increasingly diverse food preferences, and conditions remained challenging.」

「In the food-service industry, in addition to soaring raw material costs, labor costs for store operations have increased and securing personnel has become more difficult. As customers' demands for food safety and security grow, competition across industry and business-format boundaries is also intensifying, requiring increasingly detailed responses.」

「The company is facing various challenges, including increased labor costs, growing concern about food safety and security, and intensifying competition across industry and business-format boundaries, requiring a detailed and agile response.」