Risk of Store Closures and Supply Chain Disruptions Due to COVID-19

「During the three-month period ended 30 June 2024, social and economic activity gradually normalized as the COVID-19 pandemic subsided. Corporate earnings improved and personal consumption also showed signs of recovery, and the economy remained on a gradual recovery trend.」

「During the nine-month period ended 31 December 2023, the Japanese economy recovered steadily as the COVID-19 situation improved and border restrictions were further eased, among other factors.」

「During the six-month period ended 30 September 2023, economic and social activity normalized further as COVID-19 was reclassified to Category 5 and border restrictions were eased, and the economy maintained a gradual recovery trend.」

「During the three-month period ended 30 June 2023, the Japanese economy showed signs of recovery as economic activity normalized with the easing of restrictions related to COVID-19, but」

「In addition to the unstable economic and consumer environment amid the continuing COVID-19 pandemic, the surge in global resource and energy prices stemming from the war in Ukraine and the sharp depreciation of the yen due to the widening Japan-U.S. interest-rate differential, among other factors, meant that operating profit and operating cash flow did not return to positive territory during the current consolidated fiscal year. As a result, we reported a substantial operating loss and recognize that circumstances continue to exist giving rise to significant doubt regarding the going-concern assumption.」

「During the nine-month period ended 31 December 2022, the Japanese economy showed signs of recovery as economic activity normalized with the easing of restrictions on activity due to COVID-19, but」

「However, as the business environment surrounding our company is expected to remain uncertain due to changes in consumer behavior caused by COVID-19 lasting longer than anticipated, soaring energy and raw material prices, and the sharp depreciation of the yen, among other factors, we determined that further reviews of our cost structure were essential to ensure business continuity and decided to implement the following management rationalization measures.」

「However, in addition to the impact of soaring raw material prices and transportation costs, the rapid renewed spread of the Omicron variant at the beginning of the year caused market conditions to deteriorate again, resulting in a difficult environment.」

「Due to the impact of operating restrictions and lost consumption opportunities associated with the spread of COVID-19, our group was forced to report a substantial decline in revenue, a resulting operating loss and negative operating cash flow in the previous consolidated fiscal year. We therefore recognize that circumstances exist giving rise to significant doubt regarding the going-concern assumption. Under these circumstances, the negative impact of COVID-19 on business performance continued during the current consolidated fiscal year, but revenue recovered, increasing by ¥1,776 million.」

「As a result, by the nine-month period ended 31 December 2020, revenue had increased by ¥893 million and ordinary profit had improved by ¥1,014 million. As the full-year outlook calls for a return to positive ordinary profit through higher revenue and profit, we have determined that, at this time, there is no material uncertainty regarding the going-concern assumption for our group.」

「During the six-month period ended 30 September 2020, sales and profit fell short of the initial plan due to the impact of the renewed spread of COVID-19. However, the trend of improving business performance through higher revenue and profit has been maintained. As the full-year forecast plans for further revenue growth as well as a return to positive ordinary profit and operating cash flow, we have determined that there remains no material uncertainty regarding the going-concern assumption for our group.」

「As a result, during the nine-month period ended 30 June 2020, sales recovered broadly in line with plan, and operating profit and operating cash flow were also progressing toward a return to positive territory. Accordingly, we have determined that, at this time, there is no material uncertainty regarding the going-concern assumption for our group.」

「With regard to COVID-19, which has been spreading worldwide since 2020, the outlook for containment remains uncertain. Accordingly, restrictions and constraints on consumer activity associated with infection-control measures are expected to continue, potentially having a material impact on our business performance.」

「During the nine-month period ended 31 October 2020, major commercial facilities nationwide closed and our business activities were restricted due to declarations of a state of emergency and other measures taken in response to the spread of COVID-19. Even after commercial facilities resumed operations following the lifting of the state of emergency, the recovery in domestic consumption remained weak as the number of new infections continued to rise and fall, resulting in a substantial decline in revenue, a resulting operating loss and negative operating cash flow. Furthermore, with infections continuing to spread from early autumn onward, we recognize that the recovery of economic activity is likely to be significantly delayed. Based on these assumptions, our full-year forecast for the fiscal year ending January 2021 is expected to include a substantial decline in revenue, a resulting operating loss and negative operating cash flow, and we expect the declining-revenue trend to continue in the fiscal year ending January 2022.」

「Furthermore, the spread of infections in a second and third wave cannot be ruled out, and we recognize that the recovery of economic activity from autumn onward is likely to be significantly delayed. Accordingly, our full-year forecast for the fiscal year ending January 2021, based on these assumptions, is expected to include a substantial decline in revenue, a resulting operating loss and negative operating cash flow.」

「In addition, due to the spread of COVID-19, we have temporarily closed commercial facilities and directly operated stores and reduced opening hours, among other measures, and our group has also been affected in its business performance. Going forward, we expect to resume operations as the state of emergency is lifted. However, depending on developments, business activity and our group's ability to secure earnings could be affected, and we will continue to closely monitor the situation.」

「It is anticipated that a pandemic caused by an unknown virus or other factor could impose severe restrictions on the political and economic environment, potentially having a material impact on our business performance through supply chain disruptions and stagnation in consumer markets. With regard to COVID-19, which spread in Japan in 2020, it is also anticipated that containment could take an extended period and that its impact on the economic environment, including department stores, could become more significant. In such a case, it could have a material impact on our business performance. Following the declaration of a state of emergency on 7 April 2020 in response to the spread of COVID-19, our department-store business partners have been increasingly suspending operations, while our directly operated stores have also implemented measures such as temporary closures and reduced opening hours. This could have a material impact on our financial position and operating results.」