Global Economic Uncertainty and Downside Risks to the Domestic Economy

「In domestic consumption, consumers became more selective about prices, and their response to cumulative price revisions became increasingly sensitive. In spending by visitors to Japan, structural changes emerged in personal consumption from mainland China starting in November 2025, and growth in tax-free sales at our major directly operated stores clearly slowed from that month onward.」

「Against a backdrop of persistent inflation, increasingly selective consumer spending, and climate change becoming the norm, consumers have shown an increasingly strong tendency to focus not only on price but also on value itself, including functionality, quality, and the value of the experience.」

「Although the economy maintained a gradual recovery trend, supported by a recovery in personal income and robust inbound demand, a highly uncertain environment persisted due to rising prices and geopolitical risks. In addition, structural issues have become increasingly pronounced, including a shrinking market resulting from the declining birthrate and population, the deterioration of regional economies, and growing difficulty in securing labor.」

「During the interim consolidated accounting period, the Japanese economy was significantly affected by record-breaking heat and fluctuations in foreign exchange rates, which impacted consumer spending.」

「During the cumulative third quarter period, the Japanese economy saw the normalization of social and economic activity gather pace as COVID-19 moved toward containment. Personal consumption also strengthened its recovery trend, supported in part by robust inbound demand, particularly from tourists from East Asia. Meanwhile, concerns continued over the yen's depreciation trend, the prolonged surge in raw-material and energy prices, and cooling consumer sentiment due to rising prices.」

「During the cumulative second quarter period, progress was seen in containing COVID-19 both in Japan and overseas, and personal consumption was on an upward trend. However, the yen's depreciation and rising prices continued, and some uncertainty remained a concern.」

「During the cumulative first quarter period, the Japanese economy showed signs of a full-scale recovery in economic activity as restrictions on activities were eased following the reclassification of COVID-19 as a Class 5 infectious disease, despite continued uncertainty from soaring raw-material prices and inflation caused by exchange-rate fluctuations.」

「During the cumulative second quarter period, the Japanese economy remained uncertain due to surging global resource prices, supply-chain disruptions, and the rapid depreciation of the yen.」

「Meanwhile, Russia's invasion of Ukraine beginning in February 2022 caused global raw-material prices to surge, and price increases were seen across a wide range of products. In the foreign-exchange market, the sharp depreciation of the yen increased import costs, while lockdowns in Shanghai, a major global trading port, lasting approximately 2 months from the end of March had a significant impact on supply chains. As a result, economic conditions remained such that the outlook could not be taken for granted.」

「In addition, concerns have arisen that accelerating global inflation and rising geopolitical risks will drive up raw-material prices and logistics costs, adversely affecting personal consumption.」

「Meanwhile, the rapid spread of COVID-19 variants from the end of the year has left conditions uncertain.」

「During the cumulative second quarter period, the Japanese economy remained in a challenging state due to the impact of COVID-19. Although a recovery in personal consumption was expected as measures to prevent the spread of infection, including vaccinations, were implemented, consumption trends remained uncertain.」

「From September through October, signs of improvement were observed as a result of government initiatives such as GoTo Travel and GoTo Eat and a gradual recovery in consumer sentiment. However, when COVID-19 began to spread again, mainly in urban areas, from November, the trend toward weaker consumer sentiment intensified, and challenging conditions continued.」

「During the cumulative second quarter period, the Japanese economy remained severely affected by the prolonged impact of COVID-19. Although some recovery in personal consumption was observed after the lifting of the state of emergency, a full recovery in consumption had not been achieved, and challenging conditions continued.」

「Due to the effects of approximately 2 months of closures of directly operated stores and other factors associated with the spread of COVID-19, revenue was ¥12,200 million, down 32.5% year on year, operating loss was ¥479 million (compared with operating profit of ¥1,902 million in the same period of the previous year), and ordinary loss was ¥76 million (compared with ordinary profit of ¥1,946 million in the same period of the previous year).」

「The business environment surrounding the Group is expected to remain challenging due to the effects of the consumption tax increase, climate changes including repeated typhoons and an exceptionally warm winter, and the shortening of business hours and temporary closures of the Group's principal sales channels, namely directly operated stores, department stores, and specialty sports retailers, accompanying the spread of COVID-19.」

「During the nine-month period ended in the third quarter, there was no occurrence of any new business or other risk, nor any material change in the business or other risks described in the annual securities report for the previous fiscal year.」

「During the six-month period ended [current second quarter], there were no new business risks and no material changes to the business risks described in the prior fiscal year's annual securities report.」

「No new business or other risks arose during the cumulative first quarter of the current consolidated fiscal year.」

「No new business or other risks arose during the third-quarter cumulative consolidated period.」

「During the six-month period ended [current second quarter], there were no new business risks and no material changes to the business risks described in the prior fiscal year's annual securities report.」

「No new business or other risks arose during the cumulative first quarter of the current consolidated fiscal year.」

「The business environment surrounding the Group is expected to remain challenging, amid uncertain economic trends and foreign-exchange markets and increasingly intense competition.」

「It is necessary to remain mindful of the effects on the Japanese economy of fluctuations in domestic and overseas political and economic conditions, including the continuing tensions surrounding the Korean Peninsula, and the outlook remains uncertain.」

「No new business or other risks arose during the cumulative first quarter of the current consolidated fiscal year.」

「In addition, overseas political and economic conditions are becoming increasingly unstable, including an economic slowdown in emerging Asian economies such as China, the UK's withdrawal from the EU, changes in US economic policy following the inauguration of the Trump administration, and the recent escalation of tensions surrounding the Korean Peninsula, raising concerns about spillover effects on the Japanese economy.」

「No new business or other risks arose during the third-quarter cumulative consolidated period.」

「Uncertainty in overseas economies is increasing, including economic stagnation in emerging Asian economies such as China, economic weakness in resource-producing countries such as Russia and Brazil due to lower resource prices, and the UK's withdrawal from the EU. Concerns about spillover effects on the Japanese economy remain. In addition, concerns about a downturn in economic conditions due to irregular weather, including a prolonged period of unusually warm weather following a hot summer, remain, and the outlook for the domestic economy continues to be uncertain.」

「There were no newly arising business or other risks during the cumulative first quarter period. Although the Company recorded an operating loss, an ordinary loss, and a quarterly net loss attributable to owners of the parent during the cumulative first quarter period, this was due to seasonal fluctuations in performance between the first and second halves of the year, which are characteristic of the Group's businesses. As results have generally progressed in line with the initial plan, no material events or conditions have been identified that raise substantial doubt about the going concern assumption, and there have been no material changes to the business and other risks described in the annual securities report for the previous fiscal year.」

「Uncertainty across the global economy is increasing, raising concerns about spillover effects on the Japanese economy. In addition, concerns about a downturn in economic conditions due to the effects of the recent Kumamoto earthquake remain, and the outlook for the domestic economy continues to be uncertain.」