Overview of Kawabe <8123> business

4. Characteristics of revenue, risk factors, issues and countermeasures

As revenue characteristics and risk factors, there are seasonal factors, the influence of the economy and weather on consumer sentiment, changes in consumption trends, closure and reduction of sales floor area in department stores and mass merchandisers which are the main sales channels, and license contract changes for introduced products. As for seasonal factors, handkerchiefs are the main gift demand market due to overseas famous brands, and scarves and mufflers are in demand during the autumn and winter season as cold-weather items. To address the risk factor of department store and mass merchandiser closure and sales floor reduction, we are promoting expansion of new sales channels (specialty stores, retail stores, foreign-affiliated mass merchandisers, etc.), expansion of direct sales and EC sales, and event planning and operation outside of department stores. As for the license contracts for introduced brands, we are actively promoting the introduction of new brands that capture changes in consumption trends and strengthening S&B as a countermeasure. As for the impact of exchange rate fluctuations, most of the purchases of overseas famous brands in the personal goods business are domestic purchases via general trading companies, but direct imports account for the majority of purchases of overseas famous brands in the fragrance business, which could be affected by exchange rate fluctuations.

Regarding the licensing agreements for the introduced brands, there is a possibility of M&A or changes in management policies on the side of the licensors. However, as a countermeasure, we actively promote the introduction of new brands that capture changes in consumer trends and S&B. In addition, while the majority of the procurement of well-known overseas brands in the daily goods business is through general trading companies and domestic procurement, the procurement of well-known overseas brands in the fragrance business is mostly done through direct imports, so there is a possibility of being affected by exchange rate fluctuations.

(Authored by FISCO guest analyst Masanobu Mizuta)