Risk Management

Description of risks
While Japanese laws do not clearly define whether diopter tests for sales of glasses performed by those who do not have a medical practitioner’s license are classified as a medical practice, assistance for selecting glasses that has almost no risk of harming a human body is generally not considered a medical practice. Assistance in diopter tests conducted by the Group is within the scope that does not cause any harm to the health and safety of a human body, and there are no cases of causing a serious effect on a human body in the past. Furthermore, the Group believes that even these acts of assistance must be backed by sufficient technique and knowledge, and focuses on enhancing the internal training system. However, if assistance in diopter tests mentioned above is deemed to be classified as a medical practice due to amendments to laws and regulations or changes in interpretation thereof, a decline in net sales associated with changes to the business model and other factors may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
When selling glasses at eyewear stores in Japan, we provide assistance in diopter tests for selecting lenses with diopters appropriate for customers’ vision. However, we do not provide ophthalmologic diagnoses or medical examinations that would be classified as a medical practice. We also make sure not to perform acts that could be considered a medical practice during regular sales activities, so that we do not violate the Medical Practitioners’ Act.

Description of risks
In its domestic eyewear business, the Group imports some of its lenses for glasses and ready-made reading glasses directly from manufacturers outside of Japan and procures contact lenses from companies in Japan for sales. Lenses for glasses and ready-made reading glasses are categorized as general medical devices under the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices (the PMD Act) and contact lenses are categorized as specially-controlled medical devices under the PMD Act, which regulates the acts of importing or selling these devices. While the Group strives to properly manage the quality of lenses and other devices in compliance with the PMD Act, related laws, and various orders, in an unlikely event that the Group violates these regulations and applicable licenses are revoked, subsequent issues with product supply may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
The Tokyo head office of JINS Inc., which oversees the import and sales of lenses for glasses, has acquired a third-class marketing license for medical devices as stipulated in Article 23-2, Paragraph 1 of the PMD Act. In addition, the Logistics Center of JINS Inc., which stores lenses for glasses, has obtained a registration of medical device manufacturing business as stipulated in Article 23-2-3, Paragraph 1 of the PMD Act. Furthermore, all of the stores, Tokyo head office, and Logistics Center of JINS Inc., which engage in sales of contact lenses, have acquired a license for selling specially-controlled medical devices, etc. as stipulated in Article 39, Paragraph 1 of the PMD Act. Moreover, the Group has established specialized departments for each category and strives to properly manage the quality of lenses, contact lenses, and other devices in accordance with the regulations of the PMD Act and related laws, to make sure we do not violate various regulations.

Description of risks
The Group is considered a personal information handling business operator as stipulated in the Personal Information Protection Act, because it receives personal information such as customers’ names and addresses in its business activities. Accordingly, the Group has established an internal management system and thoroughly educated its employees, in addition to painstakingly taking measures to prevent personal information leaks. However, in an unlikely event of a personal information leak to external parties, a decline in net sales following the loss of trust and other factors may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
The Group has established the Privacy Policy, Personal Information Protection Rules, Information Security Policy, and Information Security Guidelines for appropriate management according to the importance of each piece of information, and carefully manages personal information. In addition, the Group holds meetings of the Personal Information Committee and Information Security Committee once a month to monitor the operation and management and to work on continuous improvements.

Privacy Policy

Security Policy

Description of risks
If a defect in glasses, contact lenses, or another product sold by the Group causes damage to a customer’s body or property, significant costs that would be incurred, such as the payment of compensation for damages, cost of product recalls, and cost of providing replacement products, as well as the loss of trust from society, may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
The Group has established a quality control department, and takes extreme care to prevent safety defects in products it sells, including glasses and contact lenses. The Group has also established a contact point for inquiries from customers to address any complaints after the sales of products. Moreover, the Group has taken out a liability insurance policy in case the Group is held liable by customers for product-related incidents.

Description of risks
Within the domestic retail eyewear market, which is the business domain of the domestic eyewear business of the Group, the market for eyeglasses for vision correction is maturing. Should a significant contraction of the overall market occur due to changes in the competitive environment or other structural changes, it may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
The market has a strong need for eyewear products of the Group, and the Group believes that there is still room for improving revenue from the domestic market by reviewing and restructuring store and sales formats. Regardless, the Group is simultaneously working on expanding its business in overseas markets and starting new businesses.

Description of risks
Should a significant contraction of the overall retail eyewear market occur due to a spread of alternative products and services, such as vision correction surgeries using laser equipment, or the advent of new means of vision correction driven by technological advancements that exceed the Group’s expectations, it may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
The Group is working to expand the lineup of products with functions other than vision correction, such as blocking blue light and pollens. At the same time, the Group is constantly exploring the development of new businesses in addition to the retail eyewear business, including the JINS MEME business and business that coexist with local communities.

Description of risks
If a large-scale disaster such as an earthquake or tsunami occurs near the Group’s store facility or logistics base and causes a serious damage to such facility, should the Group become unable to engage in business activities for an extended period of time, including selling products and supplying products to stores, it may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
In order to minimize damages to business assets and continue or quickly recover the operation of the core business in case of an emergency such as a natural disaster, a large fire, or an act of terrorism, together with establishing two logistics bases in Kanto and Kansai, the Group has designated activities to be conducted at ordinary times and methods and means for continuing business in an emergency.

Description of risks
If an infectious disease such as COVID-19 spreads rapidly and causes a pandemic, the Group’s manufacturing bases, offices, and stores may be forced to suspend their operations, which may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
Based on its business continuity plan, the Group has established a system to minimize the impact even if an outbreak of an infectious disease occurs at one of its manufacturing bases, logistics bases, or other facilities. For our head office departments, we have developed an environment that enables working from home. In addition, we are recommending staggered work hours, ensuring all employees wear masks at workplaces, and switching internal meetings over to online meetings or streaming. To address the possibility of store closures, the entire Group is working to transform its business model and reduce the impact, including our efforts to lead customers to e-commerce sales.

Description of risks
While the Group is promoting the use of IT in an effort to streamline back-office operations and improve productivity, the progress of digitalization is accompanied by an increased information security risk. Should an incident such as a leak of important corporate information asset, suspension of information systems, or loss or falsification of data occur, it may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
The Group considers cyberattacks and information leaks by people within the Group to be the biggest information security-related risks. The Group has established a department that specializes in IT governance to take security measures against each cause of risk, thereby reducing information security risk and enhancing measures against security incidents.

Description of risks
The Group has procured some of the funds for new store openings and other capital investment, as well as a portion of its working capital, through bank loans, and may procure funds through bank loans and similar means going forward according to future fund requirements.
Should the level of interest rates rise due to an increased reliance on interest-bearing liabilities in the future or changes in the financial environment, it may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
The Group strives to reduce its reliance on interest-bearing liabilities while flexibly procuring funds to nimbly adapt to interest rate trends.

Description of risks
The Group has entered into loan commitment agreements with counterparty banks to flexibly and stably procure working capital and funding for capital investments mainly for new store openings. Should there be difficulties in necessary financing due to future changes in the financial market and trends in the state of profit or loss and net assets of the Group, it may have an impact on the business results and financial conditions of the Group. In addition, on February 12, 2020, the Company issued euro yen denominated convertible bond-type bonds with share acquisition rights due 2023 and euro yen denominated convertible bond-type bonds with share acquisition rights due 2025. If the Company’s stock price remains at a level lower than the conversion values and these convertible bonds are not converted to shares as expected, the Company would have to redeem all of the remaining convertible bonds at face value on each maturity date. Should this happen, the Company may have to take measures such as refinancing, which may include other means of financing.

Measures to mitigate risks
The Group has entered into loan commitment agreements with counterparty banks to flexibly and stably procure funding for capital investments and working capital, and the Group maintains good relationships with counterparty banks so as not to hinder necessary financing.

Description of risks
Because the Group imports most of the glasses frames and some of the lenses, which are the Group’s main products, directly from China and other foreign countries, purchase costs are affected by exchange rate fluctuations. In addition, the Group holds nine overseas consolidated subsidiaries, six of which are operating companies, and one overseas affiliate accounted for using the equity method (hereinafter the “overseas subsidiaries and affiliates”) as of the end of the fiscal year under review. Because the amounts denominated in foreign currencies in financial statements of overseas subsidiaries and affiliates are converted to Japanese yen in consolidated financial statements of the Company, the Company’s consolidated financial statements are affected by exchange rate fluctuations between Japanese yen and each currency. Should exchange rates fluctuate drastically, factors including a sharp increase in import purchase costs and fluctuations of yen-denominated figures in financial statements of overseas consolidated subsidiaries may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
For purchase costs, the Group pays close attention to exchange rate fluctuations and controls the exchange rate fluctuation risk to minimize its impact on the Group’s business results and financial conditions, such as by securing payment currencies when the yen is strong. In addition, we strive to reduce the effects of exchange rate fluctuations for purchase costs by promoting the establishment of a domestic manufacturing system.

Description of risks
In the domestic eyewear business and the overseas eyewear business, the Group has succeeded in gaining support of consumers and operators managing commercial facilities as a result of differentiating itself from other retail eyewear companies by setting clear and reasonable prices and offering new products on an ongoing basis through active product development. However, should a competitor that offers higher added-value than the Group appear due to another company in the industry converting its business model or a company from a different industry or from overseas entering the market and the Group’s competitive advantage decline, a decline in net sales and other factors may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
The Group will continue differentiating itself such as by setting clear and reasonable prices, offering new products on an ongoing basis through active product development, and increasing contact with customers through revisions of the sales format that make use of digital transformation. Through these efforts, the Group will offer high added-value and maintain its competitive advantage.

Description of risks
While the Group designs and plans its products internally, we outsource manufacturing to external companies, many of which are partner factories and companies (trading companies) in China.
Because imports from China make up a substantial portion of the Group’s product purchases and wield a significant impact, the Group diversifies risks such as by contracting multiple factories within China and exploring outsourcing partners in countries other than China. Regardless, should manufacturing be hindered by changes in the society, economy, or political situation in China or statutory regulations and restrictions imposed by Chinese authorities, or if personnel expenses in China increase rapidly or exchange rates fluctuate drastically, factors including the loss of sales opportunities and a sharp increase in import purchase costs may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
Because the Group outsources manufacturing of glasses to partner factories and companies in China and its impact may be significant, the Group has contracted partners in different regions with multiple bases within China. In addition, we strive to reduce the effects of the situation in China for manufacturing products by promoting the establishment of a domestic manufacturing system.

Description of risks
The Group outsources manufacturing of our products to partner factories and companies. For locations where products are sold, roadside stores in suburbs are internally designed and constructed, and we perform unique interior decorations for stores opened in shopping centers and other locations. However, with rising prices of raw materials and materials due to disasters, climate change, and trends in the social, economic, and political conditions in Japan and overseas, rising purchase costs and costs to open stores may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
The Group will revise the product lineup and selling prices and review the design of stores to make sure the business results and financial conditions of the Group are not adversely affected.

Description of risks
The Group has deployed its stores mainly in city centers, major regional cities and surrounding neighborhoods, regional shopping centers, department stores, and station buildings. Accordingly, the Group strives to increase net sales per store by enhancing the ability to attract customers and maintain close communication with the leasing divisions of commercial facilities, in order to induce more solicitations from commercial facilities. However, should the number of commercial facilities in development and turnover of tenants in existing commercial facilities decrease significantly, the Group may be unable to open new stores as planned, which may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
The Group strives to increase net sales per store by enhancing the ability to attract customers and maintain close communication with the leasing divisions of commercial facilities, in order to induce more solicitations from commercial facilities. In addition, we are making progress in opening roadside stores in addition to locations within commercial facilities.

Description of risks
The basic policy of the Group is to open stores by leasing locations. The Group provides leasehold, guarantee deposits, construction assistance fund receivables, and other payments to landowners and business operators of shopping centers and other commercial facilities, in accordance with lease agreements. If a landowner or operator goes bankrupt, or if the Group withdraws from a location before the term of the contract expires, it may become difficult to collect all or part of the abovementioned leasehold, guarantee deposits, etc. Should this happen, it may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
When opening new stores based on lease agreements, the Group sufficiently examines the credit status and matters related to rights of landowners and commercial facilities such as shopping centers. The Group also keeps an eye on the collection and management of receivables such as leasehold and guarantee deposits after the stores are open. When a landowner or a business operator of a commercial facility, such as a shopping center, is not a listed company, the Group takes out a credit insurance policy against receivables to be collected.

Description of risks
While the Group plans to expand its business by actively opening new specialty eyewear stores, our ability to open new stores depends on securing and developing human resources including excellent store employees and store managers. Moreover, the Group believes that it is important to strengthen the management execution structure and enhance the planning, development, and production management departments for promoting differentiation from our competitors. Should we experience difficulties in securing human resources commensurate with the Group’s plans for expansion of the number of stores and enhancement of the planning, development, and production management departments, our inability to open new stores as planned and differentiate ourselves from competitors may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
The Group secures human resources by actively employing mid-career hires who can be an immediate asset while hiring new graduates on an ongoing basis. Also, we strive to realize an environment where employees can work to the fullest in any region by rectifying income differences between regions by standardizing base hourly wages (the minimum hourly wage before adding allowances, etc., based on skills) of fixed-term employment workers such as associate employees and part-time employees to the standard level in Tokyo. In addition, the Group conducts ongoing group training at the Tokyo head office, Maebashi head office, and several locations nationwide, as well as online training, for store employees in an effort to develop human resources. Furthermore, in order to obtain Certified Optician Skills licenses, a national certification, together with establishing the internal educational institution, “JINS Academy,” we have established an education system that supports employees in charge of internal educational training to attend external technical schools for opticians.

Description of risks
Should the Group lose its market share as a result of being unable to effectively stop a third party imitating the Group’s products due to an issue with the protection of its intellectual property or exercise of its rights, or if the Group receives a claim for damages or cease and desist for alleged infringement of intellectual property rights of a third party, it may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
In order to keep proposing cutting-edge products to the market, the Group continuously develops new products and technologies not only through in-house development but also through cooperation with partner companies and research institutions including universities, while respecting the intellectual property rights of third parties. During the process, the Group works to protect particularly important technology, idea, knowhow and design by obtaining intellectual property rights such as patents or classifying them as trade secrets. In addition, because the Group designs, plans, and sells its products under its in-house brands including JINS, the Group has obtained trademark rights to its key brand names and product names to protect its brands.

Description of risks
In the overseas eyewear business, the Group expanded to China in 2010, to the United States and Taiwan in 2015, and to the Philippines and Hong Kong in 2018. The Group is also considering entry to other overseas markets in the future. Operating business overseas contains several risks including those listed below, and should these risks materialize, it may have an impact on the business results and financial conditions of the Group.
- Violation of and infringement on various laws and regulations
- Unexpected revisions to laws and tightening of regulations
- Changes in government policies that are detrimental to business activities
- Sharp increase in personnel expenses and difficulties in hiring
- Underdeveloped infrastructure
- Potential international taxation risk
- Social or economic turmoil due to an act of terrorism, war, disease, disaster, or other factors

Measures to mitigate risks
When entering an overseas market, the Group sufficiently studies and considers various conditions of the target country in advance, including its market size, competitive environment, and statutory regulations. In addition, the Group keeps an eye on any changes in the environment related to business operations even after the entry to make sure the business results and financial conditions of the Group are not adversely affected.

Description of risks
When opening a new store, the Group either constructs a building for the store on a piece of leased land or installs decorations and fixtures inside a leased building or a part of a building, and these buildings, decorations, and fixtures are recorded as non-current assets. Should a need to record an impairment loss of non-current assets related to a particular store arise due to significant deterioration in the profitability of the store, it may have an impact on the business results and financial conditions of the Group.

Measures to mitigate risks
The Group pays close attention to the profitability of each store, and if there is a sign of deterioration in profitability, the Group appropriately determines recoverability and records impairment losses as needed to minimize the impact on the business results and financial conditions of the Group.