The decrease in deal volume is the result of a shift in our company-wide strategy.

Specifically, we have narrowed our M&A scope to focus strictly on core business areas, while selectively passing on non-core opportunities where the impact on overall performance would be limited.

Behind this decision is our desire, given current market conditions, to sustain our M&A activities using free cash flow and debt financing without over-relying on equity issuance. Consequently, we are taking a highly selective approach to target transactions. As a result of this selectivity – and our commitment to avoiding rushed deals – the number of executed transactions has decreased; however, we continue to build up a robust pipeline focused primarily on our core domains.

On a calendar-adjusted (day-of-the-week adjusted) basis, the underlying same-store sales growth rate for June was 104%. This was due to weather-related factors in the first half of June, such as typhoons, which caused same-store growth to temporarily slow down in certain weeks.

However, looking at the final week of June alone, sales saw strong growth of 125.9% year-on-year.

This surge was driven by the impact of our GiGO-exclusive merchandise promotions coming to fruition, led by the “‘TWICE’ JAPAN Debut 9th Anniversary! Dot-designed ‘TWICE LOVELYS’ available exclusively at GiGO!” campaign that launched in the last week of June.

This strong momentum has continued into July, and we have a robust lineup of IP collaboration initiatives scheduled for the second half of the year, including the summer peak season in August as well as the winter peak season in December and January.

Regarding Kiddleton Force, our newly introduced AI operational application, we adopted a phased, region-by-region rollout strategy to avoid the operational risks associated with a nationwide launch. Although we initially experienced software bugs and varying compliance rates on the ground, we have continuously implemented system improvements.

As a result, in the United States, we phased out our legacy system (CCX) at the end of June and successfully completed the full transition to a Kiddleton Force-managed structure in July. In Canada, CCX will be shut down at the end of July, marking a complete transition to Kiddleton Force starting in August.

As previously announced, we expect operations to normalize from August onward (the third quarter). This refers to recovering our key KPI – monthly visits to mini-locations – back to pre-merger levels of approximately 15,000 visits per month.

During the transition period up to now, the dual operation of both CCX and Kiddleton Force created an added burden. The need to maintain certain tasks on CCX while simultaneously adapting to Kiddleton Force served as a bottleneck to recovering our visit count.

However, following the full transition to Kiddleton Force in the United States this July, visit numbers have shown a clear recovering trend. Notably, in the period starting July 21, just ahead of the full normalization in August, daily visit counts across each day of the week have reached their highest levels since the system integration issues occurred last November.

Furthermore, alongside the transition to Kiddleton Force, operational measures such as rigorous hands-on management from headquarters and the introduction of an incentive scheme for field merchandisers (rounders) have also contributed to the recovery in visit frequency.

By maintaining this established management structure throughout the second half of the fiscal year, we expect the full normalization of our operations to proceed as planned.

Regarding the realization of cost synergies, which was one of the primary objectives of the integration, initiatives were temporarily paused until system issues and the transition to the new system settled down. This served as the reason why fixed costs in our North American business remained higher than originally projected. However, now that we have a clear line of sight toward operational normalization, we will resume these measures in the third quarter starting in August and work to realize the originally anticipated cost synergies.