Revenue Growth and Lower Gross Margins from More Medium and Large FM Projects
First written in FY2024-Q1. 7 of 10 entries say "Worsened", first in FY2024. Latest entry: 2026-08-10.
AlphaPurchase moved to the "Worse" side of this theme in 2025.
1 other company's latest entry also says "Restated".
- FY2026-H1WorsenedAnnual report
「Although the gross margin declined because of a deterioration in the product and service mix and improved from the first quarter, the increase in sales was insufficient to absorb higher fixed costs, including personnel expenses assumed for the increased number of transactions, resulting in lower profit for the business as a whole year on year.」
FM revenue increased 22.9% year on year because of more large construction projects, but segment profit declined 13.4% because the weaker product and service mix and higher fixed costs could not be absorbed. - FY2025WorsenedAnnual report
「In the fourth quarter, we were unable to keep pace with the sharp increase in demand for materials for store renovations under a separate materials-and-labor model. Costs rose sharply because of emergency imports of needed products and chartered deliveries timed to construction schedules, so the increase in sales did not translate into higher profit and fourth-quarter and full-year segment profit fell substantially year on year.」
The FM business could not fully respond to the concentration of renovation projects in the fourth quarter, resulting in higher emergency-import and charter-delivery costs. Full-year revenue fell 0.6% and segment profit fell 47.7%, adding demand concentration and response costs to the existing project-mix pressure on gross margin. - FY2025-H1WorsenedAnnual report
「Although customer traffic and performance were strong because of inbound demand, customers tended to postpone renovation work requiring stores or facilities to close or reduce the scale of projects against this strong demand. As a result, sales continued to fall below the prior-year period for the second consecutive quarter.」
FM revenue continued to fall below the prior-year period as renovation projects were postponed or reduced amid strong customer traffic. Higher consolidated SG&A costs, including the establishment of a construction-focused subsidiary, also contributed to a 40.3% year-on-year decline in segment profit. - FY2024WorsenedAnnual report
「The change in sales mix also reduced the segment-wide gross margin, causing the segment margin to deteriorate from 3.3% to 2.7%.」
The FM segment margin fell from 3.3% to 2.7% as large-facility renovation projects were postponed and small-store projects declined. - FY2024-H1RestatedAnnual report
「During the interim consolidated accounting period, the number of small-store projects, which require more work but have relatively high gross margins, declined. As a result, the change in sales mix reduced the segment-wide gross margin and caused the segment margin to deteriorate from 3.9% to 2.9%, a 1% decline.」
The decline in small-store projects reduced the FM segment margin from 3.9% to 2.9% through a change in project mix. Medium and large projects are advantageous for revenue but have lower gross margins. - FY2024-Q1First statedAnnual report
「Large projects have a higher proportion of materials costs and can generate more sales with fewer people. Accordingly, medium and large store projects generate higher sales per employee and are more efficient in terms of staffing than small-store projects. However, because they are awarded at prices reflecting that efficiency, their gross margin per project is lower than that of small-store projects.」
The FM business first explicitly described the relationship between project mix and profitability: more medium and large projects increase sales per employee but lower gross margin per project. In the quarter, this mix change increased sales but reduced profit.