Margin compression due to price increases and a higher proportion of high-cost products

「As a result, the operating loss was ¥174 million, compared with an operating loss of ¥50 million in the previous period, and the ordinary loss was ¥175 million, compared with an operating loss of ¥45 million in the previous period.」

「For the interim accounting period, net sales were ¥638 million, down 11.1% year on year; operating loss was ¥176 million, compared with an operating loss of ¥147 million in the same period of the previous year; and ordinary loss was ¥177 million, compared with an ordinary loss of ¥144 million in the same period of the previous year.」

「Although sales declined substantially, measures including price increases for existing products and efforts to reduce import costs gradually began to bear fruit, improving the cost ratio despite the impact of the weaker yen. As a result, the cost-of-sales ratio improved 16.8 percentage points from the previous period, demonstrating the results of the profit structure reforms.」

「Although sales fell substantially, gross profit improvement produced significant results and the cost ratio improved 18 percentage points from the same period of the previous year. As a result, gross profit fell 50.6% year on year to ¥331 million.」

「Although sales fell substantially, gross profit improvement produced significant results and the cost ratio improved 21 percentage points from the same period of the previous year. As a result, gross profit fell 34% year on year to ¥186 million.」

「As a result, in the 47th fiscal period, sales declined, but the gross profit margin improved 6.3 percentage points, enabling the Company to achieve its target ROE of at least 10%.」

「As a result of these initiatives, although the scale of sales was shrinking, the improvement in the gross profit margin began to appear numerically even as the yen continued to weaken.」

「Under these conditions, although domestic sales were affected by the overall market downturn, the gross profit margin has begun to improve slightly as a result of the price increases implemented in the latter half of the first quarter.」

「As a result, for the cumulative first quarter, net sales were ¥1,011 million, down 28.8% year on year; operating profit was ¥1 million, down 99.2%; ordinary profit was ¥6 million, down 95.3%; and quarterly net profit was ¥4 million, down 95.5%.」

「Although sales were substantially higher than in the previous period, the gross profit margin narrowed because overseas sales, which generate relatively low margins, accounted for more than 60% of total sales, while procurement costs for domestic sales were significantly affected by higher raw-material and manufacturing labor costs and the weaker yen at the time of import.」

「In terms of profit, imports purchased for domestic sales were significantly affected by the weaker yen, and the increase in cost of sales put pressure on gross profit. For the Company, whose business model involves overseas manufacturing, the foreign-exchange gain on overseas sales and foreign-exchange loss on domestic sales combined to produce a larger foreign-exchange loss.」

「In terms of profit, the increase in procurement costs due to the weaker yen had a significant impact on the Company's profit structure, and profit from domestic sales declined substantially. During the cumulative second quarter, the overall impact of the weaker yen was almost evenly offset between export sales and import purchases, so overseas sales covered the decline in profit from domestic sales.」

「As a result, sales increased substantially, rising 88.4% year on year, but gross profit growth was limited to 21.7% because sales were weighted toward overseas business with a high cost-of-sales ratio and overall cost of sales increased due to the sharp depreciation of the yen and higher raw-material costs.」

「Although procurement costs rose as materials and labor costs increased in manufacturing locations, customers increasingly demanded price reductions. In addition, high-cost products, including overseas sales, accounted for a large proportion of sales, limiting gross profit growth to 12.6% year on year.」

「Although sales increased, margins narrowed relative to sales because overseas sales, which generate relatively low margins, accounted for a very large proportion of total sales; cost of sales increased; domestic and international transportation costs rose; promotional expenses were incurred to resume displaying in-store samples that had been suspended during the COVID-19 pandemic; and expenses were incurred for medium-term research and development of new businesses.」

「Operating profit increased 68.0% from the previous period to ¥492 million, and the operating margin reached 11.0%, exceeding the Company's target of at least 10%.」

「As a measure to compete with products offered by other companies in overseas markets, the Company lowered the selling prices of some products, resulting in high-cost products accounting for a large proportion of sales during the period.」

「The operating margin target of 10% fell slightly short at 7.8%, mainly due to the decline in sales described above.」

「The exchange rate for import settlements during the fiscal year was roughly in line with the previous year's average, keeping the cost ratio flat. Total expenses also remained at approximately the previous year's level, enabling the operating margin to reach 10.4% of sales, meeting the Company's target operating margin of 10%.」

「The cost ratio normalized as import purchase rates stabilized, and operating profit for the fiscal year, including the expenses of consolidated subsidiaries, was ¥476 million. Despite the decline in domestic sales described above, the operating margin remained at a healthy 11.2% of sales.」

「As described above, the main issue was the slow recovery in domestic sales, and sales declined again in the third quarter. Although the cost ratio improved, operating profit fell 10.8% and ordinary profit fell 6.8%.」

「Although sales fell short of recovering fully during the second quarter, progress in improving the cost ratio for domestic sales resulted in an 81% year-on-year increase in operating profit and structural improvement. Ordinary profit and net profit had recovered from their levels as of the first quarter.」

「Accordingly, the high-cost product mix has also continued from the first half.」

「However, in domestic sales, the proportion of high-cost product groups such as bicycles increased substantially in the cumulative second quarter, leading sales while compressing the gross profit margin.」