Q1 revenue and earnings declined; reassess the reliability of the full-year forecast based on first-half demand and costs

Q1 revenue for FY2027 ending February 2027 was ¥1,854.9 million, down ¥83.9 million, or 4.3%, from ¥1,938.8 million in the year-earlier quarter. Operating income also fell ¥44.7 million, or 10.7%, from ¥417.3 million to ¥372.6 million, while ordinary income was ¥383.0 million and net income for the quarter was ¥273.0 million. Operating income declined more sharply than revenue, and the operating margin fell 1.4 percentage points from approximately 21.5% in the year-earlier quarter to approximately 20.1%.

The company left its full-year forecasts unchanged at revenue of ¥5,350 million, operating income of ¥100 million, ordinary income of ¥180 million, net income of ¥120 million and annual dividends of ¥11. Looking at Q1 mechanically, revenue had reached 34.7% of the full-year forecast and operating income 372.6%. However, the company has a seasonal pattern in which revenue and earnings are concentrated in the first half, including the spring clothing changeover season. It is therefore inappropriate to view Q1 operating income exceeding the full-year forecast as a straightforward basis for an upside surprise for the full year.

Cumulative revenue and operating income through Q2 in the comparable prior period were ¥3,130.2 million and ¥309.4 million, respectively. At the next earnings release, the focus will be how much of the Q1 decline in revenue and earnings was absorbed by a recovery in Q2 demand. In particular, we will monitor where cumulative first-half operating income lands against the full-year forecast of ¥100 million, and whether increases in labor costs, POS register expenses, fuel costs and raw material costs continue from Q2 onward. Whether the full-year forecast is revised and whether the annual dividend of ¥11 is maintained are also disclosure items to monitor.