Q1 revenue was broadly in line with plan, but earnings progress is significantly behind.

Revenue for the first quarter of the fiscal year ending March 2027 was ¥17,917 million, up 0.8% from ¥17,774 million in the year-earlier quarter. Operating profit, however, fell 36.6% to ¥310 million from ¥490 million, while ordinary profit was ¥372 million and net profit attributable to owners of the parent was ¥244 million, down 30.8% and 33.3% year on year, respectively. The first issue to assess in H1 is that growth in revenue has not translated into profit growth.

Q1 progress against the full-year forecasts was 23.9% for revenue, calculated as ¥17,917 million ÷ ¥75,000 million, and 15.5% for operating profit, calculated as ¥310 million ÷ ¥2,000 million. Revenue was broadly in line with the 25.0% elapsed-period benchmark, while operating profit was 8.4 percentage points below it. To meet the full-year targets, the company must generate an additional ¥57,083 million in revenue and ¥1,690 million in operating profit over the remaining 3 quarters. On a simple half-year basis, revenue of ¥37,500 million and operating profit of ¥1,000 million would serve as reference benchmarks for H1.

The Q1 operating margin was 1.73%, calculated as ¥310 million ÷ ¥17,917 million, down approximately 1.03 percentage points from 2.76% in the year-earlier quarter, calculated as ¥490 million ÷ ¥17,774 million. The company cites higher logistics costs and other expenses from refurbishing logistics hubs and securing operating personnel, higher procurement costs for fresh products, and increased imported raw material costs due to the weaker yen as factors behind the decline in profit, but it has not disclosed the increase attributable to logistics costs, procurement costs or foreign exchange effects. In H1, it will be necessary to assess whether these cost increases are continuing and the extent to which they have been absorbed through price revisions, product mix and productivity improvements.

Meanwhile, the food manufacturing business reported higher profit, so the company-wide decline cannot be explained solely by weaker demand. As of Q1, the full-year forecasts remained unchanged at revenue of ¥75,000 million, operating profit of ¥2,000 million, ordinary profit of ¥2,100 million and net profit of ¥1,400 million. Accordingly, key H1 issues will be the basis for maintaining these forecasts and how far the operating margin can recover from at least the Q1 level of 1.73%.