After the full-year profit plan was halved, FY2027-H1 becomes the key test of the turnaround

As of the FY2027 first-quarter earnings release, the forecasts were revenue of ¥37.6 billion, operating profit of ¥360 million, ordinary profit of ¥320 million, net profit of ¥190 million and an annual dividend of ¥50. Following the 21 August revision, the forecasts became revenue of ¥37.2 billion, operating profit of ¥180 million, ordinary profit of ¥130 million and net profit of ¥52 million. The revenue reduction was limited to ¥400 million, or approximately 1.1%, while operating profit was cut by ¥180 million, or 50.0%. Ordinary profit and net profit were reduced by 59.4% and 72.6%, respectively. The revision reflects a much greater deterioration in profit margins and cost assumptions than in sales volume.

The company attributed the downward revision to reduced spending following continuing food price increases, weak sales of midsummer products due to lower temperatures from July onward, and sluggish sales of seasonal apparel. Other reports have also pointed to margin pressure from higher raw-material costs. Accordingly, in FY2027-H1 it will be necessary to check whether customer numbers and items purchased per customer have recovered after food price revisions, and whether apparel and seasonal-product sales are below the prior-year period, while assessing profit margins as well as revenue.

FY2027 first-quarter revenue was ¥9.039 billion, representing approximately 24.3% progress against the revised full-year revenue forecast of ¥37.2 billion. Operating loss was ¥43 million, so progress against the revised full-year operating profit forecast of ¥180 million was negative. Given the company’s seasonality, the first-quarter loss alone does not establish that the full-year target will be missed. However, if operating profitability is not restored by the first half, the assumption that ¥180 million of operating profit can be generated in the second half will become considerably more demanding.

Based on the information provided, the specific revised first-half forecasts for revenue, operating profit, ordinary profit and net profit announced on 21 August cannot be confirmed. At the FY2027-H1 results, it will be important to disclose not only actual results but also the revised first-half forecasts, progress against the full-year forecasts, and assumptions for gross margin, personnel expenses and logistics costs supporting the full-year plan. If the full-year forecasts were simply divided by two, revenue of ¥18.6 billion and operating profit of ¥90 million would result. These are not the company’s actual plans, but they provide a minimum reference point for measuring progress.