Revenue growth, but thin margins make delivery against the full-year earnings-growth forecast the next focus

First-quarter consolidated revenue was ¥2,543 million, up 4.6% year on year, while operating profit fell ¥45 million to ¥26 million from ¥71 million a year earlier, a decline of 62.3%. Ordinary profit was ¥33 million and net profit attributable to owners of the parent was ¥31 million, keeping the company profitable through to the bottom line. Revenue was approximately 24.0% of the full-year forecast of ¥10,591 million, but operating profit was only approximately 7.6% of its full-year forecast, showing a substantial gap between the pace of revenue and profit generation.

The full-year forecasts are revenue of ¥10,591 million, operating profit of ¥341 million, ordinary profit of ¥321 million, and net profit attributable to owners of the parent of ¥288 million. Operating profit is projected to increase 70.4% from the FY2026 result of ¥200 million, implying a full-year operating margin of approximately 3.2%. By contrast, the first-quarter operating margin was approximately 1.0%. If half of the full-year forecast were simply earned in the first half, first-half operating profit of ¥170.5 million and revenue of ¥5,295.5 million would provide one progress benchmark. However, the company has not presented these levels as first-half targets, and performance must be assessed taking seasonality into account.

Past full-year results were revenue of ¥13,859 million and operating profit of ¥267 million in FY2024, revenue of ¥10,663 million and operating profit of ¥250 million in FY2025, and revenue of ¥9,881 million and operating profit of ¥200 million in FY2026. Revenue is difficult to compare on a straightforward basis because the method of recognizing revenue changed after the hotel assets were transferred. Nevertheless, the FY2027 forecast calls for revenue to recover to ¥10,591 million while raising operating profit to ¥341 million. Accordingly, the first-half results should be assessed not simply for revenue growth, but for whether gross margin, personnel-cost ratio and SG&A ratio have actually improved.

The year-on-year change in first-quarter operating profit is explained by positive contributions of ¥57 million from revenue growth and ¥3 million from costs and other factors, offset by negative factors of ¥21 million in personnel costs, ¥29 million in SG&A expenses, ¥48 million from store openings and closures, and ¥7 million in other items. Upfront costs associated with new stores, hiring and advertising reduced profit. The key questions are whether these costs will run their course in the first half and whether revenue contributions from new stores will exceed their costs. The first-quarter materials provided revenue by segment, but did not disclose specific breakdowns of segment profit, personnel-cost ratios or cost ratios. The next results announcement will be watched for disclosure, where possible in monetary or percentage terms, of what is driving the recovery in margins.