Customer acquisition investment front-loaded, widening first-quarter operating loss despite only modest sales growth

First-quarter revenue was ¥3.9765 billion, up 0.8% from ¥3.945 billion a year earlier. However, the operating loss was ¥180.81 million, widening by ¥101.52 million from the ¥79.29 million loss in the prior-year quarter. The ordinary loss was ¥183 million and the net loss for the quarter was ¥226 million, with losses remaining at the operating, ordinary and net profit levels.

The company said the operating loss widened because it strengthened advertising investment during the peak demand season, while acquiring new and returning customers through a renewal of its core products, television commercials, outbound calls to customers who had cancelled in the past, and return-purchase initiatives combining its own e-commerce channel with wholesale distribution. Advertising expenses were ¥119 million, up 13.8% year on year, and selling, general and administrative expenses as a percentage of revenue were 30.1%. The first-quarter materials did not break down total SG&A expenses, the payback period for advertising investment, customer acquisition costs or the retention rate of customers acquired through advertising on a monetary basis.

The full-year forecasts were unchanged at revenue of ¥16.256 billion, gross profit of ¥8.97 billion and operating profit of ¥62 million. First-quarter progress was 24.5% for revenue and 25.0% for gross profit. No ordinary progress rate was shown for operating profit because the first quarter posted an operating loss of ¥180.81 million. On a simple calculation, achieving full-year operating profit of ¥62 million would require total operating profit of approximately ¥243 million from the second quarter onward.

At the next earnings announcement, it will be necessary to confirm not only whether the 256,000 subscribers and 96.5% customer retention rate are maintained, but also the extent to which higher advertising expenses translated into average order value, retention and revenue. Of particular importance will be whether the company discloses cumulative advertising expenses, the number of new and returning customers acquired through advertising, customer acquisition costs and contribution margins by channel. Even if investment aimed at prioritizing sales growth continues, the key questions will be whether the first-half cumulative operating loss narrows from ¥53 million in the prior-year period and whether additional support is provided for maintaining the full-year forecast.