The core domestic business delivered higher revenue and operating profit, but there is limited headroom against the full-year plan

In the first quarter of the fiscal year ending March 2027, revenue was ¥56,132 million, operating profit was ¥17,883 million, ordinary profit was ¥17,866 million, and net income attributable to owners of the parent was ¥11,895 million. Year on year, revenue increased 3.9%, operating profit 5.7%, ordinary profit 7.4% and net income 4.6%, with profit growth slightly outpacing the expansion in revenue. The first-quarter operating margin calculated from the disclosed amounts was approximately 31.9%, although this quarterly metric was not officially disclosed on the cover page of the earnings summary.

The full-year plan calls for revenue of ¥241,900 million, operating profit of ¥74,400 million, ordinary profit of ¥74,400 million and net income attributable to owners of the parent of ¥49,700 million, with none changed from the initial plan. Progress was approximately 23.2% for revenue, 24.0% for operating profit and 23.9% for net income. Compared with 25%, which would result from simply dividing the full year into 4 equal periods, profit progress was broadly in line with the plan while revenue was slightly below it. The previous fiscal year's results were revenue of ¥228,373 million and operating profit of ¥69,366 million, and the company plan assumes growth of 5.9% in revenue and 7.3% in operating profit.

The company cited sales at ZOZOTOWN, customer acquisition through TV commercials and web advertising, new member acquisition, expansion of brands and categories, promotional activity by LINE Yahoo Commerce, and a longer consolidation period for LYST as factors behind first-quarter revenue growth. Accordingly, the increase was not simply organic growth in the existing domestic business, but also included the effects of promotions and changes in the consolidation scope and period. The first-quarter disclosure did not show the amount contributed by each factor or the revenue breakdown between the domestic ZOZOTOWN main site and external channels.

At the next interim results, it will be important to check whether demand after the summer main sale continues from 2Q onward and whether the operating margin can be maintained relative to the amount of advertising and discounting. In particular, the key points are whether revenue approaches 50% of the half-year plan and whether operating profit progress continues to exceed revenue progress. It will also be necessary to check the growth rate of the existing domestic business excluding the longer LYST consolidation period, LINE Yahoo Commerce's contribution and whether the full-year earnings forecast is revised.