Whether sales growth leads to a recovery in operating profit is the key focus

Revenue in the interim period was ¥26,806 million, up 8.3% year on year, while operating profit was ¥890 million, down 15.3%. Revenue increased by ¥2,055 million, whereas operating profit fell by ¥161 million from ¥1,051 million in the same period of the previous year, showing that higher revenue has not translated directly into higher operating profit. This will be the most important point to assess at the next earnings announcement.

The operating margin was approximately 3.32% in the interim period, calculated as ¥890 million ÷ ¥26,806 million. In the same period of the previous year, it was approximately 4.25%, calculated as ¥1,051 million ÷ ¥24,751 million, a decline of approximately 0.93 percentage points. The company cited higher personnel expenses and raw-material costs, as well as expenses related to store openings and new businesses, as factors behind the decline in profit. However, it has not disclosed the impact by expense category or the extent to which these costs were offset by price revisions and higher average customer spend.

The full-year forecasts are revenue of ¥58,000 million, operating profit of ¥2,500 million, ordinary profit of ¥2,350 million and net income attributable to owners of the parent of ¥800 million. At the interim point, progress stood at 46.2% for revenue and 35.6% for operating profit. As a simple quarterly progress benchmark, 9-month cumulative revenue of ¥43,500 million and operating profit of ¥1,875 million would provide one reference point. However, the food-service business is seasonal, so these levels should not be treated mechanically as the full-year achievement threshold. The third-quarter margin and the timing of second-half expenses also need to be considered.

Ordinary profit was ¥1,122 million, up 68.5% year on year, due in part to foreign-exchange gains from the fair-value valuation of foreign-exchange contracts. This reflects a factor separate from earnings power at the operating level. In the third quarter, the focus will be on whether operating profit is improving without relying on foreign-exchange gains, whether revenue growth is driven by customer numbers, average customer spend or new store openings, and whether the company provides additional disclosure of the amounts attributable to personnel expenses, raw-material costs and new-store opening costs.