FY2027 began with declining revenue and earnings, with product sales recovery the focus for H1

Consolidated revenue in Q1 was ¥3,033.022 million, down 4.0% year on year, while operating profit was ¥81.597 million, down 29.5%, and ordinary profit was ¥127 million, down 19.8%. The operating margin was approximately 2.7%, down approximately 1.0 percentage point from approximately 3.7% a year earlier. Meanwhile, net income attributable to owners of the parent was ¥326 million, up 65.8%, but this was due to the contribution of extraordinary income rather than an improvement in the core business. In H1, operating profit and ordinary profit therefore need to be given priority in assessing the recovery.

By segment, revenue in the dyeing and finishing business was ¥1,679.476 million, up 1.7% year on year, but the business posted an operating loss of ¥4.751 million. The loss narrowed from an operating loss of ¥26 million a year earlier, but the business has yet to generate profit despite higher revenue. The product sales business posted revenue of ¥1,219.937 million, down 12.0%, and operating profit of ¥5.774 million, down 91.6%, indicating a deterioration in profitability beyond the decline in revenue. Its margin remained approximately 0.47%, making recovery from this level in H1 an important issue.

The real estate business posted revenue of ¥133.609 million and operating profit of ¥80.574 million, both up year on year. The business accounted for a large share of total segment profit in Q1 and effectively supported almost all of consolidated operating profit of ¥81.597 million. Accordingly, even if consolidated operating profit improves in H1, it will be necessary to distinguish between an improvement in the core dyeing and finishing and product sales businesses and a stable contribution from real estate.

The company cited weak sales of summer apparel, weaker demand for high-end apparel, reductions in product inventories and make-to-order production, higher raw material prices, and a ¥77 million allowance for doubtful accounts as factors behind the decline in earnings. In H1, the points to monitor are whether revenue in the product sales business returns to year-on-year growth, whether the dyeing and finishing business turns at least marginally profitable, and whether the operating margin exceeds the 2.7% recorded in Q1.