Revenue growth, but lower gross and operating margins, with the focus on confirming profit recovery in the first half

Revenue in the first quarter of the fiscal year ending February 2027 was ¥2,518.780 million, up ¥333.063 million from ¥2,185.717 million in the year-earlier quarter. Operating profit, by contrast, was ¥76.947 million, down ¥21.110 million from ¥98.057 million. The earnings presentation stated that gross margin was 19.9%, down 1.5 percentage points year on year, while operating margin was also 3.0%, down 1.5 percentage points.

The full-year forecasts are revenue of ¥11,650 million and operating profit of ¥825 million. At the first-quarter stage, revenue had reached 21.6% of the forecast, compared with 9.2% for operating profit, meaning revenue progress was significantly ahead of profit progress. Although the company has not disclosed formal interim targets for the first half, a simple 50% progress benchmark would imply cumulative first-half revenue of ¥5,825 million and operating profit of ¥412.5 million. Whether profit can be built up from first-quarter operating profit of ¥76 million to this level will be important.

The earnings presentation cited higher procurement costs due to the weaker yen and strategic investment in marketing and human resources aimed at medium- to long-term growth as factors behind the decline in profit. However, the amounts by factor have not been disclosed, nor has the amount of SG&A expenses itself. In the first half, it will be necessary to assess whether the decline in gross margin narrows, whether the 16.8% ratio of SG&A expenses to revenue declines, and whether strategic investment represents temporary upfront spending or a continuing increase in expenses.

The company operates as a single segment, planning, manufacturing and selling towel products and other goods, and does not disclose profit by segment. Accordingly, in the first-half results, the quality of earnings growth should be assessed not only by the recovery in operating profit, but also through the combination of gross margin, the SG&A ratio and sales by channel. Achieving the full-year operating profit forecast will require a level above the 5.6% operating margin recorded in FY2026, making the extent of improvement from 3.0% in the first quarter the key focus.