Revenue growth, but operating profit recovery is lagging; the key focus is how long the margin decline will persist

FY2026-H1 revenue was ¥70,749 million, up 2.5% from ¥69,018 million in the same period of the previous year. However, operating profit was only ¥2,162 million, down 67.5% from ¥6,648 million a year earlier. As profit fell sharply despite higher revenue, this earnings release should be viewed less in terms of revenue scale and more in terms of the recovery in margins and cost absorption.

On a simple calculation, the operating margin fell by approximately 6.6 percentage points, from approximately 9.6% in the same period of the previous year to approximately 3.1%. Ordinary profit was ¥3,006 million and interim net profit attributable to owners of the parent was ¥1,136 million, down 58.5% and 64.1% year on year, respectively. The company attributes the increase in revenue to new products and advertising and marketing activities, but the reported earnings figures do not provide an operating profit bridge showing the amounts attributable to each factor, or a breakdown of changes in advertising, R&D and logistics costs.

The full-year forecasts are revenue of ¥173,000 million, operating profit of ¥12,500 million, ordinary profit of ¥13,000 million and net profit of ¥10,000 million. At the FY2026-H1 stage, progress was approximately 40.9%, 17.3%, 23.1% and 11.4%, respectively. The simple gaps to the full-year forecasts are ¥102,251 million for revenue and ¥10,338 million for operating profit, implying a substantial build-up in profit in the second half. In the third quarter, the key issue is not simply whether revenue continues to grow, but whether cumulative operating profit and the operating margin have clearly improved from the second-quarter cumulative levels.

Next time, we will check whether the resumption of domestic advertising and the impact of new products are absorbing cost of sales and SG&A expenses, whether losses in the international business are narrowing, and how far underlying earnings have recovered after excluding temporary factors such as site consolidation costs and product recall-related losses. Even if the full-year forecast is not revised, an explanation will be needed regarding the likelihood of achieving FY2026 if operating profit progress remains low.