Revenue growth has not translated into profit growth; the focus is on margin recovery in Q2

Revenue in FY2027-Q1 was ¥4,308 million, up ¥1,072 million, or 33.1%, from ¥3,236 million in the same period of the previous year. Operating profit, however, fell ¥63 million, from ¥291 million to ¥228 million, resulting in higher revenue but lower profit. Operating margin declined 3.7 percentage points, from approximately 9.0% in the same period of the previous year to 5.3%, indicating that the expansion in revenue scale has not translated directly into improved profitability.

According to the earnings presentation, gross margin was 60.3%, down 2.9 percentage points year on year, while adjusted EBITDA was ¥339 million, down 14.3%, and the adjusted EBITDA margin was 7.9%, down 4.4 percentage points. Major SG&A items included personnel expenses of ¥484 million, commissions paid of ¥347 million, advertising expenses of ¥440 million, rent of ¥286 million, freight and packing expenses of ¥217 million, and depreciation and amortization of ¥111 million. In the next earnings release, it will be important to determine which costs, among advertising, personnel, stores and logistics, contributed most to the decline in margins, including the year-on-year change in each expense.

Meanwhile, net income attributable to owners of the parent increased 56.3% year on year to ¥130 million, moving differently from operating profit. No extraordinary gains or losses were recorded in FY2027-Q1, while an impairment loss of ¥5.444 million was recorded in the same period of the previous year. The increase in net income alone therefore makes it difficult to conclude that underlying profitability improved. In FY2027-H1, the company will need to be assessed on how far operating margin recovers from 5.3%, whether gross margin can remain in the 60% range, and whether the SG&A ratio and adjusted EBITDA margin improve, alongside sales trends by brand.