Gross margin improvement continues, but can it absorb the decline in revenue and bring the company into the black?

Revenue in the first half of FY2026 was ¥4,365 million, down ¥822 million, or 15.8%, from ¥5,187 million in the same period of the previous year. Meanwhile, the gross margin improved by 3.5 percentage points year on year to 35.0%, and selling, general and administrative expenses also fell by ¥174 million. As a result, the operating loss narrowed by ¥70 million, from ¥384 million in the same period of the previous year to ¥314 million. Even with demand remaining weak, the first issue to assess in these results is whether manufacturing cost reductions, pricing and expense control can continue to reduce losses.

The full-year forecast calls for revenue of ¥10,500 million and an operating profit of ¥30 million. Based simply on first-half results, achieving the full-year revenue forecast requires revenue of ¥6,135 million in the second half, while securing 75% progress by the nine-month point requires at least ¥3,510 million in revenue in the third quarter alone after the first half. For operating income, the company posted an operating loss of ¥314 million in the first half, so it needs operating profit of ¥344 million in the second half alone to turn a full-year operating profit of ¥30 million. If the nine-month loss exceeds ¥344 million, the improvement required in the final quarter will be even greater.

The comparable period, the nine months of FY2025, recorded revenue of ¥6,766 million and an operating loss of ¥842 million. Even if nine-month FY2026 revenue has not yet recovered beyond the previous year, whether the loss has clearly narrowed from ¥842 million and whether the 35.0% gross margin improvement shown in the first half has been maintained will help determine whether the restructuring of the earnings model is working. Conversely, if revenue continues to decline and gross margin improvement stalls, it will be difficult for fixed-cost reductions alone to support the full-year profit forecast.

The company operates in a single segment, home appliances, and does not disclose profit by product category or region. Accordingly, at the next results announcement, it will be necessary to check not only revenue and operating income, but also the breakdown of the gross margin improvement, the amount of SG&A reductions, the contribution from price revisions and manufacturing cost reductions, and whether nine-month operating cash flow is disclosed. Even if the full-year forecast is maintained, it will be important to see whether the company provides a specific explanation of which products and regions will generate the ¥6,135 million of revenue and ¥344 million of operating profit required over the remaining period.