Will sales growth fail to translate into profit, with the decline in operating margin continuing?

FY2027-Q1 revenue was ¥242,078 million, up 6.1% year on year, while operating profit was ¥13,782 million, down 6.2%. Compared with revenue of ¥228,170 million and operating profit of ¥14,468 million in the year-earlier quarter, revenue increased while operating profit declined by ¥913 million. The calculated operating margin also fell by approximately 0.6 percentage points, from approximately 6.4% to approximately 5.7%. The fact that simple growth in sales volume and revenue scale has not translated into profit is the central issue to be examined in the next interim results.

By segment, revenue from the digital consumer-electronics specialty-store operations business rose 17.5% year on year to ¥90,336 million, driving company-wide revenue growth. Segment profit, however, fell 2.3% to ¥6,117 million. Sales growth in air conditioners, televisions and washing machines, as well as promotions and sales events, lifted revenue, but the latest disclosure does not quantify the respective effects of promotional expenses, discounts, product mix and store operating costs on profit margins.

The mobile-carrier-store operations business also saw revenue rise only 0.6% year on year to ¥91,589 million, while segment profit fell 6.3% to ¥5,664 million. The company cited the decline in special demand following the end of 3G services. In FY2027-H1, it will be necessary to check whether this reaction has run its course and whether revisions to administrative fees and higher personnel and utility costs can be absorbed by consulting revenue and service sales.

In the next results, important disclosures will include gross profit or gross margin, factors behind changes in selling, general and administrative expenses, the burden of discounts and promotional expenses, and revenue and profit per store for the digital consumer-electronics and mobile-carrier-store businesses. In particular, we will assess whether higher revenue is accompanied by improved profitability by checking not only year-on-year revenue growth but also whether operating profit exceeds the year-earlier level and whether operating margin returns to at least the 6% range.