Revenue recovered, but higher logistics costs nearly wiped out first-quarter margins

First-quarter revenue was ¥27,285 million, up ¥777 million, or approximately 2.9%, from ¥26,508 million in the same period of the previous year. Revenue exceeded the previous year's level, indicating that demand and sales activity did not deteriorate across the board. Operating profit, however, fell by ¥198 million, from ¥206 million in the same period of the previous year to ¥8 million, a decline of 96.1%. The increase in revenue did not translate into higher operating profit, resulting in a clear margin squeeze.

The operating margin was approximately 0.78% in the same period of the previous year, calculated as ¥206 million divided by ¥26,508 million, compared with approximately 0.03% in the current period, calculated as ¥8 million divided by ¥27,285 million. In a low-margin business, even a 0.75-percentage-point decline can have a significant impact on profit. It is therefore important to determine whether higher logistics costs and changes to trading terms with certain customers affected gross profit or selling, general and administrative expenses, and by how many millions of yen. As of the first quarter, the factors have been explained, but the increase in logistics costs and the profit impact of the changes to trading terms have not been broken down by amount.

First-half results for the same period of the previous year were revenue of ¥52,875 million and operating profit of ¥677 million, producing an operating margin of approximately 1.28%. Accordingly, even if FY2027-H1 revenue is at or above the previous year's level, a significant shortfall in operating profit from ¥677 million would mean that full-year profit recovery would be concentrated in the second half. We will look at how much operating profit has recovered by the end of the first half from the ¥8 million recorded in the first quarter, and whether higher logistics costs were absorbed in the second quarter alone.

The reported business consists of a single segment, the pet-related business, and no disclosure has been identified that separates the effects of logistics costs, trading terms and product mix by segment. In the first-half results, it will therefore be necessary to examine not only operating profit but also the gross margin, the increase in logistics costs, selling, general and administrative expenses as a percentage of revenue, and the impact of changes to trading terms, in order to determine whether revenue growth was driven by pricing or by volume and transaction value.