Revenue growth fails to translate into profit, with costs and labor expenses once again weighing on earnings

Revenue in the first quarter of the fiscal year ending February 2027 was ¥10,329 million, operating profit was ¥80.885 million, ordinary profit was ¥70.105 million, and profit attributable to owners of the parent was ¥40.445 million. Revenue increased 3.6% year on year, but the decline was greater at the profit levels, with operating profit down 20.3%, ordinary profit down 25.7% and net profit down 30.0%. Operating profit margin calculated simply from revenue and operating profit was approximately 0.78%, but the company does not disclose its operating profit margin on revenue.

In the interim period last year, revenue was ¥20,347 million, operating profit was ¥116.885 million, ordinary profit was ¥106.756 million and net profit was ¥43.215 million. At the next interim results announcement, even if revenue exceeds ¥20,347 million, operating profit below ¥116.885 million would indicate that the lack of conversion of revenue growth into profit improvement is continuing. In particular, first-quarter net profit of ¥40.445 million was close to the ¥43.215 million reported for the interim period last year, so the buildup of profit for the first half needs to be assessed, including the effects of taxes and extraordinary income and losses.

The company attributed the decline in profit to inflation accompanying higher crude oil prices and increased labor costs, among other factors. However, it has not disclosed a bridge showing how many millions of yen each of crude oil-related costs, labor costs, procurement costs and the effects of price increases reduced profit. The only reported segment is the retail business, and there is no information to separate profit contributions by store or region. At the interim results announcement, it will therefore be important to see whether the company can additionally disclose gross profit margin, SG&A expenses, labor costs and their changes from the same period last year.