FY2026 is moving toward a return to profitability, but the key full-year question is whether the earnings improvement is sustainable

Revenue for the first half of the fiscal year ending September 2026 was ¥5,326 million, up just 3.7% year on year, while operating profit was ¥631 million, up 168.4%. The operating margin rose from approximately 4.6% in the year-earlier period to approximately 11.9%, indicating that profitability improved for reasons that cannot be explained by revenue growth alone. The ¥396 million increase from operating profit of ¥235 million in the year-earlier period will need to be examined in the next earnings report to determine whether the improvement continued in the second half.

For the nine months, revenue was ¥7,325 million, operating profit was ¥723 million, ordinary profit was ¥706 million and net profit was ¥774 million. Year on year, revenue increased 7.9%, operating profit 319.0%, ordinary profit 389.4% and net profit 916.4%. The operating margin calculated on revenue improved by 7.4 percentage points, from approximately 2.5% in the year-earlier period to approximately 9.9%. However, because operating profit has already exceeded the full-year forecast of ¥620 million by ¥103 million, the key question at the annual results stage will be whether profit can exceed ¥723 million further, or whether it stalled in the fourth quarter, rather than simply whether the earnings forecast was achieved.

In its explanation, the company attributed the increase in profit to stronger merchandising proposals, a focus on best-selling products, continued cost reductions, a substantial decrease in merchandise inventory valuation losses recognized in the year-earlier period, and lower selling, general and administrative expenses. The cost of sales ratio improved by 5.7 percentage points year on year in the first half and by 5.5 percentage points for the nine months, but the absolute gross margin and the amount of merchandise valuation losses were not sufficiently broken down in the earnings summary provided. It will be necessary to distinguish the reversal of the valuation-loss effect from structural improvement driven by procurement terms, product mix and logistics efficiencies.

In FY2024, the company recorded an operating loss of ¥298 million and a net loss of ¥283 million. In FY2025, it recovered to operating profit of ¥270 million and net profit of ¥194 million, with further improvement in FY2026 through the first half and nine months. At the next earnings report, the company should disclose, where possible, the full-year cost of sales ratio, total selling, general and administrative expenses, merchandise valuation losses, logistics costs and labor costs, to assess how much of the nine-month operating profit of ¥723 million represents normal earning power.