Will the disconnect between first-quarter revenue growth and operating profit decline be resolved in the first half?

FY2027-Q1 revenue was ¥18,710 million, up 7.9% year on year, while operating profit was ¥704 million, down 45.8%, ordinary profit was ¥941 million, down 28.0%, and net income attributable to owners of the parent was ¥397 million, down 40.6%. The operating margin was approximately 3.8%, calculated by dividing ¥704 million by ¥18,710 million, down approximately 3.7 percentage points from approximately 7.5% a year earlier, based on operating profit of ¥1,299 million and revenue of ¥17,335 million. The fact that higher revenue has not translated directly into profit is the first issue to confirm in the next earnings release.

FY2026-H1, the comparative period, generated revenue of ¥34,450 million, operating profit of ¥2,506 million and an operating margin of approximately 7.3%, with operating profit up 103.5% year on year. Full-year FY2026 operating profit also improved to ¥4,136 million, with an operating margin of 6.1%, so FY2027-H1 will be compared against a high profit base. As of the first quarter, revenue progress toward the full-year forecast of ¥70,500 million was approximately 26.5%, while progress toward the operating profit forecast of ¥4,200 million was only approximately 16.8%, indicating that profit is ramping up more slowly than revenue.

For the full year, the company forecasts revenue of ¥70,500 million, operating profit of ¥4,200 million, ordinary profit of ¥4,200 million and net income attributable to owners of the parent of ¥3,000 million, and it did not revise its forecasts in the first quarter. However, the company did not prepare a quarterly statement of cash flows for the first quarter, and its reportable segments consist of a single household goods segment, so the disclosure does not allow the ¥704 million decline in profit to be analyzed through cash-generation capacity or profit by business.

For FY2027-H1, the focus will be on whether operating profit can exceed the year-earlier ¥2,506 million and whether the operating margin can recover to around 7.3%. Even if revenue exceeds the year-earlier level, an operating margin remaining in the 3% to 5% range would warrant scrutiny of not only upfront expenses but also structural deterioration in selling, general and administrative expenses, product mix and procurement costs. Conversely, if first-half operating profit exceeds ¥2,506 million and the reasons for higher development and advertising expenses, along with the timing of their recovery, are explained, the first-quarter profit decline will be easier to view as a temporary burden associated with investment in new products.