Margins recover despite flat sales, reaching 60% of full-year operating profit plan

Revenue for the six months from January through June 2026 was ¥24,239 million, down 0.2% from ¥24,284 million in the year-earlier period. Operating profit, however, rose 39.1% to ¥1,139 million from ¥819 million, while ordinary profit was ¥1,347 million and interim net profit attributable to owners of the parent was ¥909 million. With revenue virtually flat and operating profit up ¥320 million, the focus has shifted from whether sales are growing to whether the margin improvement is temporary or structural.

The operating margin calculated from revenue and operating profit was approximately 4.70% in the first half, up approximately 1.33 percentage points from approximately 3.37% in the year-earlier period. The company cited the launch of its summer merchandise, new store openings, product expansion, initiatives to enhance brand value, and an increase in foreign visitors to Japan as factors behind the change in profit. However, the earnings information provided does not disclose an operating profit bridge separating the improvement in gross margin, the reduction in selling, general and administrative expenses, and the profit impact of foreign exchange. In the third quarter, it will be necessary to determine whether gross margin or expense efficiency is the main source of the improvement.

Full-year guidance remained revenue of ¥47,000 million, operating profit of ¥1,900 million, ordinary profit of ¥2,200 million, and net profit attributable to owners of the parent of ¥1,600 million, with no revisions as of the first half. First-half progress was 51.6% for revenue, 59.9% for operating profit, 61.2% for ordinary profit, and 56.8% for net profit, meaning the profit measures are ahead of revenue. On a simple calculation, achieving the full-year plan will require second-half revenue of ¥22,761 million, operating profit of ¥761 million, ordinary profit of ¥853 million, and net profit of ¥691 million.

For the next results announcement, cumulative nine-month revenue of ¥35,250 million and operating profit of ¥1,425 million will be useful progress benchmarks. If operating profit falls short of these levels, it will be necessary to distinguish between a seasonal issue arising from the second-half-weighted plan and renewed pressure on margins from lower sales after the end of the Korean contract or higher procurement costs due to the weaker yen. The company also recorded an impairment loss of ¥26 million and a loss on transfer of business of ¥103 million in the first half, so it will be necessary to check whether the operating profit improvement is independent of extraordinary gains and losses.