From a rush in demand ahead of price increases to maintaining volumes after the increases

The domestic Interior segment reported revenue of ¥43,941 million in FY2027-Q1, up 12.7% year on year, and operating profit of ¥5,287 million, up 31.0%. The operating margin, calculated from revenue and operating profit, was approximately 12.0%. Progress against the full-year forecast was also slightly ahead on profit, at 25.9% for revenue and 29.1% for operating profit. However, the revenue growth included demand brought forward ahead of the 1 July 2026 price revisions, making it difficult to conclude that the underlying volume trend has improved as such.

In the Q1 breakdown of operating profit changes, sales volumes contributed ¥1,010 million in profit, while gross profit per unit and logistics costs and other expenses reduced profit by ¥420 million and ¥220 million, respectively. Personnel expenses of ¥130 million and promotional expenses of ¥110 million also weighed on profit. Q1 profit growth was therefore driven mainly by volume recovery; higher unit prices had not yet translated directly into improved gross profit per unit. The next results should distinguish between higher sales volumes and improvements in unit prices and product mix.

For its major products, the company had planned transaction price revisions of approximately 18% to 30% from orders received on 1 July 2026, covering wallcoverings, flooring, fabrics, exterior products, auxiliary materials and adhesives. FY2027-H1 will be the first period in which these revisions are fully reflected. We will assess through the gross margin and segment operating margin whether higher selling prices following the revisions outweigh weakness in the residential and non-residential markets and the reactionary decline in sales volumes, and whether they can absorb higher procurement and logistics costs.

The Q1 supplementary materials showed higher sales volumes and the monetary factors behind changes in profit, but did not disclose the breakdown of unit prices, volumes and the impact of price revisions by product. In the next results, it will be important to see not only whether domestic Interior revenue remains positive year on year, but also whether the operating margin can remain around Q1’s 12.0% and whether gross profit per unit turns into a positive contributor. If margins are maintained despite lower volumes, this would confirm that the price increases are taking hold. If only revenue rises while margins decline, price pass-through may not be keeping pace with cost increases.