Operating losses widen despite flat sales, making first-half earnings recovery the key focus

First-quarter sales for the fiscal year ending March 2027 were ¥11,946 million, down ¥45 million, or 0.4%, from ¥11,991 million in the year-earlier quarter. Operating income fell from an operating loss of ¥74 million in the year-earlier quarter to an operating loss of ¥238 million, a deterioration of ¥164 million. The operating margin calculated from sales and operating income fell from approximately negative 0.6% in the year-earlier quarter to approximately negative 2.0%. The company also posted an ordinary loss of ¥222 million and a quarterly net loss attributable to owners of the parent of ¥131 million, resulting in losses at the operating, ordinary and net income levels.

The company cited persistently high food ingredient, logistics and energy prices, higher labor costs associated with securing personnel, and consumers’ growing preference for thrift and selective spending as factors behind the deterioration. In addition, as part of its work-style reforms, it closed all stores for 2 days in May for each business format, but it has not disclosed the monetary impact of these closures on first-quarter sales or operating income. Accordingly, the first-half results will need to distinguish the temporary impact of the closures from the ongoing effects of higher costs and weaker demand.

The full-year plan remains unchanged at sales of ¥55,000 million, operating profit of ¥3,200 million, ordinary profit of ¥3,250 million and net income of ¥2,100 million. First-quarter sales represented 21.7% of the full-year plan, approximately 3.3 percentage points below a simple 25% progression that ignores seasonality. As the company posted an operating loss of ¥238 million in the first quarter, it will need to generate operating profit of ¥3,438 million over the remaining 9 months to meet the full-year operating profit plan. At the half-year stage, the key issue will be not only whether sales reach a simple ¥27,500 million, but also whether operating income improves from the year-earlier first-half loss of ¥93 million.

The first-quarter financial results report does not show profit contributions by business format or changes in food costs, labor costs, logistics costs and utilities because the reported segments effectively comprise a single segment. The company also did not prepare a quarterly consolidated statement of cash flows, so the impact of the operating loss on cash generation cannot be confirmed. At the next earnings release, first-half sales, operating profit, sales by business format, changes by cost category and any revision to the full-year forecast should be reviewed together.