Revenue is on plan, but can operating profit maintain its lead in the first half?

FY2027-1Q revenue was ¥1,233 million, up 1.7% year on year, while operating profit was ¥152 million, down 7.8%. The full-year forecasts are revenue of ¥4,900 million and operating profit of ¥525 million, putting 1Q progress at 25.2% and 29.0%, respectively. Revenue was progressing at almost one-quarter of the full-year forecast, while operating profit was approximately 3.8 percentage points ahead of revenue.

The 1Q operating margin was approximately 12.3%, calculated by dividing ¥152 million by ¥1,233 million, exceeding the approximately 10.7% operating margin implied by the full-year forecast. However, despite year-on-year revenue growth, operating profit declined. The company attributed this to increases in various expenses and depreciation and amortisation expense associated with store renovations. As the company has not disclosed the amount of the expense increase or the increase in depreciation and amortisation expense from the previous year, the fact that the 1Q margin exceeded the full-year plan does not by itself indicate that the cost issue has been resolved.

If the full-year plan progresses evenly by half, the FY2027-H1 benchmarks would be revenue of ¥2,450 million and operating profit of ¥262.5 million. Based on the 1Q results, revenue would need to increase by ¥1,217 million and operating profit by ¥110.5 million to reach the first-half benchmarks. However, this calculation does not reflect seasonality in banquets and weddings. In 2Q, it will therefore be necessary to assess not only whether 50% of the full-year plan has been achieved, but also the year-on-year growth rate and cumulative operating margin.

As of 1Q, the full-year earnings forecasts had not been revised. Revenue of ¥4,900 million, operating profit of ¥525 million, ordinary profit of ¥485 million and net profit of ¥455 million were maintained. The 1Q earnings summary did not disclose a year-on-year comparison of the operating margin or a breakdown of the expense increase. In H1, it will be necessary to monitor the cumulative operating margin, renovation-related costs and whether the full-year forecasts are revised, to determine whether profit is ahead because of underlying strength or a temporary difference in progress.