Will higher sales be offset by continued operating losses due to rising costs?

Revenue for April through June 2026 was ¥3,066.902 million, an increase of ¥25.970 million, or 0.9%, from ¥3,040.932 million in the same period of the previous year. Operating income, however, deteriorated by ¥100.050 million, changing from a profit of ¥24.949 million in the same period of the previous year to an operating loss of ¥75.101 million. The calculated operating margin fell by approximately 3.27 percentage points, from approximately 0.82% to approximately negative 2.45%. With revenue essentially flat, the deterioration was concentrated in profitability.

The company cites higher procurement costs and labor expenses as reasons for the deterioration in profit, but does not break out the increases in procurement costs and labor expenses or the impact of other expense items. The company also reports a single segment, with no disclosure allowing gross profit or operating profit to be compared by business format. Based on the materials currently available, it is therefore difficult to determine whether the first-quarter loss was temporary, caused by higher raw-material prices and wages, or structural, including inadequate price pass-through and lower store productivity.

To bring first-half operating profit to zero or above, the company will need to offset at least the first-quarter operating loss of ¥75.101 million through second-quarter operating profit alone. An operating profit of more than ¥75.101 million will be required to achieve an actual profit, so the first-half results should be reviewed not only for cumulative operating profit but also for second-quarter revenue, operating profit and operating margin separately from the first quarter.

Moreover, given that the company posted an operating loss despite revenue rising to ¥3,066.902 million, the first-half results will need to show which of the increase in average selling prices from price increases, customer numbers, store count, procurement cost ratio and labor cost ratio affected the margin. In particular, it will be important to determine whether the company can quantify the impact of the higher procurement costs and labor expenses it identified, and whether price revisions and operational improvements intended to reduce the operating loss are producing results.