Operating profit led the way in Q1. Can the company maintain strong progress in H1?

Consolidated revenue in Q1 of FY2027 was ¥29,407 million, down 1.2% year on year, while operating profit was ¥1,929 million, up 79.4%. The full-year forecasts are revenue of ¥116,000 million and operating profit of ¥5,600 million, putting Q1 progress at 25.4% for revenue and 34.4% for operating profit. Operating profit's progress rate was approximately 9.0 percentage points ahead of revenue, indicating that profit is currently running ahead of revenue.

The operating margin rose from approximately 3.6% in the year-ago quarter, when revenue was ¥29,777 million and operating profit was ¥1,075 million, to approximately 6.6% in the current quarter. Despite a ¥370 million decline in revenue, operating profit increased by ¥854 million. The key question for H1 is therefore whether this approximately 3.0-point improvement can be sustained. The company cited strong apparel, event and tax-free sales, as well as hotel construction orders in its interior construction business, as reasons for the Q1 earnings growth, but it did not disclose the profit contribution of each factor.

If the full-year forecasts are simply allocated evenly over six months, the reference levels would be revenue of ¥58,000 million, operating profit of ¥2,800 million and net income attributable to owners of the parent of ¥1,950 million. These are not targets set by the company for the first half, but mechanical benchmarks that do not reflect seasonality. After Q1, the amounts required over the remaining 9 months to meet the full-year forecasts are revenue of ¥86,593 million, operating profit of ¥3,671 million, ordinary profit of ¥3,586 million and net income of ¥2,574 million.

At the H1 results announcement, the focus will be not only on whether operating profit increased, but also on whether the margin improvement accompanying the decline in revenue continued in the second quarter. Specific points include the extent to which the negative impact from the anniversary effect of the official shop opened at the Osaka-Kansai Expo venue and the reversal of strong new-car sales in the previous year will persist into the second half, and whether the company provides new explanations of the assumptions underlying its full-year forecasts and the levels required over the remaining period.