Profit recovery in the first half becomes the focus as earnings decline despite higher revenue

First-quarter operating revenue was ¥18,321 million, up 6.6% year on year, while operating profit was ¥263 million, down 46.8% year on year. The operating margin fell approximately 1.45 percentage points, from approximately 2.89% in the same quarter of the previous year to approximately 1.44%. Revenue growth has not translated directly into profit growth, making the extent of the recovery in deteriorated profitability, rather than the sustainability of revenue growth, the key issue for the next first-half results.

The company cites lower productivity in existing businesses associated with the consolidation of facilities, a one-off increase in personnel expenses, and lower warehouse utilization at some existing facilities as reasons for the decline in profit. However, it has not disclosed the monetary contribution of each factor. First-quarter operating profit of ¥263 million represented 20.3% of the full-year forecast of ¥1,300 million, while operating revenue of ¥18,321 million represented 24.4% of the full-year forecast of ¥75,000 million, indicating that profit is lagging revenue in terms of progress.

Although allocating the full-year forecast evenly across 4 quarters does not account for factors such as seasonality, operating revenue of ¥37,500 million and operating profit of ¥650 million provide useful benchmarks for comparison with the cumulative first-half results. Deducting first-quarter results from the full-year forecasts leaves required amounts over the remaining 9 months of ¥56,679 million in operating revenue, ¥1,037 million in operating profit, ¥863 million in ordinary profit, and ¥545 million in net profit attributable to owners of the parent. For operating profit, this equates to an average of approximately ¥346 million over the remaining 3 quarters, making it important to check whether signs of recovery emerge in the second quarter.

Operating revenue for the fiscal year ended March 2026 was ¥71,317 million, and operating profit was ¥1,437 million, resulting in an operating margin of approximately 2.02%. The forecast for the fiscal year ending March 2027 is operating revenue of ¥75,000 million and operating profit of ¥1,300 million, implying a planned decline in the operating margin to approximately 1.73%. As the company itself expects a lower full-year margin than in the previous year, the next results should be assessed not only on whether the full-year forecast was maintained, but also on whether the one-off factors affecting first-quarter results have diminished, whether profitability has recovered in the Center Business and Asset Business, and how much margin deterioration the plan assumes.