Can the company absorb the personnel investment in H1 despite higher revenue but lower operating profit?

FY2027 Q1 revenue was ¥4,087.874 million, up approximately ¥14 million from ¥4,073.520 million in the prior-year period. Operating profit, however, fell to ¥383.117 million from ¥403.558 million. The operating margin was 9.37%, down 0.54 percentage points from approximately 9.91% in the prior-year period. The issue this time is therefore not insufficient demand, but the failure to convert the increase in revenue into operating profit.

The company cited higher costs associated with personnel investment, including an increase in headcount, as the reason for the decline in operating profit. It has not disclosed the increase in personnel expenses, the number of additional employees, or a breakdown between one-time and recurring costs such as recruitment and training expenses. The company also reports a single segment comprising businesses including restaurants and banquets, making it impossible to identify in the income statement whether the personnel investment burden arose in banquets, cafeterias, retail outlets or other areas. In FY2027-H1, it will be necessary to determine whether the higher costs represent front-loaded investment limited to Q1 or an increase in fixed costs that will continue into the second half and beyond.

While operating profit declined, ordinary profit was ¥457.518 million and net income for the quarter was ¥313.239 million, up ¥15 million and ¥19 million, respectively, year on year. The gap between ordinary profit and operating profit was ¥74.401 million, while the gap between ordinary profit and net income for the quarter was ¥144.279 million. No extraordinary gains or losses were identified in Q1. Non-operating gains and losses or the tax burden may have supported the appearance of earnings, but the company did not provide a detailed breakdown of non-operating income and expenses. In Q2, the company should be assessed not only on a recovery in operating profit, but also on whether the ¥74.401 million gap is repeatable.

The FY2027 full-year forecasts remain unchanged at revenue of ¥16,330 million, operating profit of ¥1,440 million, ordinary profit of ¥1,500 million and net income of ¥1,010 million. Q1 progress against the full-year forecasts was 25.0% for revenue, 26.6% for operating profit, 30.5% for ordinary profit and 31.0% for net income. Although these are simple benchmarks that ignore seasonality, we will assess whether cumulative Q2 revenue reaches ¥8,165 million and operating profit reaches ¥720 million, and whether the operating margin improves from Q1's 9.37%, alongside any disclosure of the amount of personnel investment.