Revenue growth, but narrower margins — FY2027-H1 will test cost absorption

FY2027-Q1 revenue was ¥7,618 million, up ¥359 million from ¥7,259 million in the year-earlier period. Operating profit, however, fell ¥216 million, from ¥675 million to ¥459 million, while the operating margin declined 3.3 percentage points, from approximately 9.3% to approximately 6.0%. Although the scale of the business expanded, profit failed to keep pace, resulting in a pattern of higher revenue but lower profit. FY2027-H1 will therefore need to establish whether this margin pressure is temporary or structural.

The full-year forecasts remain revenue of ¥32,000 million, operating profit of ¥1,200 million, ordinary profit of ¥1,200 million and net income attributable to owners of the parent of ¥900 million, with no revisions as of FY2027-Q1. FY2027-Q1 progress was approximately 23.8% for revenue and 38.3% for operating profit. Profit is ahead of revenue against the full-year plan, but has deteriorated sharply year on year. If the first half is simply treated as 50% of the full year, revenue of ¥16,000 million and operating profit of ¥600 million provide one reference point. Given the seasonality of the hotel business, however, it will also be important to see how the Company explains seasonal factors in the first half.

The Company cites rising inbound spending, new hotel openings, digital transformation, and the strengthening of its membership base and overseas sales network, while identifying higher raw-material costs, utilities and personnel expenses as a challenging operating environment. FY2027-Q1 did not, however, provide a detailed monetary breakdown of the ¥216 million decline in operating profit, such as personnel expenses, energy costs, pre-opening expenses and depreciation. Depreciation was ¥518 million in FY2026 and ¥137 million in FY2027-Q1, so it will be necessary to determine how much of the margin decline was caused by higher fixed costs associated with new hotel openings.

FY2027-Q1 also included ¥4 million in losses on disposal of non-current assets and ¥13 million in impairment losses. These amounts are small relative to operating profit of ¥459 million, but whether impairment losses increase in FY2027-H1 and whether the affected assets are identified will be relevant to assessing earnings quality. In the first-half results, it will be necessary to track not only revenue growth, but also whether operating profit of around ¥600 million is secured, whether the operating margin recovers from 6.0%, changes in each cost item, and the distinction between pre-opening expenses and ordinary operating expenses.