Higher revenue but lower operating income: SG&A weighed on earnings in FY2027-Q1

Revenue in FY2027-Q1 was ¥68.815 billion, up 7.2% from ¥64.223 billion in the same period of the previous year. However, operating profit fell ¥353 million to ¥2.333 billion from ¥2.686 billion, a decline of 13.1%. The operating margin declined by approximately 0.8 percentage points, from approximately 4.2% in the same period of the previous year to approximately 3.4%, indicating that higher revenue did not translate directly into higher profit. Ordinary profit also declined 12.2% to ¥2.677 billion, while quarterly net profit attributable to owners of the parent declined 26.0% to ¥1.480 billion.

The primary reason for the decline in margins was that selling, general and administrative expenses increased 13.2%, while gross profit increased 10.1% year on year. Tire sales promotions, higher selling prices for oil, maintenance demand, web initiatives and e-commerce sales contributed to higher revenue, but did not offset increases in selling, general and administrative expenses, including store operating costs and costs related to new store openings. No cash flow statement was prepared for the first quarter, so it is not possible to determine how much working capital and capital expenditure contributed to the difference between profit and cash flow. No significant contribution from extraordinary gains, extraordinary losses or impairment losses has been identified, so the decline in operating profit appears to primarily reflect the cost burden of the core business.

By segment, the Autobacs business generated revenue of ¥48.994 billion and segment profit of ¥4.604 billion. Revenue increased 5.3%, but profit declined 0.5%. The Consumer business generated revenue of ¥14.563 billion and profit of ¥419 million, the Wholesale business generated revenue of ¥8.381 billion and profit of ¥148 million, and the Expansion business generated revenue of ¥3.204 billion and profit of ¥354 million. First-quarter progress toward the full-year forecast was approximately 22.9% for revenue and approximately 15.6% for operating profit, with profit tracking behind revenue. In FY2027-H1, in addition to whether the full-year assumptions of ¥300 billion in revenue and ¥15 billion in operating profit can be maintained, we will monitor the growth in selling, general and administrative expenses, the margins of the core business, and the recovery in segment profit.