Revenue growth, but an operating loss: domestic gross margin and costs are the key swing factors for turning profitable in FY2027

First-quarter operating revenue was ¥24,913 million, up 5.0% from ¥23,721 million in the same period of the previous year. However, operating income turned from ¥0 million in the same period of the previous year to an operating loss of ¥2,015 million, resulting in a simple operating margin calculation of approximately negative 8.1%. Ordinary loss was ¥1,898 million, and the loss attributable to owners of the parent was ¥2,308 million, indicating that revenue growth has not translated into profit.

By segment, operating revenue from the domestic business was ¥22,406 million, or 104.8% of the year-earlier level, while segment loss was ¥1,923 million. The overseas business reported operating revenue of ¥2,506 million, or 107.4% of the year-earlier level, and a segment loss of ¥92 million. Accordingly, most of the consolidated operating loss arose from the domestic business. The overseas business's loss improved by approximately ¥100 million from ¥192 million in the same period of the previous year, but it has not yet reached profitability.

For the fiscal year ending February 2027, the company forecast operating revenue of ¥97,000 million, operating income of ¥1,500 million, ordinary income of ¥1,900 million and profit attributable to owners of the parent of ¥100 million, and maintained these projections as of the first quarter. First-quarter operating revenue represented approximately 25.7% of the full-year forecast, close to the proportion of the year elapsed, while operating results were in the red. To reach full-year operating income of ¥1,500 million from the first-quarter operating loss, cumulative operating income of ¥3,515 million will be required over the remaining 9 months. On a simple average basis, this equates to approximately ¥1,172 million per quarter, although the company has not disclosed the required levels for the first and second halves after taking seasonality into account.

At the next results announcement, in addition to the extent of improvement in first-half cumulative operating income, we will look at whether the domestic business's gross margin and increases in advertising and promotion expenses and personnel expenses have stabilized. The first-quarter supplementary materials did not show progress against the full-year forecast, management's self-assessment of the plan, or a bridge quantifying the factors behind changes. It will therefore also be important to see whether the second-quarter results provide specific support for maintaining the full-year plan and clarify the profit level required over the remaining period.