Will profit progress improve in 1Q despite higher revenue and lower operating profit by the first half?

First-quarter revenue for the fiscal year ending March 2027 rose 3.7% year on year to ¥215,331 million, while operating profit fell 1.5% to ¥12,091 million and ordinary profit fell 2.2% to ¥11,880 million. Net income attributable to owners of the parent rose 0.9% to ¥8,017 million, indicating that changes in extraordinary income and expenses or the tax burden partially absorbed the pressure on operating profit. The operating margin was 5.62% based on the reported figures, down approximately 0.29 percentage points from approximately 5.91% in the prior-year quarter, calculated as ¥12,276 million divided by ¥207,698 million.

The company maintained its full-year forecast for the fiscal year ending March 2027 at revenue of ¥876,000 million, operating profit of ¥48,800 million, ordinary profit of ¥48,100 million and net income of ¥32,150 million. First-quarter progress against the full-year forecast was approximately 24.6% for revenue and 24.8% for operating profit, broadly in line with the 25% elapsed-quarter ratio. However, assuming the first half is simply 50% of the full-year forecast, revenue of ¥438,000 million and operating profit of ¥24,400 million are not the company's seasonally adjusted first-half targets. In FY2027-H1, it will therefore be necessary to assess not only the gap against these levels but also the direction of year-on-year growth and margins.

The company cited the effects of refurbishing existing stores, resilience in the pharmacy and e-commerce businesses, and a temporary increase in demand for daily necessities as factors behind the revenue growth. On the other hand, sales of seasonal summer products were weak due to factors including rainy weather, and inbound demand declined, meaning that revenue growth did not translate directly into operating profit. In the discount store business, the company explained that sales of high-margin products such as discretionary goods were strong, while lower-than-expected cashless payment usage reduced the burden of costs such as fees. This is also important because the main cause of the decline in profit was not a uniform deterioration in demand across the group.

Next time, the key points will be whether cumulative first-half operating profit can secure the simple progress benchmark of around ¥24,400 million and whether the operating margin exceeds the first-quarter level of 5.62%. It will also be necessary to confirm whether operating profit returns to year-on-year growth, whether the weakness in summer products and the decline in inbound demand prove temporary, and whether the contributions from the pharmacy, e-commerce and daily necessities businesses continue. Even if the full-year forecast is maintained, the issue will be whether the assumption of a heavier concentration of profit in the second half is becoming more pronounced.