It is time to start ZOZO's Q&A session for institutional investors for the first quarter of FY25 ending in March 2026. We have on the call Director, Executive Vice President, and CFO Koji Yanagisawa, and also Director, CEO Fuminori Hirose, and General Manager of Corporate Planning Yusaku Kobayashi. Hello. The three of them will be answering your questions. The session will last until 6:00 P.M. If you have questions, please raise your hand with a button. When you're appointed, please unmute. Inform us of your company, your name, followed by your questions. Mr. Kazahaya.
Hello, Kazahaya from UBS Securities. Thank you for allowing me to attend this Q&A session. I have three questions and I apologize in advance that they're quite basic questions.
First of all, for the first quarter, you mentioned earlier during the presentation the qualitative aspect of it, but would you be able to give us more information about the progress against the original plan? Please. That is my first question.
Sure. Mr. Kazahaya, thank you very much for your question. Oh, hello, Kobayashi-san.
About GMV, as Yanagisawa reported to you for ZOZOTOWN, we did undershoot slightly our plan. That is because we had large-scale promotions, which is ZOZO Matsuri, that we did not have in the original plan at the beginning of the year. We surpassed the plan, but all in all, it is in line with the plan. That's how we expressed it. For the profit against the year-beginning plan, we are overshooting.
The reason for this is that when we created our budget, the promotion expenses that we had for the first quarter will be deferred into the second quarter. We didn't use all of it. Also, the operational efficiency turned out to be much higher than what we expected at the beginning of this year. Therefore, labor cost of the logistics-related expenses have been improved greatly. For other items, we didn't have significant improvements.
Oh, thank you. I believe that in the first quarter, I remember vaguely you saying that it was okay for you to have loss of profit, but yes, we did mention that, but we were able to have positive growth. Okay, and then you revised the plan. I'm a little confused. At the beginning of this period, what did you expect from Lyst? How is this revision different from the original plan? Would you just walk me through that please?
Sure. At the beginning of this year, M&A expenses related to Lyst was the only item. Or I should say on top of that there was goodwill amortization that were recorded, and we didn't expect any positive impact of Lyst GMV, but we modified our view on the goodwill and also Lyst standalone business performance. We were able to add that this time around.
I see. I understand. If that's the case, I believe that the goodwill is just a slight change from JPY 20.5 billion. Sorry, it used to be JPY 21 billion and it's now JPY 20.5 billion. The others are going to be coming from the performance of Lyst. Yes. That means that excluding Lyst, for the original plan, there's not much change, right? My third question is your Lyst plan.
I don't know how to put this in words, but this is the very first time for us to experience this. As a CFO, how do you see this? I mean, are you a bit aggressive on this? Are there any risks of having a downward trend on this one in the future? How do you see this?
About the plan, all in all, our plan is flat, meaning it's not aggressive, but it's not too conservative either. It's rather natural or organic, I should say. The bottom line, which is the OP, with respect to OP, relatively speaking, I don't think there's going to be much variance. On the other hand, for GMV, I believe that this could be a fluctuation point because we're going to be greatly impacted by the market environment as well.
This may fluctuate, but we can control the advertising expenses so that we can progress the bottom line as we planned. That is the image I have in mind. I see.
Thank you. Just to build on, it's about JPY 50-something billion, and you have JPY 600 million worth in red ink. Is it correct for me to understand that the OP is going to improve? Do you think that I should think of the risk for further exacerbation of the loss?
For next year, I can't really give you specific numbers here, but I believe that we should expect further loss. It may be a little bit higher than this year, or a little less, but I don't think this will mean significant loss.
Okay, got it. Thank you. That's all from me.
Next, Hirai-san.
Hello from Nomura. I have two questions. First is about the logistics cost.
I believe that you were able to drive efficiency once again. When you look back, I believe that this improvement started in the second quarter last year. I think it's going to start to level off. How do you see the improvement of operational efficiency going forward in the second quarter.
In second quarter and onward, I don't think we're going to have that much positive impact of the improvement of operational efficiency. We don't really expect that. We don't really incorporate that into our plan.
I see. My second question is about the Lyst promotional expenses. You have excluded some and then it's. It seems like when you calculated you would use about 8% of GMV for the sales promotion. Currently we're still in the phase to improve the platform.
Is it correct for me to understand that it would still be 8% when you're still in the phase to improve the platform? Or do you think that when the platform improves you will be able to decrease the amount of the promotional fees against the GMV? How do you see this going forward for Lyst?
Promotional expenses for this period, we have been working to make it more efficient. Promotional expense against GMV has been suppressed a little more than the previous year and next year and onward. I mean, I can't say anything definitive at this stage, but by improving the platform, I don't think we can have the effect of the improvement of the platform in a short period of time. Next year I think we need to spend some time to do that.
For next year as well, I believe that it will be around the same level as well.
All right, thank you. May I come ask you a follow up question? You mentioned that the amount of loss could be the same level as this year or could be a little bit more. Is that because there will be more sales promotion expenses that you need to incur for next year?
This is not so much about individual items, but when it comes to business management, there's going to be renewal of the platform and then we also need to invest in the development and that's going to be upfront investment that we need to make.
Okay, I learned a lot. Thank you.
Next, from Nomura Securities, Yamaoka san, go ahead.
Hello, Yamaoka from Nomura. I do have a couple of questions. The first one, sorry, it's really detailed.
The first quarter sales promotion I believe includes M&A expenses and one time expenses. How much is that exactly, please?
Hello, I'd like to answer that. For the annual, I know, financial results announcement, we mentioned this already. We said that we are expecting JPY 800 million approximately and then it was in line with that. For outsourcing or contracting that was JPY 20 billion and others are a little over JPY 600 million. Thank you.
Just kind of building on what the other person asked. When it comes to improving the operational efficiency of the logistics centers, could you elaborate on that? What have you been successful at and how did this work?
Okay, so we received the items from the brands and there are some that are slow moving.
What we do is to actively sell them during sales period or we return them to the brands, and by doing so we can reduce the volume of the inventory. That's what we're working on. By doing so, we will be able to have reduced capacity that will help us to do better picking. This also leads to improving the operational efficiency. Also, there is a Tsukuba 3 CapEx that we incurred for, and then we've been able to reduce the manpower there, and that had a positive impact as well.
Okay. If that's the case, I feel like that sort of effect can last a little longer or no.
We started that around October last year, and I believe that another person asked this question. It's going to start to taper off sometime.
Okay, I have two more questions. Sorry.
ZOZOTOWN's active number of members, you mentioned that that is solidly increasing and that's because you're spending on sales promotions. What are the initiatives that you're doing differently? It seems like the number of active members is growing quite strongly this year compared to other periods. Are you spending money differently? Are there any changes you experienced this first quarter?
It's the advertisement, as Yanagisawa mentioned, web ad or online ad is going well and we are investing our expenses there. That is leading to the increase of the number of active members. We didn't really drastically change the way we do this. Of course, we're fine tuning what we do, but we didn't do anything fundamentally different or drastically different.
You're basically using the expenses within your budget, but you're still making it effective.
Exactly. We are allocating it differently. We're putting more on the web app, for example.
Okay, I'm sorry, I'm asking a lot of questions about the Lyst Corporation. You mentioned about the loss. Is that because you're spending your expenses for future growth and is that why you're recording loss there? Because earlier you said that you might spend more on development, is it correct for me to understand that this can be more lucrative or profitable if you didn't invest, or is it more correct for me to think that it's just not profit making yet at this stage as a business? How should I think of this?
Of course, Lyst, in terms of the growth stage of Lyst, they're still in the loss making phase. That's why this business is still in the loss, and that is because of the size of the business. This is affiliate service, and half of the SGA for them is sales promotions.
If they narrow down on the sales promotions and narrow down the labor, then I believe that we can generate more profit. If we try to scale up the top line, we need to spend a certain level of sales promotions and we also need to invest in labor. We're still at a stage where it's less likely that they make a profit. Going forward, as we mentioned before, what we want to do is to drive more efficiency for the sales promotions and also increase our top line so that we can improve the margin. That's what we like to do in the midterm.
I see. I understand. Thank you.
Next. Yoneshima-san, go ahead.
Okay. Hello. Do you hear me? Okay. My name is Yoneshima. Yes. I have two questions. First, I apologize that this is a basic question, but the cost of goods sold has come up. Why is this the case?
For a business that requires cost of goods sold, there's outright purchase and sales, and sales are used. For those used, we offer a service to buy the items from the users and let them use that proceeds to buy new items. That has been improving.
I see. Is it correct for me to understand that you've been driving efficiency in that field as well?
Yes.
Another one is, I think Yanagisawa-san explained this too. There was a delay of the spending of the sales promotions. What did you defer in terms of the spending? Could you walk me through that again please?
Sure. I'd like to answer that. We deferred some of the expenses in different fields.
Actually, just to give you one example, ZOZOMATCH was launched in June and we decided to have promotions for that service, but it is a service that creates a lot of buzz. We decided to be a little bit careful and cautious about doing promotions, so we decided not to spend that much promotion fees there. Then there's category promotions. There are some categories that went well then without the sales promotions. That's why we deferred those expenses.
Okay, got it. Thank you. That's all from me.
Next. Okumura-san, go ahead.
Hello, my name is Okumura from Okasan Securities. Do you hear me?
Yes, yes.
Thank you. Just quickly, two questions for confirmation. This is about the Lyst plan.
His audio is really choppy. I can't hear.
Sorry, do you not hear me?
No, it's choppy. Your voice is really choppy. Sorry, we couldn't really follow what you were saying.
Do you hear me now?
Yes, yes.
The premise of GMV was that when you compare on a pro bono basis, what is the year-on-year comparison like, analysis. Sorry.
You mean Lyst standalone Y and YoY growth of GMV. Is that what you were asking?
Yes, yes.
Sorry. We do not disclose last year's business performance of Lyst. We like to refrain from giving you specific numerics. It's probably around the same level as last year.
Yes. Okay, got it. I'd like to ask you the second question, but it seems like my audio is not in a good state. I won't ask you my second question. I apologize.
Next.
Hello, Nagaoka from Bank of America. Do you hear me? Nagaoka from Bank of America. I have three or maybe four. Going to my first question. This GMV, it's disclosed in pounds. How much are you expecting in pounds?
Kobayashi-san, I'm sorry, I'm asking you a difficult answer question. When you purchased it, we do have the business performance of theirs. It was about 5 million pounds. Wait, hold on. For FY2025 we don't have the number. Oh, now I follow. You got it. Kobayashi-san, I solved this question myself. Sorry. You don't disclose it after all. When you look at it in pound, I want to know how much it is. You know, because we need to think of the foreign exchange rates. I don't know if you call that a risk, but anyway we're going to be impacted by that. How do you see the premise of this? You know, the fact that this is recorded in pound.
Okay, maybe I need to divide this. How much is the foreign exchange rate you're using?
Okay, so GBP 1 to JPY 190. Or was it JPY 160? No, JPY 109. This is in dollars.
We disclose the U.S. dollar based one. Sorry. The plan we have, we didn't make it in pound and then we have requested Lyst to come up with their business performance forecast in U.S. dollar and not pound, but in dollar. It's JPY 140. No, approximately JPY 143 to a dollar.
Okay, I understand. My second question, so really detailed. We looked at your plan for this time and last time, and then op had impact on amortization. EBITDA of minus $200 million, is that the loss for this period? I just wanted to understand better how much loss Lyst is making. Am I correct?
Yes, you're in line. I think you're on track in your understanding. We have the previous plan and the plan that we disclosed this time.
We review the goodwill amortization, and then that one goodwill amortization recalculation is going to be slightly different from the loss of Lyst.
My third question is the following. At the beginning of this period, you were conservative about the advertising business, and then it landed at plus 10%. Is this the gap of what you expected? How should we, how should I think of it on an annual base?
Sure. About the advertisement business, as you mentioned, at the beginning of this year, I mean last year, we increased the unit price of the clicks, but that tapered off, we believe, and that's why we gave it a low growth forecast. The click-through rate worked well, and we were able to exceed the plan. I think there are more moving pieces there. Would we be able to stay in the high level like we are achieving right now?
We are not sure. What we would like to do is just kind of continue to make the effort.
Lastly, just quickly, I think I'm the only one who asked about ZOZOMATCH. How do you plan to monetize this, and then when would it start to contribute to the profit? I know that it's early to ask this, but how do you like plan your business model for this one?
ZOZOMATCH. There are other matching services in the market; we are looking at them. What we like to do is to receive a subscription fee or usage fee from males. In terms of monetization, that will be the source of the revenue. When it comes to profit, I think it's too early for me to make any comment on
next. Mr. David Gibson.
Thanks. David Gibson from MST Financial on Lyst. Could you just talk about the strategy? I mean this is a very different business from consignment. You don't hold inventory. Could you outline what is the business strategy to improve this business over the next coming years? Thank you.
[Foreign language]
[Foreign language] . Thank you. Thank you.
[Foregin language]Hi Oliver Matthew from CLSA. Three questions. Number one, could you tell us about AI agents? There's been a lot of talk. Are we going to have an AI shopping agent from ZOZO.
[Foreign language]
Thank you. Could you comment briefly on the trajectory of cosmetics versus fashion? What's the kind of GMV growth you're seeing there?
[Foreign language] Congratulations. I'm very good. Final question. I think TikTok Shop has started in Japan. Are you watching that? Do you see that as a source of rising competition? Thank you.
Of course we are. [Foreign language]
Okay, thank you very much. Thank you.