Earnings Call: Q1 2027

Jul 9, 2026

Summary

Q1 sales rose 5.5% to ¥63.5bn and OP grew 5.5% despite challenging weather and conflict-related uncertainty. H1 and FY forecasts were unchanged, with growth initiatives spanning WEGO overseas expansion, Chacott cosmetics and Sirotan licensing.

I am Yasumoto. Thank you very much for joining today despite your busy schedules. First, I would like to present the highlights of the consolidated financial results for the first quarter of FY 2026, and the highlights of the consolidated performance forecast for the first half and the full year, followed by three topics as key updates. Regarding the highlights of the consolidated financial results, the Q1 began just after the outbreak of the Middle East conflict at the end of February. This was widely covered in the news, and there were concerns about its potential impact on consumer sentiment as we entered the quarter. In addition, in May, we experienced unusually high temperatures, with summer arriving earlier than in a typical year. Given these factors, Q1 started under challenging conditions. Nevertheless, we were able to achieve year-on-year growth in net sales and profit. Net sales amounted to JPY 63.5 billion, a 5.5% increase year-on-year. On page 4, there are five paragraphs, and the first three points relate to net sales. Among the drivers of this revenue growth, one notable contributor was Onward Personal Style, which operates the group's made-to-order suit business. The company delivered a significant 38.5% year-on-year increase in net sales. In addition, Chacott delivered strong results supported by the solid performance of its cosmetics business, which I will discuss later. As a result, Chacott as a whole, including the ballet business and the other operations, achieved double-digit revenue growth of 16.4%. In the overseas business, the U.S. business, which is essentially J.PRESS, achieved strong growth, driven mainly by its e-commerce operations, delivering a substantial 82.5% year-on-year increase, nearly doubling its net sales. In Asia as well, both WEGO and the production business performed strongly. In particular, the made-to-order suit factory significantly improved its utilization rate, resulting in a notable increase in net sales. As a whole, the Asia business recorded year-on-year revenue growth of 16.4%. These businesses, all of which achieved double-digit growth, collectively contributed to driving the overall increase in consolidated net sales. Onward Kashiyama, our core operating company, also posted solid results, with net sales up 2%. WEGO recorded a 7.2% increase in net sales, maintaining steady performance. Turning to net sales by brand, UNFILO, positioned as a strategically enhanced brand within Onward Kashiyama, continued its strong momentum from the previous fiscal year, achieving 25.7% year-on-year growth. As mentioned earlier, KASHIYAMA, our made-to-order suit business, delivered a significant 38.5% increase. Within Chacott, the cosmetics business alone achieved a substantial 45.4% year-on-year increase. These results were driven by enhanced digital marketing initiatives and the promotional activities, which proved highly effective. Among our core brands, Nijusanku posted a 1% increase in net sales, and WEGO also achieved 7.2% growth, both delivering solid performance. Next, regarding net sales by sales channel. Sales through department stores declined 4.5%, mainly due to store closures as well as the discontinuation of stores within the company. Meanwhile, directly operated stores and other channels achieved double-digit revenue growth of 11.7%, and e-commerce also posted solid growth of 5.2%. As a result, net sales increased 5.5% year-on-year. Next, turning to operating profit. The operating profit amounted to JPY 5.6 billion, representing a 5.5% increase year-on-year. As shown in the fourth paragraph, the gross profit margin declined by 0.9 point to 56.1%. This was primarily due to the early launch of summer products, which typically carry a lower gross margin in response to the unusually high temperatures in May. In addition, inventory levels had increased during the COVID-19 period, and that inventory de-hoarding during Q1 also pushed down the gross margin. That was the main element. Meanwhile, the SG&A expense ratio improved by 0.9 point, declining to 47.2%. Initiatives have been implemented continuously since the previous fiscal year, including strengthening the operational capabilities of multi-brand stores and promoting the Click & Try. These measures further enhanced the efficiency of store operations, which was the primary factor behind the improvement in SG&A expense ratio. As a result, both gross margin and SG&A expense ratio declined by 0.9 point, leaving the OP margin essentially unchanged. As a result, net profit amounted to JPY 5 billion, an 18.1% increase year-on-year. EBITDA also increased by 5.3% year-on-year to JPY 7 billion. Next, I would like to move on to page 5, the performance forecast highlights. To say the conclusion first, the financial forecast for both the first half and the full year remain unchanged from the initial projections. During the Q2, we will continue marketing activities in response to changes in the business environment. For the first half, net sales are forecast to increase 4.3% year-on-year to JPY 117.5 billion, operating profit to rise 11.6% to JPY 6.4 billion, net profit to grow 16.1% to JPY 5.6 billion, and EBITDA to increase 10.6% to JPY 9.3 billion, all in line with the initial forecast. For the full year as well, we remain our initial forecast. Net sales of JPY 247 billion, up by 4.3%, OP of JPY 12.8 billion, up by 10.3%, net profit of JPY 11.2 billion, up by 10.9%, and EBITDA of JPY 18.8 billion, up by 9.3%. These figures remain unchanged also from the original projections. This concludes the highlights of the consolidated performance forecasts. Next, I would like to move on to pages 6, 7, and 8. Over these three pages, I will explain three recent topics that are closely linked to our future growth strategy. The first topic concerns WEGO, which is one of our strategically enhanced brands. WEGO became a wholly owned subsidiary in the fall of 2024, and about one and a half years have passed since then. During this period, the integration of its domestic business into the ONWARD Group, including the PMI, progressed steadily and smoothly. Accordingly, beginning in FY 2026, we intend to move forward with overseas expansion, a major part of our vision since WEGO became a wholly owned subsidiary focusing primarily on the Asian market. As the first step, we aim to establish a presence in Taiwan and China. In the final week of Q1, at the end of May, we launched our own e-commerce website in Taiwan and opened our first directly operated store there. Combined sales from the store and the e-commerce for approximately one month through the end of June reached about 4.4 times the initial forecast, marking a significantly stronger than expected start. The initial plan was set at a level comparable to that of a typical domestic store, but the business had enjoyed a very strong response from the outset. The first store was opened inside the eslite spectrum – Wuchang Store, a major commercial facility in Taipei, operated by a leading developer with a large number of retail properties. During the current fiscal year, three more stores are planned to open in Taiwan, including a flagship street-level store, bringing the total to four stores. Looking ahead, we aim to expand our store network to approximately 20 stores in Taiwan by FY 2030. Since the first store has performed strongly, we are now receiving a growing number of inquiries from various developers across Taiwan. We intend to move forward as quickly as possible so that we can hit the plan ahead of schedule. Meanwhile, in China, we have already launched EC operations on Taobao and Tmall. However, we are yet to have a permanent physical store in the market, so the plan is to open a flagship street-level store in the center of Shanghai later this year, ideally in early October. Through this opening, we aim to generate synergy between the physical store and our EC operations. This concludes the topic regarding WEGO, which has achieved a strong start in its overseas expansion initiatives. The second topic is Chacott Cosmetics. Chacott originally began as a ballet-focused business, and until recently, we had not placed significant emphasis on strengthening promotions specifically for the cosmetics business. Starting in FY 2026, however, we launched our first ever TV ad for Chacott featuring Elaiza Ikeda and expanded promotional activities across online channels as well. As a result, net sales for the first quarter increased significantly, up by 45.4% YOY. The main sales channels are variety stores and drug stores. By presenting our promotional plans to these partners, we were able to expand in-store displays. This led to a broader nationwide customer reach and a substantial increase in consumer touch points. From a product standpoint, Chacott has long been confident in the high quality and high functionality cultivated through its ballet business. With the strength in the promotions, the awareness of our core products, including the Complexion Creator and the Cool Series, which are our most established and trusted item, has increased, leading to strong and steady sales growth. The third topic concerns the accelerated growth of the Sirotan character business, operated by Creative Yoko. Creative Yoko's core business is pet fashion and related goods. In addition, since 1999, 27 years ago, it has steadily developed its own IP, Sirotan, a harp seal character. While broader awareness is still in the early stages, it has cultivated a very strong and loyal fan base over the past 27 years. Both the merchandise business and the licensing business, which began 10 years ago, have continued to perform steadily. In the first quarter, net sales increased 4.9% YOY. Furthermore, following the spring release, it has been decided that a terrestrial TV anime series will be broadcast nationwide on the TV Asahi network starting in October this year. This is expected to significantly expand the general consumer awareness of the Sirotan IP. By generating synergy with the upcoming anime broadcast, we aim to significantly expand both the merchandise business and, in particular, the licensing business through collaborations with various partner companies. We intend for this to serve as the first step towards accelerating the growth of the Sirotan business. As for recent developments, Licensing Japan, the annual exhibition that brings together licensors and the licensees, was held at Tokyo Big Sight in June. Creative Yoko and Sirotan participated as usual, and the number of visitors to the booth from both Japan and overseas increased by 40% YOY. More than 60 companies from over 10 countries and regions visited the booth, reflecting strong expectations for the upcoming anime adaptation. We are receiving enthusiastic interest from potential licensee partners across a wide range of industries. At present, together with TV Asahi, we are in the process of selecting partners, including overseas partners, to support the global expansion of this business. A full-scale rollout will begin this fall, so please stay watching the results and the development. In June, Sirotan won the first place in the partner category of the Sanrio Character Awards, a long-standing and highly prestigious competition hosted by Sanrio. This recognition is expected to further expand the collaboration opportunities with a wide range of partner companies. Although full scale development of the Sirotan business will begin in the fall, preparations are already progressing steadily. Furthermore, Creative Yoko is re-editing and reorganizing store layouts, including flagship street-level stores, to ensure that Sirotan-related products are displayed in more prominent and visible locations. We believe these initiatives will further strengthen customer engagement with the Sirotan IP. That concludes my remarks. Good morning. This is Yoshida from the finance, accounting, and IR. I would like to begin with page 11, which represents the Q1 results by major operating company. As mentioned in highlights, consolidated results for the Q1 were as follows: Net sales totaled JPY 63.5 billion, a 5.5% increase year-on-year, or up by JPY 3.3 billion. OP amounted to JPY 5.6 billion, also a 5.5% increase YOY, or up by JPY 0.3 billion. Starting this fiscal year, the breakdown has been reorganized by business domain in line with our group vision. First, regarding item 4, the domestic fashion business domain. Net sales amounted to JPY 45 billion, 4.5% year-on-year increase, or up by approximately JPY 2 billion. OP totaled about JPY 4.4 billion, a 15% increase YOY, or up by about JPY 0.6 billion. Within that domain, Onward Kashiyama posted a 2% increase in net sales. Although sales in department stores declined, sales at directly operated stores, including shopping centers and EC, grew. Store efficiency improved, leading to a better SG&A expense ratio, and OP increased by approximately 9.7%. Item 2, WEGO's domestic business recorded higher revenue and profit. Existing store sales increased 6.9%, driven mainly by stronger performance in women's collaboration items. Item 3, Onward Personal Style, the made-to-order business, also posted significant growth. In addition to 11 newly opened stores, existing stores achieved a 12% increase in sales, resulting in a 38.5% rise in net sales and a 55.9% increase in OP. Item 8, the overseas fashion business domain, recorded net sales of JPY 5.6 billion, or 16.2% year-on-year increase, up by approximately JPY 0.8 billion. This domain is yet to generate operating profit, but losses improved by JPY 8 million. Within this domain, item 5, the JOSEPH business in Europe, saw slower performance in physical stores due to impacts related to the war. However, EC and wholesale grew, resulting in higher revenue and profits. Item 6, the J.PRESS business in the U.S., continued to see strong growth in the EC sales, resulting in a significant increase in revenue and a return to profitability. Item 7, in Asia, net sales increased 16.4%. This was driven by higher sales at the Dalian factory for made-to-order suits, as well as strong performance in WEGO's Shanghai EC operations, which began full-scale overseas expansion this fiscal year, as mentioned earlier. Although profit declined due to front-loaded expenses related to the Taiwan store openings, we expect the Asia total to post higher profit for the full year. Item 14, the wellness business domain, recorded net sales of JPY 11.9 billion, an increase of JPY 1 billion, or 9.6% year-on-year. OP, however, declined by approximately JPY 200 million. Within this domain, item 10, Chacott, saw significant growth in its cosmetics business, driven by increased promotional investments. Expenses were front-loaded, but we expect these initiatives to contribute to profit in the second half. Item 12, Yamato, posted lower profit due to a one-off negative impact. Q1 of the previous fiscal year included transactions with exceptionally high gross margins. Item 13, Cosmé de Beauté, a nail care company acquired last fiscal year and newly consolidated from this first quarter, recorded net sales of nearly JPY 500 million and OP of JPY 150 million. Lastly, item 15, the corporate design business domain, also delivered steady results in the first quarter. Turning to page 12, sales by channel. Department store sales declined 4.5%. Sales at directly operated stores, including shopping centers, increased 11.7%, resulting in a 5.8% increase across physical retail channels. In EC, our own EC grew 4.5%, while third-party EC increased 7.5%, leading to a 5.2% rise in total EC sales. The EC ratio was 27%, and our own self-operated EC ratio reached 78.3%. Moving to page 14, regarding the consolidated forecast for the first half and the full year. Since first quarter results progressed largely in line with the plan, we have made no revisions to the consolidated forecast for either the first half or the full year. To recap, for the full year, we are planning a 4.3% increase in net sales, a 10.3% increase in OP, an 11% increase in net profits, and a 9.3% increase in EBITDA. Turning to page 17, the consolidated balance sheet. There were no major fluctuations in the first quarter. However, two items are worth noting. Cash decreased due to the acquisition of shares in Cosmé de Beauté, and investment in other assets declined as a result of selling policy-held shares. On page 18, items affecting net profit for the period. Non-operating income increased slightly due to foreign exchange gains. Non-operating expenses improved, reflecting a decrease in foreign exchange losses compared with the previous year. In special gains and losses, we recorded JPY 1.4 billion in gains on the sales of marketable securities, as mentioned earlier. Special losses declined due to lower impairment losses. Although corporate taxes increased year-on-year due to higher taxable income, net profit for the period ultimately rose 18.1%. Finally, turning to page 19 for cash flows. Due to timing differences of book closing, more than JPY 5 billion variance was caused by the fiscal period and falling on the weekend. Operating cash flow or the cash outflow increased JPY 7.8 billion year-on-year. Investment cash flow recorded an outflow of JPY 3.8 billion, mainly due to the share acquisition of Cosmé de Beauté. This represents a JPY 2.9 billion increase in investment outflow year-on-year. Financing cash flow recorded an outflow of JPY 1.9 billion, a JPY 6.6 billion decrease in outflow year-on-year, mainly due to lower repayments of borrowings. In the lower section, CapEx and depreciation and amortization are shown as stated. Both are progressing generally in line with the plan. That concludes my presentation.