Tokyo Lifestyle Co., Ltd. Q4 FY2026 earnings call

• Overall Business Transformation & Strategy Execution - Fiscal 2026 delivered strong double-digit revenue growth across all core operating channels, validating the company's successful transformation from a traditional retailer to a diversified consumer lifestyle platform that integrates retail, franchise, wholesale, and luxury goods businesses. - Management intentionally optimized the business model to scale faster via lower-capital franchise and wholesale channels, which explains the shift in revenue contribution away from higher-margin directly operated stores rather than indicating poor operating performance.

• Operational Expansion Highlights - The company expanded its international footprint, opening 4 new directly operated physical stores and adding 68 new wholesale customers globally. - Strategic local partnerships were expanded, and investments were made in local talent and performance-based incentive programs to strengthen organizational capabilities for global growth. - Underperforming directly operated stores were converted to franchise locations run by experienced local partners, improving overall store network efficiency and supporting the company's asset-light operating model. - Total company assets increased 48% year-over-year, and the firm remained profitable for the third consecutive year, strengthening its overall market position.

• Financial Performance Overview - Total company revenue grew 77.6% year-over-year from $210.1 million to $373.2 million. - Gross profit increased 17.5% to $28.1 million, while gross margin declined 3.9 percentage points to 7.5% due to the intentional shift in revenue mix toward lower-margin franchise and wholesale channels. - Operating expenses increased 29.6% to $24.9 million, driven by higher shipping/logistics costs, credit loss provisions, payroll/benefits/bonuses for expanding operations, professional services, and promotion/advertising/lease costs for directly operated stores. - Operating income came in at $3.2 million, down from $4.7 million in fiscal 2025, while net income was $0.7 million (down from $6.6 million in fiscal 2025), with the net income decline attributed to one-time tax-related factors rather than underlying operating weakness. - As of March 31, 2026, the company held $2.1 million in cash and cash equivalents, $186.8 million in accounts receivable (22.3% collected post-period-end), and $14.4 million in merchandise inventory, which management expects to sell in the short term based on current demand.

Tokyo Lifestyle has three core product and operating segments: 1. Directly Operated Stores: Revenue increased 15.7% year-over-year to $19.8 million, contributing 5.3% of total fiscal 2026 revenue. This segment carries higher gross margins than the firm's other operating channels. 2. Franchise Stores: Combined with wholesale operations, total revenue grew 86.9% year-over-year to $346.7 million, contributing 92.9% of total fiscal 2026 revenue. 3. Wholesale Operations: Included in the combined franchise/wholesale revenue figure above, this segment grew strongly driven by luxury goods expansion and an expanding customer base, and carries lower gross margins than directly operated stores. 4. Luxury Goods Business: This high-end merchandise segment was the fastest growing business, emerging as a meaningful growth contributor to the combined franchise and wholesale revenue total, driven by strong customer demand and successful product expansion.

- Management reaffirmed its commitment to its long-term afterlife growth strategy focused on customer acquisition, building global brand recognition, diversifying the product portfolio, and deepening customer engagement across all sales channels, with confidence in delivering sustainable long-term profitable growth as macroeconomic conditions and consumer demand improve across key markets. - The company plans to open a new distribution center in Australia in 2026 to support inventory for its Australian retail operations, with additional distribution centers planned for other strategic global markets. - Over the next three years, Tokyo Lifestyle plans to open 20 new directly operated stores across the United States, Canada, Hong Kong, Australia, Thailand, and Taiwan, while adding 23 new franchise stores across Japan, Southeast Asia, Macau, and Europe. - Management will continue focusing on disciplined execution, effective cost management, disciplined capital allocation, and strategic investment to strengthen long-term financial performance and create shareholder value.

- Forward-looking statements discussed on the call are subject to inherent known and unknown risks and uncertainties that could cause actual results to differ materially from management expectations, as outlined in the company's SEC filings including its annual Form 20F. - The company has a large accounts receivable balance of $186.8 million as of period-end, with only 22.3% collected post-period-end, presenting potential credit risk that could impact future liquidity. - Gross margin is pressured by the intentional shift in revenue mix toward lower-margin franchise and wholesale channels, which creates near-term pressure on overall profitability.

No question-and-answer session was held during this earnings call. Management opened the call for post-call questions via email to the company's IR team and third-party IR counsel, rather than conducting a live Q&A portion.