2722.T

Core Business Overview

• IK Holdings operates two core business segments: Direct Marketing and Sales Marketing, with product development and promotion shared centrally, covering multiple sales channels (store, EC, TV shopping) and multiple product categories (cosmetics, food, general merchandise).
• The company views its diversified product and channel portfolio as a core strength, as it generates large volumes of sales and consumer data that inform future strategic decisions.

First Half Operational Summary

• Consolidated first half sales came in at 7.441 billion yen (8.4% below the original plan of 8.12 billion yen), and operating profit came in at 121 million yen (47.4% below the original plan of 230 million yen). Both metrics grew year-over-year, but missed internal targets.
• Gross profit margin came in at 38.2%, a 3.2 percentage point decrease year-over-year, driven by the shift in sales mix toward the lower-margin Sales Marketing segment and contraction of the higher-margin Direct Marketing segment. Selling, general and administrative expenses as a percentage of sales fell 3.5 percentage points year-over-year, leaving overall operating profit margin largely stable at 1.6% (up from 1.4% year-over-year).

New Business Initiatives

• Launched getpop, a non-consolidated TikTok-focused SNS influencer marketing business, the company's first advertising-focused business. The primary goals are to serve external clients while building in-house SNS marketing expertise to improve the efficiency of the company's own advertising spend for its product business.
• Completed internal organizational restructuring to scale EC business: Prime Direct's wholesale business was transferred to subsidiary IK, while Prime Direct now focuses exclusively on the high-priority EC subscription business.
• Established a dedicated specialized team to expand ODM business, which is currently seeing strong inbound client demand.

Growth Strategy

The company maintains three unchanged core growth pillars from the start of the fiscal year:

• Further expansion of Korean cosmetics: The company recently launched the new brand PINKWONDER (sold nationwide at Cosme Kitchen), with an additional new brand launching soon that will bring the total domestic Korean cosmetics brand portfolio to 14. Management expects these new brands to contribute to second half results, and continues to see mid-term growth potential for Korean cosmetics in the Japanese market driven by its multi-brand, multi-channel strategy.
• Scale EC business: Continued focus on expanding EC sales after the organizational restructuring.
• Expand ODM business: ODM demand is currently strong, and the dedicated team is expected to accelerate growth in this segment.

• Full year FY2026 guidance has been revised downward from the original forecast: full year sales are now forecast at 14.7 billion yen (10.4% below the original 16.4 billion yen forecast, 96.6% of prior year actual sales), and full year operating profit is now forecast at 350 million yen (30% below the original 500 million yen forecast, 82.2% of prior year actual sales). Management states this downward revision reflects a realistic assessment of current performance to date.
• Direct Marketing is expected to continue contracting through the second half, with full year sales forecast at 72.3% of the prior year level, meeting the company's cost reduction targets for the segment.
• Sales Marketing full year sales are forecast to grow 5% year-over-year, but will remain 10% below the original planned level.
• Overall, the company met its targets for reducing low-margin/non-strategic portions of the business, but failed to hit planned growth for strategic expansion areas (EC, Korean cosmetics), leading to the downward full year revision.
• A 200 million yen deferred tax asset gain from recent group absorption merger restructuring is currently estimated, but will be finalized and disclosed in the third quarter reporting period.

1. Direct Marketing Segment: This segment has a very high gross profit margin, and has been profitable since last year. In the first half of FY2026, operating profit increased 46 million yen year-over-year, but sales decreased to 76% of the prior year's level as the company intentionally reduced the segment size to cut high advertising expenses. This segment's contraction contributed to the overall decrease in the company's consolidated gross profit margin and selling, general and administrative expenses. 2. Sales Marketing (Wholesale) Segment: This segment has a naturally lower gross profit margin, and growth in this segment pulls the overall consolidated gross profit margin down. In the first half of FY2026, sales grew 12% year-over-year. As a percentage of total sales, this segment is growing, driven by expansion of Korean cosmetics in retail store channels. 3. Korean Cosmetics Category: This is the company's largest growth category, with first half FY2026 sales reaching 2.26 billion yen, a 9.3% increase year-over-year (down from 30% year-over-year growth in the prior year's first half). 4. ODM Business: ODM contributed just over 1 billion yen to first half sales, representing a meaningful portion of total revenue. By sales channel: TV Shopping route sales share decreased from 8% year-over-year to 3% (down from 30% in 2021), while Store route sales share increased from 7% in 2021 to 26% currently, driven by Korean cosmetics expansion.

• The company failed to achieve planned growth in its key strategic expansion areas: EC route sales growth missed expectations, and new product/new brand launches for Korean cosmetics were delayed in the first half, leading to slower growth than planned. Management identifies internal operational speed and scale of expansion as key weaknesses that need to be addressed to meet growth targets.
• Gross profit margin has declined slightly year-over-year due to the shift in sales mix toward the lower-margin wholesale segment, and the company has not yet built out a sustainable cycle of increasing advertising spend to drive sales and profit growth, which is a current key strategic challenge.
• TikTok Shop, a key EC expansion initiative, is currently underperforming expectations and facing headwinds, as widespread industry entry has delayed operational rollout and growth has been slower than forecast.

• Q: What are the unique strengths and characteristics of getpop compared to other SNS marketing firms, and what is your future development plan for the business?

A: Unlike traditional influencer marketing that relies on high-follower count influencers, getpop works with 4,000 registered connected LINE members: interested members purchase the product with their own money, test it, film an authentic review video, and send it to getpop along with their receipt. getpop checks for compliance, then pays members a full refund for the product plus a per-view fee based on the video's total playback. This model creates a large volume of authentic user-generated content that complements traditional influencer marketing: when a user engages with a top influencer's post about a product, TikTok's algorithm will then serve additional related user content from getpop members, increasing content reach and share of voice on users' feeds. This is an unprecedented service model that drives higher engagement. For future expansion, getpop will initially focus on beauty and fashion, which already spend heavily on SNS marketing, and will expand into underpenetrated industries such as food service and furniture using the expertise built in the cosmetics category.

• Q: What is the current status of TikTok Shop, your EC expansion initiative, and what is your outlook for the business going forward?

A: Currently, TikTok Shop is performing far below expectations, and we are struggling with growth. That said, we are seeing steady incremental growth. The entire industry entered the platform all at once, which created delays for our content creation and launch, and we are still in a testing phase. We believe TikTok Shop will grow over the long term and we need to grow our presence there, but current near-term results are lackluster.

• Q: What is getpop's revenue model? Is it monthly membership fees, or project-based fees from client brands?

A: getpop uses a project-based model: clients pay an advertising campaign fee upfront, and getpop uses that budget to pay participating member creators based on playback volume. The spread between the client fee and total creator payouts is getpop's profit. There is no fixed monthly revenue model.

• Q: How does your pricing structure work, and do you offer playback guarantees for campaigns?

A: We offer multiple plans that vary slightly by client. A key unique strength is that we do not work with famous top influencers, and instead guarantee a minimum playback volume: we commit to running the campaign until we hit the agreed playback target, and clients pay based on this guaranteed target. Unlike top influencers, where even large follower counts do not guarantee a minimum number of views, getpop commits to a clear, measurable playback outcome, which is a major benefit for clients.

• Q: Can you restate why you missed the original full year forecast and had to revise guidance downward, what are the key challenges for EC and Korean cosmetics growth?

A: We successfully hit all of our targets to reduce size and cost for the non-strategic areas of the business we planned to shrink. The miss came entirely from our core strategic growth areas: EC and Korean cosmetics did not grow as quickly as we expected. This reflects internal weaknesses: we are a smaller company with limited capacity, so our speed of expansion and volume of new launches was slower than we planned. We recognize that we need to improve the speed and scale of our response to keep up with fast market changes, and that is our key focus going forward.