PICKLES HOLDINGS CO.,LTD. Q2 FY2026 earnings call

1. Profitability Improvement Initiatives

• SKU rationalization: Targeting 10% total SKU reduction this fiscal year after cutting 10% at the core Tokorozawa plant last fiscal year. 8% reduction achieved group-wide by the 2nd quarter, implemented per-facility based on SKU profitability to avoid negative sales impact.
• Selling price review: Completed price and content size adjustments for 3 core

By Product Category (Half-year actual 22.321 billion yen total):

• Self-manufactured products (asazuke, kimchi, prepared meals): Sales impacted by consumer cost-cutting on side dish categories like asazuke, while prepared meals grew driven by convenience store demand.
• Traded non-manufactured products (takuan, pickled plums, etc.): Sales declined due to poor harvest-driven raw material price hikes for core pickled plum items.

By Sales Channel (Half-year actual 22.321 billion yen total):

• Mass retail stores: 16.136 billion yen, 72.3% of total channel revenue. Sales declined due to consumer buy-downs, product SKU rationalization, and price reviews, as this channel is the main outlet for core asazuke/kimchi products.
• Convenience stores: 4.161 billion yen, 18.6% of total channel revenue. Sales grew driven by expanded prepared meal sales and successful promotional campaigns.
• Food service/other: 2.023 billion yen, 9.1% of total channel revenue. Offset core pickled plum sales declines with new frozen prepared meal sales to business clients, resulting in a year-over-year sales increase.

Full-year 2026 planned:

• Product category: Self-manufactured products planned at 29.083 billion yen; traded products planned at 12.616 billion yen (year-over-year decline due to price reviews amid cost increases).
• Sales channel: Mass retail stores planned at 30.912 billion yen; convenience stores planned at 7.349 billion yen (sales growth); food service/other planned at 3.438 billion yen.

• Full-year 2026 February term guidance was upward revised following stronger-than-expected 2nd quarter results. The revised full-year forecast calls for 41.7 billion yen in net sales (0.4% year-over-year increase) and 2.08 billion yen in operating profit (62.6% year-over-year increase), which includes a 190 million yen reduction in depreciation expense from the switch to straight-line depreciation. • The company maintains its original priority of profit over sales, and will continue this strategy through the second half. The depreciation accounting change and stabilized raw material costs are expected to support full-year profit growth. • 2027 February term and beyond targets have not been updated with this revision, and will be reviewed via the company's rolling planning process next fiscal year. The company continues to evaluate up to 3 billion yen in growth investment including M&A alongside its three core strategic priorities. • Selling, general and administrative (SG&A) expense ratio is projected to improve 0.1 percentage points full-year, even amid continued logistics cost increases, due to ongoing delivery route and operational efficiency initiatives.

• Unpredictable weather and extreme temperatures can cause poor harvests and sharp price spikes for core vegetable raw materials (especially Chinese cabbage), which can significantly increase input costs and hurt margins if not properly hedged. • Continued consumer cost-cutting amid broader high inflation can depress demand for the company's side dish products, leading to lower-than-expected sales. • Persistent industry-wide logistics cost inflation from the 2024 logistics logistics workforce shortage could pressure SG&A expenses even with efficiency measures in place. • The company currently does not meet the Tokyo Stock Exchange listing maintenance standard for market capitalization, and faces the risk of delisting if it fails to improve its share price to the 1,200 yen target. • Entry into the frozen food market faces high barriers to competition from established players, and new business expansion may not meet the expected 1 billion yen+ revenue target.

Q: How much additional room is there for further profitability improvement, and are there any new unannounced improvement initiatives? / A: The company will continue price adjustments for seasonal products in the second half, and the full impact of the first half's kimchi price increases will flow through to H2 results. The largest source of future improvement is scaling production at Ibaraki Plant, which will free up production capacity at other existing plants for new product development and reduce the share of higher-cost night shift production. The company will continue to advance incremental improvement initiatives along its current strategy.

Q: This year's heatwave has again delayed Chinese cabbage planting, similar to last year's price spike. What is the company's preparedness for this risk? / A: This year's harvest is similarly delayed to last year, but the company has mitigated risk by pre-contracting with earlier-harvest production regions outside Ibaraki and holding pre-stored Chinese cabbage from Nagano. The company has secured uninterrupted supply for October and November, and is protected from sharp market price spikes similar to last year's event.

Q: What is Picklus' competitive advantage for entering the commercial frozen food market, which is dominated by low-cost imported products? / A: Unlike commodity imported frozen vegetables, Picklus leverages its in-house vegetable processing and seasoning expertise to offer value-added flavored products that can be used directly by restaurants for menu add-ons. The company is targeting a differentiated position away from commodity imports, focusing on products that meet operator demand for simplified operations amid industry labor shortages.

Q: What is the outlook for convenience store prepared meal sales growth next half, and what new product development aligns with current consumer trends? / A: Convenience store consumer trends are shifting toward purchasing multiple small-portion items for flexible meal combinations, and demand for vegetable-focused products remains strong. The company's