St.Cousair CO.,LTD. Q1 FY2026 earnings call

Core Financial Performance

• Total consolidated revenue: 4.781 billion yen, 4% YoY increase
• Gross profit: 1.732 billion yen, 8.7% YoY increase; gross profit margin 36.2%, up 1.5 percentage points YoY, driven by promotion of high-margin product categories (e.g. dashi stocks) and optimization of wholesale prices for franchisees
• Operating profit: 139 million yen, 59.5% YoY increase; operating margin 2.9%, up 1 percentage point YoY
• Quarterly net profit: 28 million yen, 64.6% YoY decrease, driven by recognition of foreign exchange losses
• Raw material costs increased by 31 million yen YoY due to ongoing price inflation
• Selling, general and administrative expenses (SG&A): Personnel costs rose 5.9% YoY to 642 million yen due to base pay increases; packaging and transportation costs fell 6.3% YoY to 297 million yen due to improved logistics efficiency and in-house gift set processing; depreciation rose 10.9% YoY to 59 million yen due to new store openings and renovations; other expenses rose 17.4% YoY to 450 million yen due to increased strategic promotional spending

Operational Updates

• Store network: 2 new Kuze Fuku Shoten stores opened, 1 Sanqueur store closed, resulting in a total net increase of 1 store, ending the quarter at 176 total stores (11 Sanqueur, 165 Kuze Fuku Shoten)
• Organizational change: Implemented a new business headquarters system in July 2025 to concentrate resources on the core Kuze Fuku Shoten brand, enabling faster end-to-end operations and customer-aligned initiatives
• In-store reform: The new Kuze Fuku Shoten Business Headquarters is prioritizing customer-centric store layout reforms to boost customer count and purchase conversion, focusing on creating attractive, dynamic stores that encourage visits and extended stays through in-store tasting, improved customer service, seasonal themed displays, and enhanced front-end operations (faster checkout, better gift wrapping, targeted information dissemination)
• Strategic M&A: Acquired a food manufacturing factory in Nagano, Nagano Prefecture to expand in-house production capacity and strengthen the food SPA (vertical integrated manufacturing-retail) model. The factory is scheduled to start operations in June 2026 after renovations, and is expected to improve profitability via reduced outsourcing costs, optimized logistics and inventory management, and increase in-house production capacity by approximately 20%
• Customer loyalty target: Has a mid-term goal to triple the number of royal (core repeat) customers to 200,000 within 3 years to drive sustainable growth, with in-store reform identified as the urgent priority to address the current decline in total customer count
• Balance sheet: Current assets increased 2.4% from fiscal year-end to 6.271 billion yen driven by higher cash and deposits; total liabilities increased 8% to 4.625 billion yen driven by higher long-term debt from new financing; net assets decreased 5.8% to 4.671 billion yen due to dividend payouts offsetting quarterly net profit, resulting in an equity ratio of 50.2%, down 3.4 percentage points from fiscal year-end

By sales channel:

1. Retail stores (direct-operated + FC): 3.122 billion yen, 3.7% YoY decrease, accounting for 65.3% of total revenue. The decline was driven by customer count reductions from changing consumer purchasing behavior amid rising food and rice prices.
2. EC: 299 million yen, 1.5% YoY decrease, accounting for 6.3% of total revenue. Weakened home consumption demand offset increased gift demand.
3. Wholesale: 758 million yen, 22% YoY increase, accounting for 15.8% of total revenue. Sales recovered at major retail chain clients following strengthened promotion of top-selling products and customer-aligned product development.
4. Global: 601 million yen, 40.3% YoY increase, accounting for 12.6% of total revenue. Breakdown by region: US: 382 million yen, 39.2% YoY increase (driven by existing brand growth and incremental revenue from the acquired Bonnie's Jams business); Taiwan: 215 million yen, 88.1% YoY increase (driven by strong sales to US retail chains); Other regions: 3 million yen, 92.1% YoY decrease (driven by unstable sales in South Korea, the main market in this group).

• The first quarter achieved progress against full-year guidance of 23% for revenue, 15.1% for operating profit, 11.5% for ordinary profit, and 5.7% for net profit attributable to parent shareholders, with revenue and operating profit tracking in line with plan
• Management maintained the full-year 2026 March fiscal year guidance, and will continue efforts to improve gross profit margin and reduce SG&A to meet or exceed full-year targets across all channels
• For the retail store channel, management will prioritize boosting existing store customer count through in-store tasting, layout improvements, and enhanced sales and customer service capabilities
• Management confirms commitment to expanding the global business as a core growth driver, with ongoing plans to expand geographic footprint and business scale

• Ongoing raw material price inflation has increased cost of goods sold, with a 31 million yen year-over-year increase in the first quarter
• Rising food prices (especially rice prices) have shifted consumer purchasing behavior, leading to declining customer counts at existing retail stores, which is the company's most pressing near-term operational challenge
• Unstable sales performance in South Korea has dragged down results for other global regions outside of the US and Taiwan
• Recognition of foreign exchange losses led to a sharp decline in quarterly net profit, indicating exposure to currency volatility
• The company's equity ratio declined 3.4 percentage points from the prior fiscal year-end following new debt financing and dividend payouts

No substantive question-and-answer content was included in the provided earnings call transcript.