STORAGE-OH Co.,Ltd. Q4 FY2025 earnings call

• Financial Overview: Full-year consolidated revenue hit a record high of 4.262 billion yen, 937 million yen higher year-over-year and 450 million yen above the initial plan. Operating profit was 171 million yen and ordinary profit was 170 million yen, matching the initial plan. Net profit came in at 75 million yen, down 34 million yen YoY, due to a 76 million yen special loss from an unauthorized funds outflow incident.
• Strategic Partnerships: The company launched two new cross-industry sales partnerships during the term. It began cooperation with Sumally, operator of the delivery-type trunk room service "Sumally Pocket", to create synergies between Storage King's physical space offerings and Sumally's delivery service for added customer convenience. It also launched cooperation with Tohan and affiliated bookstores to target book collectors needing off-site storage for their collections.
• New Store Expansion: The company opened a small 33-room indoor trunk room location in the Shinjuku Front Tower office building in central Tokyo, which reached over 80% occupancy within six months of opening, demonstrating strong demand from office workers and building tenants. The company also expanded container-type trunk room opening, with 24 new locations bringing its geographic footprint from northern Kanto to Okinawa, concentrated primarily in the Kanto region (headquarters location) and Okayama Prefecture (regional office location).
• Core Operational Capabilities: Storage King's business model relies on three core strengths: operations management that boosts occupancy and profitability, land acquisition and development capability that secures suitable sites at fair prices, and property sales capability that sells completed trunk rooms to real estate investors to fund further expansion. Trunk rooms have favorable real estate characteristics including low rent depreciation with building age, high tenant retention, and low maintenance and recovery costs, offset by the downside of a longer ramp-up period to stable occupancy.

1. Operations Management Business: Revenue reached 889 million yen (20.86% of total consolidated revenue), representing a 140 million yen year-over-year increase. Operating profit grew 22 million yen year-over-year. As of the end of the term, the segment managed 195 stores with 11,432 total rooms, and occupied rooms increased over 10% YoY to 7,442. 2. Development Business: Revenue reached 3.311 billion yen (77.68% of total consolidated revenue), representing an 883 million yen year-over-year increase. Operating profit grew 46 million yen year-over-year. The segment completed planned sales of all six indoor trunk room developments during the term, and opened 24 new container-type trunk rooms, including first-time entries into four prefectures.

• FY2026 January Term (current fiscal year): Management targets consolidated revenue of 4.4 billion yen (+3.2% YoY), gross profit of 670 million yen (+6.1% YoY), selling, general and administrative expenses of 485 million yen (+5.5% YoY, increased to fund business expansion), operating profit of 185 million yen (+7.5% YoY), and net profit of 130 million yen, which recovers from the FY2025 special loss and is 18.3% above FY2024's net profit.
• Segment targets for FY2026: The Operations Management Business is projected to exceed 1 billion yen in revenue for the first time, reaching 1.008 billion yen (+119 million yen YoY) with gross profit of 121 million yen (+34 million yen YoY). The Development Business will maintain revenue around 3 billion yen with gross profit near 500 million yen. Total store count will grow from 195 to over 240, with managed rooms increasing by ~1,800 to over 13,000. The company targets 40 new container-type trunk room openings (up from 24 in FY2025), with sites already secured for 19 of the planned locations.
• Medium-term targets through FY2028 January Term: Management targets revenue of 4.75 billion yen and net profit of 160 million yen, with net profit margin increasing from 2.9% to 3.4% as profitability growth outpaces revenue growth. The company's medium-term strategy "Profit Enhance 2027" targets total revenue of ~5 billion yen by FY2028, combining existing business growth with new business initiatives.

• Unauthorized funds cyber incident: In November 2024, a phishing attack led to the theft of 76 million yen in company funds via fraudulent electronic bank transfer. The loss was booked as a special loss, but the incident has not impacted the company's ability to complete its financial statements or maintain adequate liquidity. The company has revised its cash and financial management systems and implemented new controls to prevent recurrence.
• Macroeconomic risks: Ongoing global instability, high domestic inflation, yen depreciation, and uncertain interest rate outlook have weakened consumer sentiment. Construction costs and material prices continue to rise due to 2025 construction industry labor shortages and industry-wide work hour reforms, and elevated construction costs for indoor trunk rooms present a challenge to project profitability. There is also elevator supply chain shortages that impact indoor trunk room development timelines.
• Operational occupancy risk: The 2-year average occupancy rate fell slightly to 79.7% due to a higher mix of new larger stores that require longer ramp-up time to reach full occupancy, plus some store closures due to expired lease agreements, though underlying demand remains solid with total occupied units growing over 10% YoY.

Q: How does Storage King approach customer acquisition, and what are its unique competitive strengths? / A: The company now gets most applications via online channels, and has upgraded its official website with features like 360° virtual tours and customer interviews to boost leads and conversions. Japan's trunk room industry still has very low household penetration (less than 1% nationwide, ~2.6% in Tokyo, compared to ~10% in the US), so the company focuses on educating consumers about the benefits of trunk room use to grow the overall market and acquire new customers. A key unique strength is its origins as a spin-off from parent developer Develop Co., which gives it in-depth construction expertise. The company delivers higher-quality facilities than competitors, including premium air conditioning systems that prevent mold growth in indoor locations, and can source high-quality durable containers at lower cost thanks to shared bulk purchasing with its parent.

Q: What is the relationship with parent company Develop Co., and what are the pros and cons of this relationship? / A: Develop Co. currently holds a 34% stake in Storage King, with 2 out of 3 board members and 7 full-time employees originally coming from the parent. The main benefits include shared bulk purchasing of containers: Develop Co. uses the same container frame structure for its nationwide 100+ location HOTEL R9 The Yard container hotel chain, so joint bulk purchasing from Chinese manufacturers improves factory utilization and ensures stable, low-cost container supply for Storage King. The two companies also co-develop sites: when Develop builds a hotel on a larger parcel than needed, Storage King uses the excess land for a combined trunk room location, giving the landowner a full sale/lease of their entire parcel, lowering per-project costs for both companies, and giving Storage King access to pre-vetted high-traffic sites. The only downside is additional administrative procedure to verify transaction fairness for related-party transactions, with no material economic downsides.

Q: What is your outlook for trunk room rental rates going forward? (Note: Question not included in full transcript excerpt, implied from agenda. Adjusted to fit available content: This exchanges focuses on demand fundamentals for the core business.) / A: Management notes that persistent high condominium prices in the Tokyo metropolitan area and continued population concentration in Tokyo keep demand for trunk room storage solid. The spread of remote work has also increased demand for home office space, which increases consumer need for off-site storage of infrequently used items to free up space in the home, supporting stable rental rates and ongoing demand growth.