3030.T

Long-term Vision & STEP1 Retrospective

• Hub's 50th Anniversary founding vision (2022-2030) splits the 9-year period into three 3-year mid-term plans. STEP1 (2022-2024) was defined as the "Restoration Phase", focused on rebuilding the company's profit structure after COVID-19 pandemic-era losses.
• Over STEP1, the company completed key milestones: restarted new store openings, achieved full-year profitability in 2023, hit 10 billion yen in annual sales in the final year, and stabilized its balance sheet with a 46.7% equity ratio and steady reduction of interest-bearing debt to 1.44 billion yen.

2024 Operational Initiatives

• Implemented price adjustments to offset rising raw material and procurement costs, keeping the cost of goods ratio at roughly the prior year's level, which led to higher average spend but reduced foot traffic that management has identified as a top priority to address.
• Expanded customer acquisition initiatives: collaborated with nearby hotels (including partner Richmond Hotel) to drive inbound and domestic tourist traffic, ran IP content collaborations, promoted popular international sports screenings, expanded social media outreach, and continued sales of co-branded products at convenience stores.
• Grew total membership to 530,000 (up 160,000 YoY), with 220,000 active app members. Rolled out segmented promotional campaigns, including personalized coupons for lapsed members, which delivered a 10.9% coupon redemption rate and accelerated repeat visits.
• Delivered strong productivity improvements: sales per labor hour hit 7,018 yen (exceeding the annual target by 218 yen), and productivity per labor hour hit 4,878 yen (exceeding target by 78 yen). This allowed the company to implement base pay raises while reducing the labor cost ratio from 35.9% in 2023 to 34.6% in 2024. Rolled out productivity enhancements including a food delivery tracking system and semi-self-checkout registers at 21 stores.
• Launched the regional promotion "Local Attraction Promotion Project" in partnership with ANA Akindo, holding regional specialty fairs for Hakodate, Tokushima, and Kagoshima to build local community ties ahead of national expansion.
• Shifted new store strategy to prioritize openings in transportation and high-foot-traffic hubs, expanding from a historical dominant region strategy to a national footprint. All 2024 new stores (in Fukuoka, Niigata, Osaka) opened in JR station commercial facilities and posted strong early sales.

STEP2 Mid-term Plan (2025-2027) Overview

• STEP2 is defined as the "Challenge Phase", with core growth strategy "SmasH47" targeting new store openings across all 47 Japanese prefectures, centered on locations in transportation and high-foot-traffic hubs. The annual operating theme is "TRADE ON: Overcome contradictions, open the door to new possibilities".
• SmasH47 also prioritizes collaborations with local regional partners to improve new store success rates: prior collaborations with Sapporo Brew and Echigo Beer for new regional stores have successfully strengthened local community ties. Upcoming openings include the company's first inside-gate station store in Chiba (a collaboration with JEF United Chiba soccer club) and the first store in Miyazaki Prefecture, both in JR station facilities.
• Cash allocation prioritizes growth investment in new stores, talent, and digital systems while maintaining an appropriate equity ratio. External financing will be used as needed to support accelerated new store expansion.
• Governance and HR: issued stock options to 257 existing employees who stayed through the COVID-19 pandemic, to align the entire company behind the 50th anniversary vision. Targets a 30% payout ratio for shareholder dividends, and upwardly revised the 2025 fiscal year dividend to 10 yen per share from the prior 9 yen forecast.

• For the 2026 February fiscal year (STEP2 first year), management guidance calls for total net sales of 11.3 billion yen, operating profit of 470 million yen, ordinary profit of 450 million yen, net income of 420 million yen, and a full-year dividend of 10 yen per share.
• The 3-year STEP2 mid-term plan targets 5 new stores in 2025, 12 new stores in 2026, and 16 new stores in 2027, for accelerated new store opening growth through the plan period.
• Dividend policy maintains a target 30% payout ratio, with the 2025 fiscal year dividend upwardly revised from 9 yen to 10 yen per share.

Hub operates two core PUB brands: HUB with 91 stores, and 82 with 15 stores, plus 1 combined HUB+82 store for a total 107 stores as of the end of the 2025 February period. For the full fiscal year 2025 (STEP1 final period), total company net sales reached 10.632 billion yen, up 8.7% year-over-year, marking the first time the company exceeded 10 billion yen in annual revenue in 5 years. Operating profit was 453 million yen, up 63.6% YoY; ordinary profit was 441 million yen, up 72.7% YoY; net income attributable to parent was 446 million yen, up 64.8% YoY. Existing store sales were up 3.6% YoY, driven by a 6.8% increase in average customer spend from 2024 price adjustments, offset by a 3% YoY decline in customer foot traffic. All newly opened stores opened since the prior fiscal year posted strong sales results. Member sales accounted for 41.1% of total company revenue.

• Sustained customer foot traffic decline at existing stores following 2024 price adjustments, which missed original STEP1 foot traffic forecasts by 3%, and will require targeted remedial investment and promotional initiatives to reverse.
• Persistent broad-based cost inflation across raw materials, labor, energy, and construction costs, which pressure profit margins despite prior productivity and pricing adjustments.
• Rising interest rates increase debt servicing costs, which has prompted management to accelerate planned repayment of outstanding interest-bearing debt.
• Challenges with securing and training sufficient talent to support accelerated national new store expansion, plus a need to improve regional logistics efficiency to support a broader national footprint.
• 2024 new store openings hit only 3 locations versus the original planned 6 locations, leading to a 468 million yen negative sales variance versus the original full-year STEP1 forecast.

The full Q&A section of the transcript is cut off in the provided source material, so no complete exchanges are available for summary. Key high-priority topics raised but not fully answered in the partial transcript include:

1. Differences in investment returns and risk profiles between in-station stores and street-level stores, aligned with the company's new strategic focus on in-transit hub locations
2. Inbound tourist visit trends and the effectiveness of current inbound acquisition strategies
3. The impact of major global events on Hub's operating performance
4. Talent hiring progress to support accelerated expansion plans
5. Mitigation strategies for rising construction costs for new stores
6. Plans for further wage increases for full-time employees and hourly pay raises for part-time staff
7. Current status of late-night store operations
8. Pros and cons of the increasing cashless payment penetration
9. Status of corporate client contract closures
10. The underlying drivers of the 2026 net income guidance forecast