JOYFUL HONDA CO.,LTD. Q4 FY2025 earnings call

2025 June Fiscal Year Financial Summary

• Total sales reached 101.6% of the prior year level, operating profit hit 101.7% year-over-year, ordinary profit hit 102.0% year-over-year. All profit metrics except net profit beat full-year guidance. Net profit fell to 91.6% year-over-year due to a 1.4 billion yen gain on reversal of asset retirement obligation in the prior year.
• Operating income increased from expanded tenant areas at existing stores and new tenant recruitment. Operating profit totaled 10.7 billion yen, net profit totaled 8.3 billion yen, with all full-year profit metrics exceeding 100% of initial guidance.
• Average customer transaction value increased to 103.8% year-over-year from proactive price adjustments to offset rising procurement costs. The Materials & Pro Supplies and Daily & Consumer Goods groups performed well even in Q4, which was impacted by unfavorable weather during Golden Week.

2025 June Fiscal Year Operational Achievements

• Investment in People: Base wage increases, expanded annual paid time off for full-time employees, and restricted stock grants for employee incentives delivered an 8 percentage point improvement in positive responses to the company-wide engagement survey, and a large increase in new graduate hiring.
• Customer Problem-Solving Improvements: Skill map development and training system upgrades were completed ahead of the planned 2026 June fiscal year launch of a new team-based service model, which will expand employee service capabilities to better address customer needs. Paused in-person culture schools and workshops were restarted, earning positive customer reception.
• Digital Strategy: Rollout of self-checkout systems and mobile work devices has optimized operations, freeing up labor time to increase customer service capacity, and will be further expanded under the new mid-term plan.
• Existing Store Investment Improvements: New tenant recruitment, existing store maintenance, and the new solar carport at Chiba New Town store generates ~20% of the store's power demand, cutting CO2 emissions and utility costs while receiving positive customer feedback. Tenant areas were expanded at multiple locations, and an in-shop Honda Yard concept was launched at Furukawa Store.
• New Store Expansion Preparedness: Established formats for existing specialty stores and finalized new business model concepts, opening Pet's CLOVER Isesaki Tanakajimacho Store and Joyful Honda Material馆 Isesaki Nirizuka Store (a new format combining the existing pro-shop Honda Yard with expanded material sales) in June 2025. A partially operational specialist store transfer center was launched to improve operational efficiency, boost productivity, and accelerate new store openings.

Capital Policy and Shareholder Returns (2025 June Fiscal Year)

• Conducted a secondary offering to improve stock liquidity and accommodate selling by policy holding shareholders, then implemented share buybacks and cancellation to mitigate supply and demand imbalance. Future share buybacks will continue to be evaluated based on policy and financial conditions.
• Full-year dividend per share totaled 64 yen (32 yen interim, 32 yen final), a 14 yen increase from the prior year including a 10 yen 50th anniversary special dividend.

Previous Mid-Term Management Plan Retrospective

• Strengths: Active investment in people improved employee engagement and motivation; expanded specialized product assortment centered on the Honda Yard pro-shop concept delivered positive results; many local partnership events with governments brought in large numbers of new customers; rooftop solar panel installation cut greenhouse gas emissions ahead of schedule.
• Weaknesses: The first planned station-front location (Koyama Ekimae Store) underperformed, forcing a major overhaul of station-front expansion plans; the new large-format Joyhon Yoshioka Store had initial budget overruns at opening (it is now recovering after incorporating local customer feedback); chain-wide character product launches underperformed expectations and were scaled back. Additional delays were seen in digital marketing, app development, and M&A execution, resulting in the previous plan's sales, EBITDA, and ROE targets not being met.

1. Materials & Pro Supplies Group (Housing Segment): This segment led overall sales growth, with tools, work supplies, and electrical installation materials contributing strong performance in the 2025 June fiscal year. The lumber sub-segment struggled with slow growth due to elevated material prices and lower housing starts. The entire Life Segment saw broad-based growth across all product groups. 2. Daily & Consumer Goods Group (Life Segment): Growth was driven by successful "Mix & Match" promotional campaigns for daily consumables, plus special demand and elevated price levels for rice. Total gross profit for the full year exceeded the 2024 June fiscal year level, but overall gross margin declined slightly, due to the increased revenue contribution share of the lower-margin Life Segment, and continued rice sales at restricted margins to meet customer demand.

• 2026 June Fiscal Year Near-Term Guidance: No new large-format stores are planned. Growth will come from existing store expansion and multiple new specialized store openings. Current rice price levels are already incorporated into guidance, with continued sales growth projected. Higher selling, general and administrative expenses are expected, driven by increased depreciation from growth investments (new store openings, digital initiatives) and higher personnel costs tied to expanding gross profit. The plan projects a lower profit in the first year of the new mid-term plan, as the increased spending is required for future long-term growth. A 12th consecutive year of dividend increases is planned, with a full-year dividend of 84 yen (42 yen interim, 42 yen final), a 20 yen increase year-over-year.
• 2026-2028 June Fiscal Years Mid-Term Targets: Total sales target for 2028 June fiscal year is 150 billion yen to 160 billion yen; EBITDA margin target of 11.0% or higher; ROE target of 8.0% or higher. 20 to 30 new standalone specialty stores and new-format stores including Joyful Honda Material馆 are planned, plus 5 to 10 new specialized niche-format stores focused on specific product categories.
• Updated Shareholder Return Policy: Starting with the 2026 June fiscal year interim dividend, the DOE target is raised from 2.5% to 4.0% or higher. The company will maintain its progressive dividend policy tied to sustained profit growth, and will continue to evaluate opportunistic share buybacks in parallel with active growth investment.
• Cash Allocation Mid-Term Plan: Total cash outlay of 40 billion yen to 48 billion yen is planned over the 3-year plan, for growth initiatives and share returns, with outflows expected to exceed operating cash inflows. Growth investment is prioritized to build the foundation for long-term growth.

• External macro risks include demographic shifts from population decline, growing e-commerce competition, and sustained elevated construction material prices, which create challenges for sales growth and store expansion planning.
• The previous mid-term plan saw multiple operational missteps: underperformance of new station-front format stores, initial budget overruns for large-format new store openings, underperformance of new product initiatives, and delays in digital transformation and M&A execution, which led to the failure to meet previous quantitative targets.
• Sustained increases in utility costs, credit fees, and repair expenses are putting upward pressure on selling, general and administrative expenses, which could pressure near-term margins.

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