Vega corporation Co.,Ltd. Q3 FY2025 earnings call

• Strategic Shift

  • The company shifted to a profit-first strategy starting from the 2nd quarter of the prior fiscal year, optimizing sales promotion and marketing advertising costs across all segments
  • The strategy successfully drove profit growth despite lower cumulative revenue in the first 9 months, with the LOWYA segment returning to year-over-year revenue growth in 3Q single quarter

• OMO (Online Merge Offline) Expansion

  • Opened 3 new physical stores between October 2024, bringing total LOWYA physical stores to 8
  • A 9th new store is scheduled to open in April 2025 at Lalaport Anjo, Aichi Prefecture
  • The integrated OMO model combining SNS, physical stores and e-commerce is performing better than expected, with positive synergy for revenue growth
  • Increased small general merchandise (e.g., freezer bags) offerings to drive higher foot traffic to physical stores

• User and Digital Growth

  • LOWYA flagship store membership grew 15.1% year-over-year, with steady growth in engagement accounts and app downloads
  • Cumulative Instagram followers total 1.13 million, cumulative smartphone app downloads reached 1.68 million
  • Membership growth is broad across 20s, 30s and 40s age groups, with stable gender distribution

• New Product and Service Innovation

  • Continues to launch trend-focused, design-led private label products at affordable prices via the integrated in-house business model
  • Launched the proprietary in-house AR service "おくROOM" in November 2024, which lets users visualize furniture and room layouts in 3D/AR, automatically generate interior coordination based on room type, budget and style preferences, calculate total costs, and directly place orders
  • The service surpassed 100,000 downloads shortly after launch, recording a strong initial performance

• Sustainability Initiatives

  • Implemented multiple environmental and social focused ESG activities including donation of product photography samples, launch of eco-friendly reusable bags, and launch of highly durable long-lasting sponges

• Capital Return and Dividend

  • Announced a 1 yen per share increase in full year dividend, bringing planned 2025 fiscal year dividend to 11 yen per share
  • Revised the shareholder benefit program: for shareholders holding 100+ shares as of March 31 2025, the company will provide a 5,000 yen discount coupon usable at LOWYA flagship and direct-operated physical stores, with no minimum spend requirement, to encourage more shareholders to experience the company's products and provide feedback for product improvement

1. LOWYA Segment: 9-month cumulative revenue is 10.976 billion yen, accounting for 97.7% of total cumulative company revenue, reaching 95.5% of the prior year period. 3Q single-quarter revenue is 4.024 billion yen, up 5.9% year-over-year, hitting an all-time high for 3Q single quarter. 9-month cumulative operating profit is 511 million yen, up 54.3% year-over-year. 3Q single-quarter operating profit is 214 million yen, down 19.5% year-over-year, impacted by one-off 3 new store opening costs, warehouse relocation costs, and upfront core system replacement costs for OMO integration. Selling, general and administrative (SG&A) rate is 45.3% for the 9-month cumulative period and 44.0% for 3Q single quarter. Gross margin saw a slight increase despite yen depreciation pressures, achieved through partial price pass-through. Both customer count and average order value saw gradual growth.

2. DOKODEMO Segment: 9-month cumulative revenue is 263 million yen, accounting for 2.3% of total cumulative company revenue, reaching 83.4% of the prior year period. 9-month cumulative GMV is 571 million yen, operating result is a net loss of 20 million yen. Asia, led by Taiwan, accounts for approximately 90% of total GMV, with no major change in geographic distribution.

• Full year 2025 (ending March 2025) revenue guidance was revised downward from the original target to 16 billion yen, a 1 billion yen reduction from the prior forecast
• Full year operating profit guidance was revised downward to 900 million yen, aligned with the lower revenue target
• Projected full year ROE is 9.1% and net profit margin is 3.4% as of the current update
• Management expects Q4 2025 revenue performance to be similar to the strong growth rate seen in December 2024

• Yen depreciation (average exchange rate increased from 141.83 yen/USD in prior year 3Q to 158.18 yen/USD in current 3Q) increases product procurement costs, requiring ongoing price pass-through management
• The DOKODEMO cross-border business has not yet reached break-even or sustainable scale, and it will take additional time for the business to get on track
• Physical store opening increases near-term SG&A due to upfront opening costs, putting near-term pressure on segment profitability
• Cumulative revenue for the first 9 months is still below prior year levels due to the marketing cost optimization shift, and full year revenue will miss the original planned target

No substantive Q&A section is included in the provided transcript.