Vega corporation Co.,Ltd. Q4 FY2025 earnings call

Overall Company Performance: • Total full-year revenue was 15.935 billion yen, down 0.8% year-over-year; Q4 revenue was 4.697 billion yen, up 10.5% year-over-year • Full-year operating profit was 0.926 billion yen, up 20.1% year-over-year; Q4 operating profit was 0.419 billion yen, down 10.7% year-over-year due to ~70 million yen in one-time costs for new store opening and core system replacement • ROE reached 10.3%, net profit margin was 3.7%; end-of-period cash balance was 1.922 billion yen, with positive operating cash flow and no interest-bearing debt • Planned full-year dividend is 11 yen per share, up 1 yen year-over-year, targeting a 2% DOE, with retained earnings allocated to growth investment

Strategic Shift & Operational Progress: • Shifted to a profit-focused strategy, reduced promotion and marketing costs, while successfully maintaining overall sales scale • Opened 5 new physical stores in 2025 March fiscal year, reaching 8 stores by period end and 9 stores at the time of the earnings call; plans to open 5+ new stores in 2026 March fiscal year • Launched new AI-powered room planning service "okuROOM" in November 2024, which exceeded 300,000 downloads without major promotion, allows users to simulate 3D furniture placement based on room size and style • Transforming to an OMO (Online Merges with Offline) model, expanding touchpoints via a three-pillar structure: official self-operated website, SNS, and physical stores • Expanding product categories, gradually converting general home goods to private-label products to increase penetration of LOWYA products in customers' homes • Expanding customer engagement: holding weekly live streams, offline events, and customer co-creation activities such as displaying customer-voted products in physical stores to grow fan base

Capital Policy: • Prioritizes investing operating cash flow in physical store expansion, talent development, and IT infrastructure to support the OMO model • Maintains a solid balance sheet, uses existing cash to fund new stores with no current borrowing needs, does not rule out equity financing as an option for future growth • Committed to consistent shareholder returns aligned with the 2% DOE target, and will review dividend policy as needed with timely announcements

1. LOWYA Segment: Full-year revenue reached 15.5 billion yen, accounting for 97.3% of total company revenue. Full-year operating profit was 0.932 billion yen, up 17.4% year-over-year. In Q4, revenue was 4.614 billion yen, up 11.2% year-over-year, and gross margin hit 50.5%. After shifting to profit-focused strategy, flagships store membership increased 21.2% year-over-year, app downloads increased 17.4% year-over-year, and engagement accounts increased 46.5% year-over-year. Customer traffic declined slightly while average order value rose slightly. All months in the second half posted year-over-year revenue growth above 100%. 2. DOKODEMO Segment: This is the company's overseas cross-border e-commerce segment. Full-year GMV was 2.21 billion yen, down 17.7% year-over-year, and full-year revenue was 0.346 billion yen, down 16.8% year-over-year, accounting for 2.2% of total company revenue. GMV has bottomed out, and operating profit is roughly break-even. 80% of GMV comes from Taiwan, with minor growth in Southeast Asia and the U.S.

• For the full 2026 March fiscal year, management guides total revenue of 17.5 billion yen (upper half: 8 billion yen) and operating profit of 1.1 billion yen (upper half: 4 billion yen), targeting sustained revenue and profit growth focused on expanding the OMO D2C model • The previous 3-year plan was revised to be more conservative, with downward adjustments to revenue, operating profit, and dividend targets, primarily due to the earlier-than-planned underperformance of EC mall sales channels. The 5+ new store opening commitment for 2026 March fiscal year replaces the prior 6-8 store target, but management will still target 7-8 openings if attractive site opportunities arise • Long-term medium-term revenue target of 50 billion yen and long-term target of 100 billion yen remain unchanged

• EC mall sales channels have higher price elasticity, and price pass-through for yen depreciation-driven cost increases has been less effective than on the company's self-operated channels, leading to persistent underperformance versus plan • Physical store expansion increases fixed costs (rent and labor), requiring disciplined cost control and site selection to hit profitability targets • Exchange rate volatility increases procurement cost uncertainty; sharp yen depreciation erodes profit margins if price increases cannot be fully passed through

Q: What is Vega's physical store opening strategy, including priority regions and site selection preferences? / A: Management prioritizes dense population areas close to the company's four existing warehouses, as existing local logistics infrastructure reduces opening and operating costs. While most current stores are in shopping malls, this is a result of matching site criteria (high foot traffic in dense population areas) rather than a deliberate preference; the company will consider large street-side locations going forward to diversify its site portfolio.

Q: What caused the underperformance of LOWYA's EC mall sales channels versus plan? / A: When the yen weakened to near 162 to the U.S. dollar, Vega implemented price increases to protect margins. While the company's self-operated channels absorbed these price increases well, price elasticity is much higher on major third-party EC malls, so demand dropped more than expected after the price adjustment, leading to the plan miss.

Q: Are there any sales differences between physical stores and EC, and what new demand has physical store opening unlocked? / A: Top-selling products on EC generally also sell well in physical stores. Physical stores have unlocked new demand for high-priced furniture (customers are reluctant to buy untested high-priced items online) and small portable home goods, and the company is now strengthening product development for these categories that fit physical channel strengths.

Q: What is the current performance of sales via the "okuROOM" service? / A: okuROOM drives whole-room purchases instead of individual item orders, so the average cart value via okuROOM is 2-3x higher than the average for standard EC orders. The service still has a relatively small user base of 300,000 downloads, so full statistical analysis is still ongoing, but the trend of higher average order values and multiple-item purchases is clear.