Vega corporation Co.,Ltd. Q2 FY2026 earnings call

• Overall Financial Performance
  • Total interim company revenue is 8.289 billion yen, up 16.4% year-over-year. Total interim operating profit is 443 million yen, up 50.2% year-over-year. Gross profit is 4.308 billion yen with a 52.0% gross margin. Q2 standalone revenue is 3.937 billion yen, up 11.7% year-over-year, with operating profit of 178 million yen, up 93.5% year-over-year. All interim performance metrics exceeded 100% of the full-year forecast progress rate. The company has no outstanding debt, maintaining sufficient capacity for future physical store expansion.
• LOWYA Business Operations
  • Flagship store membership grew to 2.18 million people, with 79% of members in the 20-39 age group and 64% female, maintaining consistent demographic composition. The LOWYA flagship app reached 1.89 million downloads, Instagram followers hit 127 million, and the room design app おくROOM reached 590,000 downloads, with growing conversion to flagship store purchases. The company continues to launch new trend-aligned products focused on design, functionality, and affordable pricing, with tactile products like Snoozy loungewear and blankets performing well in physical stores. There are currently 10 operating physical stores. Three new stores will open in Q3 (November 2025: Lalaport Shin Misato, Saitama; December 2025: Aeon Mall Fukuoka, Fukuoka and the limited-term Shibuya Miyamasuzaka Store), and one more will open in spring 2026, bringing total stores to 13 by the end of the fiscal year. Management is internally discussing accelerating physical store expansion to offset EC volatility.
• Sustainability Initiatives
  • The company donates formerly discarded product photography samples for community reuse. It launched a sustainable home food waste processor that reduces waste volume by up to 90%, with output usable as fertilizer. It also introduced compressed-packaging sofas that cut shipping costs and reduce CO2 emissions.
• DOKODEMO Cross-border Business Operations
  • US EMS shipping has been paused since August 2025 due to changes to US de minimis tariff rules and US-China trade tensions, pressuring GMV and revenue. The business has partnered with an external cross-border EC system provider via OMS integration, and is onboarding second-hand product sellers to grow new cross-border product categories. It added ChatGPT automatic translation to expand into non-Asian multilingual markets.

1. LOWYA Business: Interim total revenue is 8.112 billion yen, up 16.7% year-over-year, accounting for 97.9% of total company revenue. Q2 standalone revenue is 3.849 billion yen, up 11.8% year-over-year. Interim operating profit is 440 million yen, up 48.4% year-over-year. Q2 standalone operating profit is 178 million yen, up 86.0% year-over-year. OMO (flagship online store + physical store) sales reached 2.269 billion yen in Q2, up 33.8% year-over-year, accounting for 58.9% of LOWYA's Q2 sales. 2. DOKODEMO Business: Interim GMV is 1.099 billion yen, down 1.5% year-over-year. Interim revenue is 177 million yen, up 1.9% year-over-year, accounting for 2.1% of total company revenue. Q2 operating profit was flat at break-even.

• Management maintains the original full-year (FY2026 March) guidance with no upward or downward revisions: full-year revenue is forecast at 17.5 billion yen, operating profit at 1.1 billion yen, ordinary profit at 1.1 billion yen, net profit at 660 million yen, and earnings per share at 64.19 yen. The planned annual dividend remains 12 yen per share, consistent with prior guidance, for a 2.0% DOE.
• Management prioritizes growth investment for its current expansion phase, and will continue to review dividend policy as capacity allows.

• A major Google search algorithm update between Q1 and Q2 caused a large drop in Vega's organic search rankings, reducing SEO-driven traffic to the LOWYA flagship online store and lower-than-expected flagship sales growth, creating revenue volatility for the EC channel.
• EC mall sales for LOWYA have declined year-over-year (from 1.746 billion yen to 1.58 billion yen), driven by intensifying cutthroat competition that leaves many products with no remaining profit margin.
• US market expansion for DOKODEMO has been disrupted by changes to US tariff rules, creating unexpected headwinds to cross-border growth targets.
• Physical store expansion increases fixed operating costs, requiring ongoing active management of selling, general and administrative expenses to maintain profitability.
• The overall furniture market is in a gradual secular decline due to trends like built-in storage in new residential construction.

Q: Will shopping malls remain the primary location for future physical store openings? / A: Vega management confirms that shopping malls and station buildings will stay the core of its physical store strategy, as they offer the best balance of risk and expansion speed, which aligns with the company's current goals. It also plans to trial standalone large-format roadside stores in the future, and will disclose any finalized plans promptly when they are ready.

Q: What caused the year-over-year revenue decline in LOWYA's EC mall channel? / A: The decline stems from intensifying hyper-competition in EC malls, where many products now generate revenue but no profit. Vega's core strategy focuses on in-house product development with guaranteed profit margins, so it now prioritizes its own flagship online store and physical stores as core sales channels. EC malls have different customer demand focused on low-price searches, which does not align with Vega's product strategy. The company will maintain EC mall operations at a manageable scale to avoid the outcome of growing revenue while shrinking profits.

Q: Has the impact of the Google search algorithm update stabilized? / A: Management says it is inaccurate to say the impact has faded; organic search rankings have stayed at the new lower level and stabilized, with no further large declines expected. Rankings still fluctuate by date, region and device, suggesting Google may still be running tests. This search volatility is a key reason Vega is accelerating physical store expansion to hedge against EC revenue volatility. Management expects the incremental impact going forward to be minor.

Q: What trends is Vega seeing in the furniture and home goods market, and how are customer preferences shifting with physical store expansion? / A: The overall furniture market is in a gradual decline, driven by trends like more built-in storage in new apartments, but the home decor and accessories segment is growing. New product customer response remains strong, and physical store customers are more quality-focused than purely online customers, pushing average furniture unit prices slightly higher. Increased product assortment of growing home goods has kept overall average order value flat. Customer demographics have not shifted dramatically, but there is a small increase in more design-focused, style-conscious customers. Vega will adjust its merchandise strategy to reflect these market trends.