BAROQUE JAPAN LIMITED Q4 FY2025 earnings call

Core Financial Results Overview

• Full-year consolidated results: Revenue of 58.18 billion yen (96.5% YoY), gross profit of 33.1 billion yen (96.6% YoY), operating profit of 0.81 billion yen (41.6% YoY), net loss attributable to parent shareholders of -2.57 billion yen. The net loss was primarily driven by a 2.43 billion yen equity method investment loss from the China JV business.
• Gross profit margin remained at a high competitive level, supported by planned inventory clearance through outlet channels and focused high-margin sales, but rising raw material costs could not be fully absorbed, leading to lower gross profit year-over-year.
• Operating profit declined despite company-wide labor cost controls, due to higher depreciation from domestic logistics investment and increased new business development costs, but results significantly outperformed the revised January forecast due to late-period SG&A compression.

China JV Share Transfer Update

• Baroque Japan transferred all shares of its two Chinese JV entities (retail and wholesale) to partner Belle International. This is not a full exit from the Chinese market, but a risk mitigation and restructuring step: Belle will become the exclusive general agent for MOUSSY and SLY in China, allowing Baroque to reduce its risk exposure while retaining upside for future expansion of its other 10+ brands in China. A capital relationship and ongoing partnership remains in place.
• The share transfer resolved the prior 2-month fiscal year alignment gap, allowing the company to incorporate full Jan-Feb 2025 results for the Chinese entities in this reporting period per accounting standards, improving the timeliness of financial reporting.

Domestic Business Restructuring & New Business Initiatives

• Under ongoing company-wide structural reform, the firm is comprehensively overhauling domestic apparel planning, merchandising, production, and sales processes to strengthen core domestic operations.
• The flagship The SHEL'TTER TOKYO Omokado store will leverage its prime location to launch DtoC brands from top influencers and begin full-scale distribution of international brands.
• The firm is expanding its footwear business in partnership with Belle: launching Belle's 73Hours women's footwear brand through EC and department store channels, and actively developing additional footwear brands. It is also developing a new women's apparel brand targeting fashion-conscious consumers in their 40s and 50s, aligned with the aging core customer base of its flagship MOUSSY brand.

US Business Growth Strategy

• The US business, a key long-term global growth driver, will focus on expanding the MOUSSY VINTAGE brand: the firm is strengthening marketing research and collaborating with a senior denim designer previously at a global luxury maison to develop competitive luxury-positioned products, targeting the growing global premium denim market.

1. Domestic Total: Revenue of 52.734 billion yen, 96.2% of the prior year period; Gross profit of 30.778 billion yen, 95.8% of the prior year period; Operating profit of 0.109 billion yen; Net loss of 0.525 billion yen. The breakdown by channel:
   • Fashion Building/Station Building (FB): Full-year revenue was flat year-over-year, representing an approximately 30%+ contribution to domestic apparel revenue.
   • Shopping Center (SC): Full-year revenue declined year-over-year due to persistent sluggish foot traffic, dragging on overall domestic performance.
   • Department Store: Full-year revenue increased year-over-year, outperforming other domestic channels.
   • Inbound duty-free sales at the flagship The SHEL'TTER TOKYO Omokado store increased 125% year-over-year, showing steady growth in inbound customers.
2. China (Overseas): Total related revenue was 87.6% of the prior year period; Royalty revenue was 58.3% of the prior year period; The Chinese JV retail company recorded an equity method investment loss of 2.436 billion yen; Store count decreased by 87 locations from the prior period end to 157 locations. The decline was driven by sluggish personal consumption, unprofitable store closures, and reduced purchasing by the JV retail unit.
3. US (Overseas): Revenue increased 121.7% year-over-year; Operating profit increased 159.1% year-over-year. Growth was driven by recovered wholesale orders from stabilized product supply, and domestic EC revenue grew over 120% year-over-year due to strengthened digital marketing.

• For the fiscal year ending February 2026, management guides consolidated revenue of 57.602 billion yen, gross profit of 35.434 billion yen, operating profit of 2.227 billion yen, ordinary profit of 2.139 billion yen, and net profit attributable to parent shareholders of 1.338 billion yen.
• The mid-term strategic preparation phase (Phase 1) was previously extended from 3 to 5 years, with the final Phase 1 year now set as the 2026 February fiscal year, in response to underperformance from domestic shopping center business and China operations. The long-term target of 1 trillion yen in revenue and record high profit by 2030 remains unchanged.
• 2026 February fiscal year (Phase 1 final year) KPI targets: operating profit margin of 3% to 4%, inventory turnover of 5.5 to 6.5 turns, and ROE of 4% to 5%. Long-term 2030 targets: operating profit margin of 8.9%, inventory turnover of 6.5 turns, and ROE of 15%.
• The company maintains a stable shareholder return policy: a full-year dividend of 38 yen per share is planned for the 2026 February fiscal year, alongside continuing shareholder benefits.

• China market: Persistent economic slowdown and sluggish personal consumption have led to large ongoing investment losses from the former China JV business, which materially reduced current-period net profit. This risk was addressed via the full share transfer to JV partner Belle to reduce direct exposure.
• Domestic business: The shopping center channel has faced prolonged sluggish foot traffic and underperformance, dragging on overall domestic revenue and profit growth. Unprofitable brands and stores are being closed as part of restructuring, which also reduced near-term revenue.
• Profitability: Rising raw material/input costs have not been fully absorbed, pressuring gross profit. Higher depreciation from logistics investment, new business development costs, wage improvements for talent retention, and stronger digital marketing spend have kept SG&A elevated relative to revenue growth.
• Incomplete mid-term recovery: The company has extended its post-pandemic recovery/prepare phase by two years due to ongoing operational headwinds, delaying the targeted return to sustained growth.

No question and answer section was included in the provided transcript.