BAROQUE JAPAN LIMITED Q2 FY2026 earnings call

Core Financial Results

• Consolidated gross profit was 15.07 billion yen (94.3% of prior year period), with gross margin expanding significantly YoY due to improved purchasing controls and proactive inventory liquidation across channels that greatly reduced product valuation losses. The company maintains a high gross margin for the Japanese apparel industry.
• Consolidated selling, general and administrative expenses (SG&A) were 15.152 billion yen (95.4% of prior year period), controlled via optimized advertising spend, restrained labor costs, and lower sales-linked commissions.
• Consolidated operating loss was 70 million yen, which was worse than the prior year period. Net income attributable to parent shareholders was 10 million yen, a return to profitability from a prior year loss, driven by the elimination of equity method investment losses after exiting the previous Chinese joint venture and a gain on sale of affiliate shares.
• Domestic operating loss was 179 million yen, with a net loss of 255 million yen for the domestic segment.

Existing Brand Turnaround & Refresh Strategies

• SC Brand Recovery: AZUL BY MOUSSY has seen strong early results from new advertising featuring celebrity talent and improved average order value from price adjustments. The company is accelerating delayed influencer marketing expansion to recover lost customer traffic, and will adopt the flexible pricing strategy that drove success at RODEO CROWNS WIDE BOWL, moving away from the historic focus on rigid full-price selling that hurt post-pandemic performance. RODEO CROWNS WIDE BOWL grew via IP collaborations that won new and lapsed customers, and will continue flexible pricing aligned with market demand.
• MOUSSY Rebranding for Global Expansion: As the company's 25-year flagship profit-driving brand, MOUSSY is undergoing rebranding to support expansion beyond China into new markets across Asia, North America, and Europe. MOUSSY denim sales are currently up 117.4% YoY. The company launched a co-branded collection with Vaquera at Paris Fashion Week to boost brand awareness in North America and Europe, and has refreshed the MOUSSY VINTAGE line for the US market, adding luxury designers to build a globally competitive denim brand.

New Business Initiatives

• MUS IP Business: A new IP licensing and apparel development business, starting with existing Disney character collaborations for MOUSSY and SLY, will expand to external IP and original in-house IP. The company targets growing this to a 10 billion+ yen scale business long-term.
• JD.com Joint Venture: The company launched DB Capital Limited, a 100 million USD (≈15 billion yen) registered capital joint venture based in Hong Kong with Chinese e-commerce giant JD.com. The JV will invest in high-quality Japanese consumer goods manufacturers with strong product development capabilities that can sell into the Chinese and global cross-border e-commerce market. It will leverage JD.com's 600 million active user sales channel in China to drive portfolio company growth, support Japanese manufacturers facing business succession risks, and expand overseas access for Japanese products. Baroque Japan was selected for its 10+ years of China market experience and local marketing expertise.
• New 100% Owned Subsidiaries: Baroque Trading, a non-apparel trading company to support the JV's activities, and Baroque Sustainable, an upcycled apparel business that remakes used apparel from any brand to reduce textile waste, have been established. Baroque Sustainable is restarting clothing collection programs paused during COVID and developing upcycled reuse product lines.

1. FB (Fashion Building) Brands: Revenue grew year-over-year (YoY) driven by strong demand for MOUSSY denim, which was up 117.4% YoY. Total FB segment revenue was 104% of the prior year period.
2. SC (Shopping Center) Brands: Overall segment revenue declined YoY. This decline was driven by continued customer traffic decreases at core brand AZUL, partially offset by double-digit same-store sales growth at RODEO CROWNS WIDE BOWL (110.4% YoY same-store sales, 109.8% YoY same-store customer traffic, 100.5% YoY same-store average order value).
3. Department Store Brands: Revenue declined YoY due to poor launch performance for the segment's core brand's full-price product line. Aggregate consolidated revenue for the interim period was 24.8 billion yen (89.5% of prior year period), domestic revenue was 24.41 billion yen (96.3% of prior year period). No explicit revenue contribution percentages per segment were provided in the transcript.

No explicit full-year or next-period quantitative guidance was provided in the available transcript. Management outlined only qualitative directional guidance for long-term strategic initiatives: target 3-digit (10 billion+ yen) scale for the new MUS IP business; project that the Chinese overall e-commerce market will grow from 44.4 trillion yen to 600 trillion yen by 2027, with the Japan-to-China cross-border e-commerce segment growing at ~10% annually; the company targets long-term global expansion of the MOUSSY brand into new regions beyond its existing core Chinese market.

• Continued customer traffic decline at core SC brand AZUL BY MOUSSY remains a key operational and financial risk.
• The historic weakness of SC brands in flexible pricing created significant post-pandemic underperformance, and success of the new flexible pricing strategy for AZUL is not guaranteed.
• The new JD.com joint venture and new internal business lines (IP business, sustainable upcycling, trading) are unproven, and may not achieve the company's long-term growth and scale targets.
• The exited prior Chinese joint venture negatively impacted current period consolidated revenue, and new cross-border China market initiatives carry unproven execution risk.

No question and answer section is included in the provided transcript fragment.