AEON Fantasy Co.,LTD. Q2 FY2026 earnings call

Consolidated Overall Performance

• All-time interim record for consolidated revenue (46.624 billion yen, +6.2% YoY) and all profit levels: operating profit 3.63 billion yen (+26.5% YoY), ordinary profit 3.418 billion yen (+69.7% YoY), net profit attributable to parent shareholders 1.763 billion yen (+1.389 billion yen YoY). Operating profit reached 60% and net profit reached 70.5% of full-year guidance, with strong progress.
• Total store count as of end of August 2025 was 1,273 globally, with 154 new stores opened in the interim period, maintaining aggressive opening pace.

Domestic Business Initiatives

• Existing same-store sales grew 6.7% YoY, led by the Prize segment: Kids Prize grew 20.8% YoY, accounting for 47% of the Prize segment revenue, while exclusive and movie-collaboration prizes boosted Family Prize, bringing total Prize segment growth of 10.2% YoY.
• Medal segment delivered stable 2.5% YoY sales growth, with medal member count up 3.5% YoY, supported by new machine introductions and regular events.
• Attraction segment grew sales of its "Yokubari Pass" / "My Yokubari Pass" unlimited play passes by 7.6% YoY, contributing to segment expansion.
• Digital membership grew by 1,021,000 new users across the official LINE account and "Tottotto" parenting support app, with plans to continue expanding membership and improving app utility.
• New openings: 52 total new domestic stores in the interim, including 10 playground stores (5 Chikyu no Niwa, 3 new Nobikko formats, 1 Skids Garden) and 42 amusement specialty stores (36 capsule toy stores TOYS SPOT PALO, 6 prize specialty stores PRIZE SPOT PALO). New large-format playground formats Nobikko Jumbo and Nobikko Picnic were developed to meet demand for all-day indoor play amid extreme weather, with 6 more planned for the second half.

ASEAN Business Initiatives

• Interim revenue hit a 4th consecutive all-time interim high, with operating profit down due to pre-opening costs for new stores, weaker performance at some existing stores, and higher forward-looking SG&A, while EBITDA increased by 14 million yen YoY.
• Country-level performance: Indonesia led growth at 39.8% YoY revenue, opening the first exclusive Pokémon Mezastar Forest arcade and first entry to central Java; Thailand grew 20.7% YoY, with 9 new stores including first entry to Chiang Mai; Philippines maintains #1 playground market share; Malaysia holds #1 amusement market share, with 9 new stores including first entry to Miri, East Malaysia.

China Business Initiatives

• Ongoing structural reform with unprofitable store consolidation: 42 stores closed in the interim, following 67 closed last fiscal year, with closure progress exceeding plan. Operational improvement is driven by format conversion from amusement Mollyfantasy to playground Kidzooona, and cost cutting from reduced scale.
• Operating loss improved significantly year-over-year, but delayed acquisition of profitable temporary locations and steeper-than-expected sales declines at already-announced closing stores limited near-term profit improvement. Structural reform remains on track to hit full-year plan, targeting full fiscal year operating profit break-even next fiscal year.

Sustainability

• Hosted a special film screening event for children with disabilities and their families in partnership with AEON Entertainment, as part of the company's commitment to contributing to children's futures.

1. Domestic Business: Revenue of 37.759 billion yen, +8.6% year-over-year; operating profit of 3.903 billion yen, +0.551 billion yen year-over-year; 81% of total consolidated revenue; operating margin of 10.3% (all-time high for the interim period).
2. ASEAN Business: Revenue of 7.296 billion yen, +14.2% year-over-year; operating profit of 0.381 billion yen; 15.6% of total consolidated revenue.
3. China Business: Revenue of 1.704 billion yen; operating loss of 0.653 billion yen, which is a 0.569 billion yen improvement in loss year-over-year; 3.7% of total consolidated revenue.

• Full-year 2026 February fiscal year consolidated guidance is maintained unchanged from the April 2025 announcement, with no upward or downward revision.
• Domestic second half new store openings are planned to outpace the first half, with playground expansion accelerating, and the long-term domestic growth strategy remains centered on two pillars: playground formats and strategic small-format stores.
• ASEAN management expects 20 percentage points of performance improvement from expanded existing store revitalization initiatives in the second half, targeting a performance rebound.

• China Business Risks: Acquisition of profitable temporary locations for new stores is progressing at only 30% of plan, and sales declines at closing stores after announcement have been steeper than expected, creating downward pressure on near-term profits.
• ASEAN Business Risks: Intensified competition in urban areas, with local and foreign competitors shifting investment to large-format playgrounds, eroding market share and pressuring existing store profitability. 2024 new stores had a lower-than-expected success rate after expansion into lower-grade shopping malls, hurting near-term results.
• Domestic Risks: Rising labor costs from wage increases require sustained same-store sales growth to offset cost pressures.

Q: What drove the stronger-than-expected domestic first half performance, and why did operating profit growth slow in Q2 compared to Q1? / A: The main drivers were 6.7% YoY same-store sales growth, with the high-weight Prize segment leading gains. The nearly 100% gross margin Medal segment also contributed heavily to profit even with modest growth. Additionally, the elimination of prior year new store opening costs and strong performance of 2025 new stores boosted results. The slower Q2 profit growth is due to concentrated opening costs for large new playground stores, which were all recognized in Q2.

Q: Why was ASEAN first half performance softer than expected, and what is the outlook for the second half? / A: Top-line sales are growing from sustained new store expansion over three years. Softer profit comes from three factors: upfront pre-opening costs for accelerated new openings, including the new exclusive Pokemon arcade format in Indonesia, lower success rates for 2024 new stores after expanding into more mall grades, and intensifying competition in urban areas from competitors shifting to playground formats. For the second half, the company has increased planned store revitalization initiatives by 30% versus original plan, which is expected to deliver a 20 percentage point performance improvement to rebound results.

Q: When will China achieve quarterly operating profit break-even, and what is the outlook for full break-even? / A: Structural reform progress overall is ahead of plan, with more unprofitable stores closed than targeted. However, acquisition of profitable temporary locations is only 30% on track, and post-announcement sales declines at closing stores have been worse than expected. The 42 first half closures are still being integrated, so visible profit improvement will not show until Q3, and the company expects to achieve quarterly break-even in Q4. The target of full fiscal year break-even next year remains on track, with the overall plan still on schedule.

Q: What is the long-term outlook for ASEAN profitability amid rising competition? / A: Large competing players that invested heavily in over-sized urban playground formats are now slowing new openings after over-investing, which has eased competitive pressure. Going forward, the company will focus expansion on underserved regional small and medium-sized malls, where competitors struggle to enter. New regional stores achieve 20-30 percentage points higher sales than comparable urban new stores, so the company is developing formats matched to different mall grades to minimize risk and improve profitability.