AEON Fantasy Co.,LTD. Q4 FY2026 earnings call

Core Financial and Store Network Updates

• Full-year 2026 February term consolidated revenue, operating profit, and recurring profit all hit all-time highs, with pre-depreciation operating profit also reaching a record of 17.201 billion yen. Operating cash flow reached an adjusted 14.35 billion yen after accounting for a 2.76 billion yen impact from bank holidays. Total consolidated store count reached 1,303 locations as of period end.

Domestic Business Operational Highlights

• The prize segment (largest revenue contributor) expanded kid-friendly easy-to-win prizes and diversified non-IP merchandise to drive growth; the family prize segment leveraged scale to collaborate with popular IPs for strong revenue contribution. The medal segment grew revenue to 101.1% YoY and medal membership to 102.0% YoY through new machine updates and segmented events. The experience segment grew revenue via expanded loyalty programs and new edutainment machines, while the card segment maintained strong performance from hit IP releases and exclusive events. Total digital membership across LINE and the Tototto parenting app reached 3.31 million.
• In new format expansion: 53 capsule toy stores were opened, bringing the total to 244; 13 prize specialty stores (including the new Crane Yokocho Goku format) were opened, bringing the total to 84. Crane Yokocho Goku, a new large-format crane game experience modeled after shopping, delivered projected annual revenue of ~5 billion yen for the first converted location and 15 billion yen for the second location. The new Nobikko playground brand opened locations, with family-friendly community spaces suitable for all site types for future national expansion.

Overseas Business Operational Updates

• ASEAN shifted strategy in Q3 2026 from rapid new store expansion to prioritizing existing store profitability improvement, reallocating 26 planned new store projects to existing store revitalization. Revitalized stores saw an average 16% revenue increase, with existing store profit improving from Q4 2026 onward. China continued unprofitable store consolidation and structural reform, with cost reduction and closure initiatives on track, but activated store results and temporary site acquisition missed plan targets, so full profitability improvement has not yet met expectations.

New Mid-Term Management Strategy (2026-2030, accelerated 1 year forward)

• Updated corporate vision expanded the target audience from children to the entire family, positioning the company as a "smile creation company that continues to create passionate, fun gathering spaces".
• Segmented portfolio strategy: Domestic existing business maintains and improves high capital efficiency to serve as a source of growth capital; new business concentrates investment on high-return formats to serve as a growth driver; overseas business shifts from growth-focused to capital efficiency-focused strategy.
• Domestic portfolio segmentation: (1) Core growth formats: Crane Yokocho Goku and Nobikko playground brand, prioritized for investment as key growth drivers, with Crane Yokocho Goku projected to reach 60 locations by 2030; (2) Cash contribution formats: Chikyu no Niwa playground and OYUGIWA bath business, which generate strong cash flow with larger investment requirements, so new openings will be limited to high-potential markets; (3) High-efficiency formats: TOYS SPOT PALO and PRIZE SPOT PALO small specialty stores, which have high capital returns and fast cash payback, will continue to receive consistent investment to improve balance sheet health.
• Cross-format synergies: Reuse retired equipment from Molly Fantasy in new formats to reduce investment costs, enable cross-format mutual customer referral, and bulk order equipment to lower purchase costs. The company plans to unify the membership system across all formats during the mid-term plan to enable cross-format point use and improve customer convenience and lifetime value.
• Overseas mid-term strategy: ASEAN shifts from growth to profit focus, with new openings concentrated in regional cities; Vietnam prioritizes urban expansion in partnership with the AEON Group; each country prioritizes existing store revitalization to improve profitability, with strict new store selection in Thailand and cost structure reform for headquarters and existing stores.

Consolidated: Revenue of 93.29 billion yen, operating profit of 6.114 billion yen, recurring profit of 7.358 billion yen, net profit attributable to parent company shareholders of 2.79 billion yen; all three top-line and profit metrics hit record highs. Domestic: Revenue of 75.516 billion yen (+8.7% YoY), operating profit of 7.019 billion yen (+9.3% YoY), marking 3 consecutive years of record highs. Within domestic, standard stores led by Molly Fantasy hit a record revenue of 65.1 billion yen, while specialized stores reached 10.3 billion yen in revenue and continued growing. ASEAN: Revenue of 15.222 billion yen (+15.5% YoY, also a record high), operating profit of 0.465 billion yen, a 0.724 billion yen decline YoY due to intensified competition in urban centers. By country: Malaysia saw urban existing store profit decline but recovery after revitalization; the Philippines maintained top market share in playgrounds and focused on professional talent development; Indonesia grew Pokémon MEZASTAR forest locations to 95, with revenue up 151.4% YoY; Vietnam saw existing store profit improvement after introducing popular redemption machines in January. China: Revenue of 2.85 billion yen, operating loss of 1.368 billion yen, a 1.683 billion yen improvement YoY, as unprofitable store restructuring proceeded.

• 2027 February term full-year guidance: Consolidated revenue of 98 billion yen (+5.0% YoY), operating profit of 8 billion yen (+30.8% YoY), recurring profit of 6.3 billion yen, net profit of 3 billion yen, and a full-year dividend of 20.00 yen per share. Domestic is projected to deliver 81 billion yen in revenue and 7.5 billion yen in operating profit, while overseas is projected to deliver 17.3 billion yen in revenue and 0.5 billion yen in operating profit.
• 2030 fiscal year long-term targets: Consolidated revenue of 150 billion yen, operating profit of 15 billion yen (10% operating margin), ROE of 23%, D/E ratio of ~1x, and a payout ratio of 10-15%. Domestic targets 127.5 billion yen in revenue and 12.7 billion yen in operating profit, while overseas targets 22.5 billion yen in revenue and 2.3 billion yen in operating profit.
• Capital allocation guidance: Total investment of ~79 billion yen over the 5-year mid-term period, concentrated on domestic growth: the first half of the plan will prioritize investment in new domestic stores, while overseas will reduce new store investment and increase the share of investment allocated to existing store revitalization. The company plans to gradually reduce interest-bearing debt starting from 2027 to improve financial health, and prioritizes capital allocation in the order of financial strengthening, growth investment, and shareholder return.
• The new mid-term plan is accelerated by 1 year to respond to rapid changes in the business environment across segments.

• Intensified competition in urban ASEAN markets has caused existing store profit decline, resulting in a full-year 0.724 billion yen profit drop for the ASEAN segment in 2026 February term, and slow revenue growth for the region going forward as new store expansion is slowed to prioritize revitalization.
• China's structural reform has delivered better losses than prior years, but revitalized store performance and temporary site acquisition missed plan targets, so the business remains unprofitable and continued restructuring is required.
• Projected overall population and per capita GDP growth slowdown across ASEAN countries creates long-term market uncertainty that requires flexible strategic adjustment.

Q: The mid-term plan shows ASEAN/overseas profit is projected to improve from a -0.9 billion yen deficit to +0.5 billion yen in 2026, then to +1.5 billion yen in 2027, but revenue is projected to stay nearly flat, with only ~0.6 billion yen revenue growth alongside 1 billion yen profit growth. How is this profit growth possible without corresponding top-line growth?

A: Historically, AEON Fantasy prioritized rapid expansion in ASEAN to drive growth, but intensified urban competition has created severe pressure on existing store profitability. The company has shifted strategy: it is slowing new store opening and reallocating that capital to existing store renovation and revitalization investments. Renovation investments deliver much faster payback and higher returns than new store investment. By repeating this revitalization across markets, the company can drive strong profit gains with limited total investment. Slow new store growth will keep top-line expansion low, but the profit structure of existing stores will improve, leading to higher overall margins and profit growth.