DUSKIN CO.,LTD. Q4 FY2026 earnings call

• Core Franchise System

  • Operates 6,782 franchise locations nationwide as of March 2024; headquarters provides brand licensing, business know-how, systems, and supplies to franchisees, who serve end customers.
  • Unique cooperative relationship: 6 independent franchisee associations founded early in the company's history, with the CEO serving as chair of all associations to collect franchisee feedback and align on shared growth goals.

• Hohan Group Transformation

  • Focused three core growth areas: hygiene, work-life management services, and elderly support.
  • Invested heavily in RFID tag implementation for all circulating mops and mats to automate inventory counting, improve labor efficiency, reduce heavy manual work, and improve working conditions for factory staff. Tag installation was mostly completed in the first two years of the Mid-Term Management Plan 2022.
  • Implemented CX strategy via customized member site DDuet to strengthen customer contact for dual-income households where in-person visits are less feasible.
  • Expanded service locations for on-site care services to reduce lead time and improve peak-demand responsiveness; established a dedicated household sales organization to reactivate in-person visiting sales post-COVID.

• Food Group (Mister Donut) Transformation

  • Discontinued frequent 100-yen discount promotions, which created customer pricing inconsistency and operational strain, replaced with two core strategies: 1) misdo meets, limited-time co-developed high-value products with famous brands/patissiers (starting with the successful matcha donut collab with Gion Tsujiri), and 2) Misdo Gohan, expanded in-store dine-in light meal options.
  • Launched new formats: drive-thru for suburban locations, take-out only stores to reduce rent costs and expand to new convenient locations, added net order, delivery, and piloted an unmanned checkout system at one trial location to address labor shortages.
  • As of December 2024, 33 new stores opened, on track to hit the full-year target of ~40 new stores; total operating stores are 1,036, of which 918 are renovated updated-format stores.

• New Growth Initiatives

  • Formed strategic partnerships and completed M&A: business alliance with plumbing service provider Classian, acquired a >30% stake in JP Holdings (leading childcare facility operator) to expand reach to the underpenetrated parenting generation, fully acquired Boston House (operator of the Napoli no Shokutaku Italian restaurant chain) to build a new second food segment pillar.
  • Overseas expansion focused on Southeast Asia: operates cleaning service rental in Taiwan, Mister Donut / halal-certified Big Apple donut brand across multiple markets; expanded to Singapore (now 10 stores) and Hong Kong (now 3 stores) and will focus on consolidating presence in existing Asian markets.

• Sustainability and Management Enablement

  • Core rental business is inherently circular; achieved 100% renewable energy for mop and mat manufacturing via virtual PPA purchase.
  • Prioritized DX training and e-learning for staff, paperless operations, and updated brand communication to reach younger consumers.

Total customer-facing sales for the fiscal year ending March 2024 was 432.4 billion yen, while consolidated revenue (Duskin headquarters revenue) for the same period was 178.7 billion yen. Breakdown by segment: 1. Hohan (Home Visiting Sales) Group: 60% of consolidated revenue, including Clean Service (core mop and mat rental business, the company's original business with ~90% household market share and ~53% corporate market share), Senior Care (growing market for nursing care equipment rental/sales and non-insurance elder care services), Care Service (on-site service including air conditioning cleaning, housekeeping, pest control), and Duskin Rent-all (event equipment rental). 2. Food Group: 33% of consolidated revenue, almost all from Mister Donut, with a small 16-location direct-store tonkatsu chain Katsu and Katsu in the Kinki region. 3. Other: 7% of consolidated revenue, primarily consisting of overseas business.

• Operating profit for the fiscal year ending March 2025 is projected to recover to 7.7 billion yen, after declining through 2024 due to upfront one-time RFID installation costs that are now mostly completed.
  • The long-term management strategy "Do-Connect" was publicly announced in November 2024, focused on leveraging digital tools to support the company's core strength of in-person customer engagement; this strategy will underpin the upcoming new mid-term management plan launching April 2025.
  • For Mister Donut, management will continue the current pace of ~40 new stores per year, focusing on profitable expansion in high-demand areas such as the Tokyo metropolitan area, with specific targets to be released in the new mid-term plan.
  • For the 2022-2025 mid-term plan period, the company maintains its shareholder return policy: payout ratio of 60% or a minimum 2.5% DOE (whichever is higher), targeting cumulative total payout of over 100% for the 3-year period. The projected annual dividend for FY2025 ending March 2025 is 110 yen per share, continuing the streak of consecutive dividend increases. Cumulative total payout (including ~10 billion yen in share buybacks) is projected to reach ~120% for the 3-year period, exceeding the original target. The shareholder dividend program will continue, with additional benefits for long-term holders.

• Full-scale commercial operation of the RFID system is delayed beyond the original 3-year mid-term plan timeline, with implementation issues and changing cost conditions (rising labor costs) making it difficult to hit the original target of 0.8 billion yen in annual profit contribution; full benefits are now expected after FY2025.
  • Labor shortages across Japan create headwinds for store expansion and operations, requiring ongoing investment in automation and efficiency initiatives to offset constrained labor supply.
  • Rapid expansion of new locations requires careful site selection and profitability validation; the company avoids over-aggressive expansion to protect franchisee returns.

Q: What is the efficiency improvement from RFID implementation, and is there still room for future profit improvement? / A: The original plan projected 0.8 billion yen in annual profit contribution, but implementation delays and rising labor costs have changed the baseline, making original profitability targets hard to meet. Full commercial operation is now expected next year or later. While labor hours will be significantly reduced, profit improvement depends on multiple factors beyond just time savings. For Duskin, the primary priority of the project is improving working conditions for factory staff to ensure long-term labor availability for the business, which remains the core goal moving forward.

Q: How many new Mister Donut stores will you add going forward, and how quickly will you expand new formats? / A: Store count growth is a key priority for growing Mister Donut sales, as there is still unmet demand in high-density areas like the Tokyo metropolitan area. However, the company does not prioritize growth for growth's sake: it only opens new stores after thorough research to ensure franchisee profitability, given that franchisees provide the capital for new locations. The current pace of ~40 new stores per year will continue, with specific numerical targets to be released in the next mid-term management plan.

Q: What is your competitive differentiation in senior care services versus pure-play competitors? / A: Extreme differentiation is difficult in this market, but Duskin's key advantage is its extremely strict maintenance standards for reused rental equipment such as wheelchairs and hospital beds, which eliminates safety risks for users. The company also prioritizes close collaboration with care managers, and invests in staff training and quality control to maintain its strong brand reputation. While it is not the largest player in the market by sales, it is growing in line with the overall expanding market size.

Q: Do you have plans for a stock split amid the rising share price? / A: There are no concrete plans for a stock split at this time. However, the company continuously evaluates shareholder return initiatives and corporate value growth to meet shareholder expectations, and will implement optimal measures in line with market trends and the company's growth strategy going forward.