DAIWA CYCLE CO.,LTD. Q2 FY2026 earnings call

• Company Overview and Store Network

  • Founded in 1980 starting from bicycle parking lot operation, expanded into bicycle repair and retail, and now operates 145 total stores (141 directly operated, 4 franchised) across the Tokyo-Nagoya-Osaka region as of the end of July 2025, targeting 200 total stores under its long-term expansion plan.
  • Operates two store formats: large-format DAIWA CYCLE roadside stores (~200 tsubo sales floor, ~500 bicycles displayed) on local residential roads, and smaller-format DAIWA CYCLE STYLE stores (40-100 tsubo) located in shopping malls and near train stations, utilizing location-specific advantages for customer engagement.
  • In the 2nd quarter, 6 new stores were opened (3 DAIWA CYCLE, 3 DAIWA CYCLE STYLE; 3 in Kanto, 3 in Kansai), and 2 existing franchised stores in Kansai were converted to direct operation.

• Core Competitive Strengths and Service Capabilities

  • Guided by the corporate mission of 'Creating a new normal for bicycles', the company prioritizes personalized, heartfelt service that cannot be replicated by automation. It offers unique on-site mobile repair service, which is currently fully rolled out across Osaka and is being expanded to the Tokyo metropolitan area alongside new store openings.
  • A paid support package only available at purchase, which includes theft protection, free regular inspections, repair labor discounts, and liability insurance discounts, is adopted by nearly all customers, driving high customer retention and satisfaction.
  • General bicycles are mostly private branded, while most electric-assisted bicycles are currently national branded; the company is actively expanding private brand offerings for electric-assisted and sports bicycles.

• Interim Period Operational Performance

  • Both interim net sales and operating profit hit record highs for a first half, beating the company's prior performance forecast. 11 new stores were opened in the first half, exceeding the planned 10-store target. Total new store openings year-to-date reached 13 by August, putting the full-year 20-store opening plan on track.
  • Existing store cumulative sales reached 106.1% of the prior year level. Q1 saw strong average order value growth driven by electric-assisted bicycle sales, while Q2 saw temporary weakness from rainy weather in early Q2, followed by a recovery after late June, with customer counts rising on increased repair demand but average order value seeing a slight decline.
  • The company launched its first-ever private brand child-carrying electric-assisted bicycle, which is positioned at an affordable price point with a focus on riding comfort.
  • Gross profit margin fell only 0.3 percentage points year-over-year for the full interim period, as strong growth in lower-margin electric-assisted bicycles was offset by increased high-margin repair demand starting in June.

For the 2026 January interim period, total net sales reached 11.04 billion yen, an increase of 15.5% year-over-year, and operating profit was 0.896 billion yen, an increase of 10.4% year-over-year. Breakdown by product segment: 1. Bicycles: 74% of total revenue, with strong sales of electric-assisted bicycles. Electric-assisted bicycles accounted for 63% of DAIWA CYCLE's bicycle sales in the 2025 January term, with a 21% annual average growth rate, outpacing the industry average of 3%. 2. Parts and accessories: 15% of total revenue. 3. Other (including repair fees and service revenue): 11% of total revenue. Private brand products accounted for 32.7% of total revenue, down 1.7 percentage points year-over-year, as national brand electric-assisted bicycles saw particularly strong growth. In the 2nd quarter (May-July), gross margin rose from 45.0% to 45.1% year-over-year.

• The full-year 2026 January term performance guidance originally announced on March 17 is maintained with no revisions.
• The company expects that the temporary higher costs from accelerated new store openings this year will contribute positively to profit growth starting from next fiscal year.
• Management confirmed that the full-year new store opening target of 20 stores remains on track, with 13 new stores already opened by August, putting the plan well ahead of schedule.

• Accelerated new store openings in the current fiscal year have created temporary downward pressure on operating profit, due to the increased upfront costs associated with new store expansion.
• The broader bicycle industry is currently facing weak overall demand, which creates broader market headwinds for the company's growth.
• Last fiscal year, the company missed its 20-store new store opening target by 50% (only opened 10 stores), which led to investor concern about the company's ability to hit its opening targets; the company noted that it has implemented process improvements to address this issue.

No substantive question and answer exchange is included in the provided transcript.