Japan Eyewear Holdings Co.,Ltd. Q4 FY2025 earnings call

• Overall Financial Performance

  • Full-year 2025 January period revenue grew 23.2% year-over-year to 16.6 billion yen, driven heavily by post-COVID recovery, with growth moderating gradually in the second half but remaining at a high level
  • Gross margin increased 1.4 percentage points year-over-year due to price adjustment effects and a higher share of higher-margin store sales for Four Nines
  • Operating margin held at a high 32%, delivering operating profit of 5.3 billion yen; net profit grew 69% to 3.9 billion yen, including a one-time 500 million yen positive impact from deferred tax asset recognition
  • Selling, general and administrative expenses grew 17% year-over-year (slower than 23.2% revenue growth), with advertising expenses held to a low 0.4% of revenue at 65 million yen
  • Q4 2025 revenue reached 4.57 billion yen (above Q2 levels), while operating profit came in at 1.404 billion yen slightly below Q2 due to end-of-period cost adjustments

• Operational Updates

  • Net store growth of 7 locations in the full year, ending at 105 total locations globally; 12 new stores opened (9 domestic, 3 overseas) against 5 closures/relocations
  • Inbound sales reached 3.393 billion yen, growing strongly, with Q4 inbound sales exceeding 1 billion yen for the first time; inbound sales now account for 29.7% of domestic store revenue, with room for further growth from Chinese inbound visitors
  • Average per-unit selling price continues to rise: 77,557 yen for Kaneko Glasses (up 25% from pre-COVID 2019 January period) and 81,973 yen for Four Nines (up 14% from pre-COVID levels)
  • The new 4th production facility COMMUNE was completed and will start operations in spring 2025, enabling in-house production of previously outsourced processes and expanded production for Four Nines
  • Inventory increased 374 million yen year-over-year, driven by store network expansion and inventory from the 2024 acquisition of Taiho Co., with no excessive stagnant inventory
  • Capital expenditures totaled 2.2 billion yen, mostly for new headquarters construction that was completed in December 2024; large capital expenditures are expected to decrease significantly going forward

• 5-Year Medium-Term Strategic Plan Core Direction

  • Long-term vision: "Bringing the tradition and innovation of craftsmanship to the world", aiming to become a globally loved top luxury eyewear brand
  • Core growth pillars: 1) Selective new domestic store openings for both brands; 2) Growing overseas customer base through brand penetration and store expansion, starting with Greater China; 3) Evolving group synergies from the integration of Kaneko Glasses and Four Nines; 4) Leading growth of the Sabae (world-class eyewear production hub) brand

1. Kaneko Glasses (金子眼鏡) Group: Total sales of 10.8 billion yen, representing 65% of total company revenue. Store sales reached 9.9 billion yen, growing 26.5% year-over-year. Approximately 90% of Kaneko Glasses' revenue comes from directly operated stores. 2. Four Nines (フォーナインズ) Group: Total sales of 5.9 billion yen, representing 35% of total company revenue. Store sales reached 3.1 billion yen, growing 28% year-over-year. Directly operated store sales and wholesale sales each account for approximately 50% of Four Nines' total revenue.

• 2026 January Period (first year of the 5-year plan)

  • Forecast revenue: 19.05 billion yen, up 14% year-over-year; forecast operating profit: 6.2 billion yen, up 16% year-over-year; forecast net profit: 4 billion yen (flat year-over-year, due to the removal of the 500 million yen one-time tax benefit from 2025, for an adjusted 16% net profit growth aligned with operating profit)
  • 8+ new store openings are already fully locked in, with high achievement certainty; inbound sales are forecast to grow to 4.3 billion yen, targeting over 35% of total revenue from overseas customer sales (inbound + overseas direct + overseas wholesale)
  • Planned full-year dividend of 84 yen per share, with a payout ratio slightly exceeding 50%, enabled by lower capital expenditures after the new headquarters completion

• 5-Year Medium-Term Targets (2030 January period, organic growth only, excluding M&A)

  • Target revenue of 28 billion yen, 10%+ compound annual growth; target operating profit of 10 billion yen, 13%+ compound annual growth; target operating margin of 36%+ and ROE of 25%+
  • 50+ total new store openings across both brands; 3-5% annual average per-unit selling price growth
  • Target over 45% of total revenue from overseas customers by 2030, with a long-term target of over 50%
  • Capital allocation will balance debt repayment, growth investment (new stores, production capacity/quality improvement), and shareholder returns; active consideration of share buybacks to improve liquidity in addition to stable dividends
  • The company will actively explore M&A opportunities to drive additional growth beyond the organic plan

• Insiders trading incident: An outside part-time audit & supervisory board member purchased company stock without completing required pre-approval procedures while in possession of undisclosed material information
  • This incident forced the company to cancel its planned secondary share offering and withdraw its application to switch listing to the Tokyo Stock Exchange Prime Market, causing disruption to stakeholders
  • There is uncertainty around the timing of a future re-application for Prime Market listing, as the company is prioritizing governance and compliance improvements first

Q: Will Four Nines account for a larger share of future new store openings than Kaneko Glasses, and is there still remaining white space for domestic openings? Will the company continue opening outlet stores, and does this risk damaging brand value? / A: Kaneko Glasses already has an extensive domestic store footprint, so future new store openings will be led primarily by Four Nines, which still needs more stores to connect with end customers. Significant untapped expansion opportunities remain for Kaneko Glasses in targeted regions, and the company will continue pursuing openings there. After testing outlet openings at Gotemba and Tosu with pricing that maintains consistency with full-price stores, the company found no material brand value damage. Outlets have also become a high inbound customer touchpoint, so the company will continue selective outlet openings with aligned pricing.

Q: How does the company approach M&A, what targets is it seeking, and how does it avoid cannibalization? What is the current pricing level for Chinese stores, what is the expansion outlook for China and other Asian markets? / A: The company splits M&A into two categories: manufacturing-focused and sales/brand-focused. Manufacturing M&A is a high priority to strengthen the group's production base and supply chain, and the company will pursue opportunities aggressively even if there is some overlap with existing capacity. For brand M&A, the company will target targets that fit its existing positioning, though few suitable targets of appropriate size exist; deals are expected to be small so cannibalization is not a material concern. Selling prices in China remain more than double Japanese levels. While there is large long-term expansion potential in China, growth will be gradual: the company will first focus on building brand recognition in Shanghai and Hong Kong before expanding to other tier-1 Chinese cities and other Asian markets, as sales can only grow once brand awareness is established.

Q: What is the company's stance on the insiders trading incident, will it re-pursue listing on the TSE Prime Market? What is the confirmation that the trade was not motivated by profit? / A: The incident was very shocking to management, and an independent external investigation confirmed the trade was not motivated by profit; the incident was discovered after the director self-reported to the company. Management intends to re-challenge Prime Market listing, but the immediate priority is strengthening governance systems and improving compliance awareness for all employees and directors. No timeline can be provided at this stage, with re-listing to be pursued after improvements are completed.