Kurashicom Inc. Q3 FY2025 earnings call

• Overall Financial Performance: Consolidated revenue reached 2.29 billion yen, up 26.3% YoY, near an all-time high. Operating income was 323 million yen, EBITDA was 341 million yen, with an EBITDA margin of 14.9%, achieving strong growth and solid profit simultaneously. The balance sheet remains healthy: net cash is 4.23 billion yen, equity is 5.17 billion yen, and equity ratio is 83.2%. Operating cash flow generated 240 million yen in the quarter, with 227 million yen in net cash accumulated.
• Cost Structure Improvement: Combined non-advertising cost (cost of goods sold + fixed costs) as a percentage of revenue has fallen over 10 percentage points, expanding room for marketing investment while still maintaining the target 15% EBITDA margin even with advertising spending near 13% of revenue. The improvement comes from two factors: 1) rising share of original products, especially lower-cost cosmetics, which reduced overall cost ratio; 2) near-zero net hiring this fiscal year while growing revenue ~20% YoY, lowering fixed cost ratio.
• Customer Acquisition Growth: Marketing investment focused on driving app downloads delivered strong results: new purchasers grew 46.2% YoY, total purchasers grew 29% YoY, returning purchasers grew 32.6% YoY, and new members grew 50.9% YoY. Total engagement accounts (SNS, app, YouTube followers) reached 1.6 million in the first 9 months of the fiscal year, compared to ~1 million full-year in prior periods. New member acquisition hit 78,000 in the first 9 months, matching full-year prior period levels, with total annual purchasers already exceeding last year's full-year count.
• Category Growth Strategy ("Bouquet of Categories Strategy"): Collaborations with major national brands delivered strong results this quarter: Noritake collaboration reissues sell out same-day, a linen jacket collaboration with Urban Research's Kagure brand sold out online in days and sold out at all Urban Research retail locations in one weekend, receiving positive feedback from the partner. Additional collaborations with domestic and global brands are in progress for future rollout.
• Content Milestones: The "北欧、暮らしの道具店" YouTube channel hit 1 million subscribers. foufou's Instagram follower count has nearly doubled since November 2024, driving rapid demand growth with new products selling out 100% within the month, though supply constraints are currently limiting sales growth due to the 6-month manufacturing lead time for seasonal product planning.

1. "北欧、暮らしの道具店" (Hokuou, Kurashino Doguten) Segment: Revenue of 2.236 billion yen, 27.4% year-over-year (YoY) growth, which is 97.6% of total consolidated revenue. EBITDA of 344 million yen, with an EBITDA margin of 15.4%. Purchaser count grew 29% YoY, driving revenue growth. 2. foufou Segment: Achieved its first YoY revenue growth since joining the group. Pop-up events have been well-attended, with continued growth expected from Q4 2025 onward. No further financial details were provided in the transcript.

• Full-year 2025 July term guidance was upward revised for the second time this fiscal year: full-year consolidated revenue is now projected at 8.42 billion yen, an increase of 220 million yen (2.7%) from the prior forecast. EBITDA is projected at 1.05 billion yen, a 26.5% increase from the prior forecast, with an EBITDA margin of 12.5%, up sharply from the initial 9% forecast at the start of the fiscal year.
• Only the "北欧、暮らしの道具店" segment had its forecast revised upward; the foufou segment forecast is maintained unchanged.
• Full-year free cash flow guidance was upward revised from 380 million yen to 550 million yen, a 45% increase.
• Annual dividend per share was upward revised 48% to 37 yen, aligned with the company's existing return policy.
• The company's 3-year medium-term growth strategy targets 100 billion yen in revenue and 15% EBITDA margin by the 2027 July term. The company is now proactively considering adjusting targets for next fiscal year onward, given better-than-expected current performance and improved cost structure that increases growth scalability, and will share updated targets at full-year earnings.
• Q4 2025 is a seasonal off-peak (transition season between spring/summer and fall/winter product cycles), so sequential (quarter-over-quarter) revenue decline is expected, though YoY growth remains on track; upside to the current Q4 forecast is possible, but the current forecast reflects the most probable outcome.

• Supply and inventory mismatch: Stronger-than-expected demand has led to frequent sell-outs of collaboration and new products within hours/days of launch, disappointing consumers who cannot purchase items. Production lead times mean that current orders were based on earlier lower demand forecasts, so mismatch between forecasted and actual demand is expected to improve gradually as updated orders enter the market, but over-ordering to avoid sell-outs creates inventory risk if demand does not meet projections.
• Low stock liquidity: Low share turnover and a thin order book make it difficult for investors to trade the stock, driven by low selling activity from existing shareholders (a positive reflection of investor confidence, but creates liquidity frictions). The company has no immediate need to raise new capital via new share issuance, and current share price levels do not justify stock split to improve accessibility, leaving near-term solutions limited.
• Seasonal sales volatility: Q2 and Q4 are seasonal transition periods that historically see weaker sales than Q1 and Q3, creating expected quarter-over-quarter volatility.
• foufou sales are currently constrained by supply: growing demand has outpaced existing inventory due to 6-month seasonal production lead times, limiting near-term revenue growth for the segment.

Q: After the full-year guidance upward revision, the implied Q4 2025 revenue is lower sequentially than Q3, and operating margin is projected at under 6%, which looks conservative given current strong sales. Why is this the case, and what explains the lower margin vs Q1? / A: Q4 is a seasonal off-peak (endaka) between seasonal product cycles, so it is always a weaker selling period than Q1 and Q3. The sequential decline is purely seasonal, and YoY growth remains on track. While there is some possibility of an upside surprise, the current forecast is the most probable outcome. The lower margin vs Q1 is because Q1 included one-off TV CM spending that lifted the advertising ratio, while Q4 has a normal advertising spend level, plus lower fixed costs in H1 vs H2 and some one-off costs in Q4, leading to the margin projection.

Q: The company's stock has low liquidity and low trading volume due to a thin order book, which makes it hard for individual investors to buy. Are there any plans to address this, such as a stock split? / A: Low liquidity is caused by very few existing shareholders selling their shares, which is a positive sign of investor confidence in the company. The company has no need to raise new capital via new share issuance to increase the floating supply, and the current share price is not so high that a stock split would meaningfully improve accessibility for new investors. If the share price rises 2-3x from current levels, a split would be more impactful. The company continues to discuss potential capital measures to improve liquidity, and will continue communicating results to attract more investor interest to gradually increase trading volume.

Q: After hitting 1 million YouTube subscribers, growth has slowed. Is there a strategic change, and what is the channel's growth strategy going forward? / A: The YouTube channel's core role is building brand awareness for new potential customers, supporting lower-cost paid app download advertising by pre-building familiarity and positive sentiment, rather than just chasing subscriber count. The company is currently focused on creating high-quality content rather than accelerating subscriber growth. Growth will naturally be uneven over time, but YouTube remains a high-impact part of the company's efficient marketing cycle, and the overall marketing program continues to perform very well.

Q: Many popular products sell out within half a day of launch, which disappoints customers. What is the company's approach to inventory management, and can you adjust launch timing to avoid this? / A: The recent rapid demand growth has created a gap between demand forecasts made at ordering time and current actual demand, which has led to insufficient inventory for some products. This gap is being addressed with updated ordering, and the situation should gradually improve. The company must remain cautious about over-ordering, because over-estimating demand leads to unwanted inventory risk. Adjusting launch timing is not a solution, because you cannot know actual demand until you launch, and changing timing per product is operationally complex. The company will continue improving demand forecasting and inventory planning to better match supply and demand going forward.