Kurashicom Inc. Q4 FY2025 earnings call

Overall Financial Results

• 19th consecutive year of revenue and profit growth; consolidated revenue hit 8.49 billion yen, up 21.1% YoY, beating the initial forecast of 14.1% growth.
• Gross margin improved 1.1pp to 44.9% from cost improvements in product and logistics expenses.
• EBITDA reached 1.16 billion yen, up 1.3% YoY, hitting a new record despite planned increases in marketing investment, driven by fixed cost control across other categories.
• Free cash flow exceeded 700 million yen, and the balance sheet remains healthy with an equity ratio of 84.4%.
• Full-year dividend per share was increased to 48 yen from the initial forecast of 20 yen, a 2.8x increase from the prior year's 17 yen, driven by stronger-than-expected FCF generation.

Marketing and Customer Growth

• Expanded marketing investment focused on driving mobile app downloads, resulting in 26.8% YoY growth in engagement accounts, the strongest growth in recent history.
• Addressed the prior period slowdown in new customer acquisition: new customer growth hit 25.6% YoY in Q4 FY2025, with concurrent growth in repeat and reactivated customers. Total annual buyers grew 19.1% YoY, with both buyer count and average order value growing simultaneously.

Long-Term MC2 (Multi-Category, Multi-Channel) Growth Strategy

• Multi-category expansion (called "Bouquet of Categories Strategy"): Started as a vintage Nordic tableware store, gradually expanded into apparel, cosmetics, bedding, furniture, with over half of revenue now coming from original products. Categories are tied together by a consistent Nordic lifestyle brand worldview, avoiding the inefficiency of scattered multi-brand expansion, and has also added B2B creative/solution services.
• Multi-channel customer touchpoints: Surpassed 500 million app downloads, 10 million total engagement accounts, 1 million YouTube subscribers, and 1.67 million Instagram followers. Multiple diversified channels reduce reliance on any single platform's algorithm changes, creating a stable growth base.
• Multi-generation customer base: No fixed age target; the brand's worldview appeals to all generations, with the share of customers across age groups approaching general population demographics, expanding the addressable customer base. This strategy continuously expands TAM, SAM and SOM, allowing Classicom to avoid the common "30 billion yen wall" and "100 billion yen wall" that many D2C brands face.

foufou Turnaround Progress

• After 2 years of inventory restructuring, reduced inventory value by ~30% YoY at FY2025 end without forced discounting or disposal, creating space for aggressive growth.
• Improved inventory turnover: Q4 FY2025 new product monthly inventory turnover hit 85.2%, up from over 50% in Q3, with most new products selling out within a month.
• Instagram followers grew 2.4x to 193,000 in 12 months, and a new large flagship store will open in Sendagaya in fall 2025 to add a new sales channel and drive inventory turnover.

1. 「Hokuiku, Kurashi no Doguten」 (Northern European Lifestyle Goods Store): Revenue of 8.269 billion yen, a 23.8% year-over-year increase, accounting for approximately 97.4% of total consolidated revenue. EBITDA exceeded the prior year level and beat internal performance forecasts, with strong demand continuing through Q4. 2. 「foufou»: Revenue declined year-over-year, with lower profits, due to soft demand starting from the prior year H2 and controlled inventory ordering that led to missed sales. It missed internal performance forecasts slightly, but recent demand has recovered, though inventory preparation was not completed in time for FY2025.

• For FY2026 (ending July 2026), Classicom guides consolidated revenue of 10.2 billion yen, EBITDA of 1.53 billion yen, with an EBITDA margin of 15%. This brings forward the original mid-term target of 100 billion yen revenue and 15% EBITDA margin (previously targeted for FY2027) by one year, with 20% YoY revenue growth maintained.
• EBITDA margin is expected to recover from 13.7% in FY2025 to 15%, with net profit growth exceeding 30% YoY.
• Segment guidance: 「Hokuiku, Kurashi no Doguten」 is expected to deliver nearly 20% YoY revenue growth with significant EBITDA growth driven by margin improvement; 「foufou」 targets 2x revenue growth to 460 million yen with positive profit.
• Total shareholder return is targeted at 525 million yen (the full 50% of projected FY2026 FCF of 1.05 billion yen), up from 353 million yen in FY2025. The initial dividend per share forecast is maintained at 48 yen (flat YoY), but there is upside for additional dividend or share repurchase if performance exceeds expectations, depending on market conditions and unexpected growth investment opportunities.

• Achievement of the accelerated mid-term target depends on continued repeatability of marketing investment results, and changes to the business environment or core marketing methods could make the target harder to achieve.
• While foufou's 2x revenue growth target is seen as reasonable after inventory restructuring, it remains a challenging goal, and execution risks remain around demand generation and inventory management.
• Dividend levels are subject to change based on unexpected growth investment opportunities that would reduce FCF available for return; if share repurchases are used, that would also reduce the amount available for dividends.
• Common D2C industry growth walls (the 100 billion yen revenue wall) could still impact growth in the long term, even though the current MC2 strategy has avoided them to date.

Q: What is Classicom's view on its historical growth pace and future growth prospects, compared to 2022 when revenue was 5.1 billion yen? / A: If FY2026 hits 10.2 billion yen, revenue will have doubled in 4 years, matching the 4-year doubling pace from 2019 to 2022. Over a 10-year horizon, revenue has grown 10x. Management does not see a near-term risk of growth slowdown or stall, even though macro uncertainty is increasing, and does not believe the business is at a stage where long-term growth should be questioned.

Q: Why does the multi-category multi-channel model work for Classicom, when many other firms attempt this structure? What is the key differentiator? / A: Most firms implement multi-category multi-channel via a multi-brand portfolio through M&A or new launches, which requires large amounts of capital and raises management costs, leading to lower efficiency as scale grows. Classicom's key advantage is implementing the entire strategy under a single unified brand with a consistent worldview, matching the successful large-scale model of legacy catalog retailers and Muji, while maintaining efficiency even as scale grows.

Q: What is the current share of apparel revenue, and what is the outlook for the category? / A: Apparel (including apparel accessories) surpassed 70% of total revenue in FY2025, and has been a core growth driver for the firm. The category will remain a key focus going forward, with new initiatives like collaborations with large brands to attract new customer segments. The share may shift slightly going forward as other categories like home goods and furniture grow, but the firm prioritizes meeting customer demand over targeting a specific fixed share.

Q: What is management's stance on share repurchases, given the noted upside for additional capital return beyond the base 48 yen dividend? / A: The core stance on share repurchases has not changed: management still believes it is not necessarily beneficial for either the firm or shareholders given current trading liquidity conditions. However, management keeps the option open depending on future market conditions and business needs, and maintains flexibility on capital return, hence the conservative initial dividend forecast that leaves room for additional return.