CUBE CO.,LTD. Q2 FY2025 earnings call

Core Operational Progress

• Domestic retail expansion: Completed the renovation of GINZA SIX and Daimaru Shinsaibashi stores in 2024. Opened the first permanent MARK & LONA outlet store at Gotemba Premium Outlets in June 2025 following successful test marketing via a pop-up store, and opened a second outlet at Rinku Premium Outlets in August 2025. The new outlets offer exclusive products and a premium brand experience aligned with MARK & LONA's positioning. Four more test marketing pop-ups (2 in Tokyo, 2 in Kansai) are planned for Q3 2025 to evaluate future permanent store openings.
• D2C and EC improvement: The official online store was renovated and reopened in August 2025 to improve UI/UX, with initial sales exceeding expectations. The renovation is expected to drive higher conversion, repeat purchase rates and lower operating costs going forward.
• China global expansion: Opened the first Chinese flagship store at Beijing China World Mall (a top-tier luxury mall in China) in June 2025, followed by two golf course shops in Shenzhen and Beijing by July 2025, for a total of 3 stores opened in the first half. The launch had strong foot traffic and positive market reception matching management's initial expectations.
• Southeast Asia expansion: Finalized the joint venture partner MYB, signed the JV establishment contract in July 2025, and plans to open a pop-up store in Indonesia in Q3, with ongoing preparation for a permanent store opening in Vietnam in the second half.
• South Korea business: The MARK & LONA brand has hit a market bottom earlier than the broader South Korean golf market. Management is strengthening partnership with the general agent to improve operational efficiency, focusing on joint branding, co-product development, and store portfolio optimization.
• Europe and North America: No large-scale investment is planned for 2025 and 2026 due to high market uncertainty and insufficient existing business infrastructure. Management will continue branding activities via existing wholesale and cross-border EC, and continue developing new partners for long-term market expansion.

Profit and Balance Sheet Updates

• Gross profit increased 70 million yen YoY, driven by D2C channel expansion (which improves gross margin) and the introduction of a new direct trade model that cuts costs by bypassing trading companies. Some original cost of goods sold has been reclassified to selling, general and administrative expenses (SG&A) as part of this change.
• SG&A increased due to upfront investment: Higher store labor, rent, and depreciation from store renovations, new pop-ups and new permanent stores, plus one-time increased travel and support costs for Chinese flagship store preparation. Advertising expenses decreased YoY due to improved operational efficiency centered on EC.
• Balance sheet: Current assets decreased due to capital contribution for the new China JV, while fixed assets increased due to higher affiliated company shares and new store assets. Cash and cash equivalents decreased significantly due to the ~0.3 billion yen JV investment and 0.5 billion yen transfer from ordinary to time deposits, both of which were planned in advance.

For the cumulative first half period (January-June 2025): Total revenue is 2.36 billion yen, up 2.9% YoY. Operating profit margin is 1.6%, down from 3.8% YoY. Overseas revenue accounts for 35.2% of total revenue, up 0.9 percentage points YoY. D2C (direct-to-consumer) revenue accounts for 60.7% of total revenue, up 1.5 percentage points YoY.

For the second quarter (April-June 2025): Total revenue is 1.223 billion yen, up 14.6% YoY, which is an all-time high for the company's Q2, exceeding the 2022 Q2 revenue of 1.141 billion yen during the COVID golf boom. Operating margin is 3.0%, down 1.0 percentage point YoY due to increased growth investment, but this represents a return to profit growth after a zero operating profit in Q1.

Geographic segments: Japan and South Korea account for over 90% of total revenue, remaining the company's two core markets. Domestic Japanese retail direct owned stores grew 15% YoY in Q2, driven by new openings and existing store improvements. Overseas wholesale continues to expand, centered on the ASEAN region. South Korean wholesale maintained roughly flat revenue YoY even as the South Korean golf market returned to pre-COVID levels, showing clear signs of having hit a market bottom. China just launched operations in Q2, with 3 new stores opened, and already reached the same revenue level as Taiwan.

Management maintained the original full-year 2025 earnings guidance. Key points:

• First half revenue progress is 45.4% of the full-year guidance, and operating profit progress is 17.8% of the full-year guidance. The low operating profit progress is expected, as the original plan is heavily weighted to the second half, with large high-margin orders scheduled for Q4.
• Management expects second half revenue to get contributions from new domestic store openings, and the start of scaled expansion in China and Southeast Asia.
• Management will thoroughly review SG&A across the business to control costs while expanding revenue, and target achieving the full-year earnings guidance as originally planned.

• The global golf market has returned to pre-COVID levels after the COVID-era boom, creating a challenging operating environment for domestic retail in Japan and for the South Korean market.
• Europe and North America have high market uncertainty, and the company does not have sufficient existing business infrastructure to support large-scale expansion in these regions in the near term.
• Large upfront investment for new store openings and global expansion has reduced near-term operating profit and cash holdings.

Q: What are the future plans for the Southeast Asian joint venture?

A: Cube plans to expand stores and wholesale business across Singapore, Indonesia, and Malaysia. It is currently preparing to open a pop-up store in Indonesia in Q3. Management views expanding the store network as critical to growing brand awareness, and will work with the local partner to open multiple stores quickly, while no specific target store count is disclosed at this time.

Q: What factors are driving the strong performance of domestic retail?

A: Strong growth comes from two core areas: proactive store development and targeted marketing. On the store side, Cube completed expansion and renovations of key flagship stores, rolled out pop-up stores across regions to acquire new customers, and successfully opened the first permanent outlet at Gotemba Premium Outlets as planned. On the marketing side, influencer-led SNS promotion and merchandising strategies covering both loyal customers and new buyers have driven sales gains.

Q: What is management's outlook for the Chinese business after its strong start?

A: The flagship launch in a top Beijing mall had strong opening day traffic, and the good initial performance meets management's expectations. Going forward, Cube will focus on expanding brand recognition via marketing, developing products tailored to local Chinese consumer demand, accelerating additional new store openings, and building out the e-commerce infrastructure to support an omnichannel business model in China.

Q: What strategies will Cube use to hit the full-year earnings guidance in the second half?

A: For revenue, new outlet openings, planned pop-ups, and stronger promotion for 2025 fall/winter new products will drive top-line growth. For gross margin, Cube will continue expanding the direct trade model and increasing the D2C revenue share to improve profitability. For SG&A, management will improve advertising efficiency and carry out thorough reviews of both large and small expense items to enforce company-wide cost control.