CUBE CO.,LTD. Q4 FY2025 earnings call

Core Financial Summary for FY2025 (ended December 2025)

• Total revenue was 4.863 billion yen, roughly flat YoY, coming in 6.5% below the prior forecast.
• Gross profit increased 4.8% YoY, driven by supply chain reforms centered on direct trade and a higher D2C revenue mix.
• Operating profit declined YoY due to increased upfront growth investment, with operating margin falling from 3.4% to 1.2%, and net profit reaching 34 million yen.
• Key metrics: Overseas revenue share was 34.4% (down 3.1 percentage points YoY), D2C revenue share was 61.9% (up 4.1 percentage points YoY), and e-commerce penetration was 19.0% (down 2.6 percentage points YoY).
• Balance Sheet: Current assets decreased due to capital contribution for the China joint venture, while fixed assets increased from higher affiliated company shareholdings and new store assets. Equity ratio remained healthy at 87.7%.
• Cash Flow: Cash and cash equivalents decreased significantly due to 300 million yen in spending for the China joint venture and a reallocation of cash from demand deposits to time deposits, all of which was in line with plan.

FY2026 Core Strategic Priorities

• Global Strategy (core growth pillar)
  • Concentrate management resources on China as the primary growth driver, expanding customer touchpoints via strengthened digital marketing and active store development to build brand penetration in the Chinese market.
  • Expand specialty store openings centered on Taiwan, Indonesia, and Vietnam in the priority East Asia/ASEAN region to improve brand awareness and boost sales.
  • Shift strategy in South Korea from revenue expansion to profitability improvement amid post-COVID market contraction, implementing bold structural reform to boost brand value, including optimizing store footprint, focusing investment on high-profit locations, adjusting inventory, and expanding collaborative product development and marketing between Japan and South Korea.
• D2C Strategy
  • Grow global brand awareness via SNS, and strengthen OMO (Online Merges with Offline) initiatives that seamlessly integrate in-store personal experiences and e-commerce convenience to deliver consistent customer experience regardless of channel, increasing fan lifetime value and driving sustainable growth.
  • Focus on improving customer experience in physical stores, which serve as key touchpoints to experience the brand's identity. For e-commerce, pursue overall marketing optimization and roll out content-led agile initiatives to redefine digital customer experience and rebuild e-commerce-specific value.
  • For FY2025 Domestic Retail: opened 11 pop-up stores and 2 new permanent stores to acquire new customers and boost awareness. For FY2026: will continue operating 5 existing pop-ups, open ~2 new permanent stores, and complete expansion and renovation of key stores in the Kansai region.
  • For e-commerce: completed platform renewal and UI/UX improvement in FY2025. For FY2026, will strengthen app-linked marketing, leverage generative AI for video production, expand global SNS distribution via ambassador content, and continue advancing operational sophistication.
• Supply Chain and Profit Structure Reform
  • Aggressively drive the shift from traditional consignment production via trading companies to a direct trade model, strengthen in-house led production management, cut intermediate costs, consolidate suppliers, reduce cost of goods sold, and combine these changes with increased product added value to drive fundamental profit structure reform and improve gross margin.
  • Overhaul the logistics network including utilization of bonded warehouses in parallel with building direct trade infrastructure, to simultaneously reduce domestic logistics costs and improve operational efficiency and maximize profitability.
  • For B2B business: will strengthen relationships with existing domestic wholesale partners, develop new wholesale clients via expanded product offerings, capture growth in China, implement market-aligned strategy in South Korea, and expand sales channels in ASEAN.

Global Expansion Updates

• China: Opened 3 stores including the flagship in FY2025, with a 4th store scheduled to open at Beijing CBD International Golf Club in March 2026. This opening is operated via the joint venture, so no direct investment expense is incurred by Cube standalone.
• Taiwan: Has continued steady growth after opening 2 stores in FY2024, and is conducting site research for new openings in FY2026.
• ASEAN: Opened the first permanent store in Vietnam in FY2025, is in active negotiations for a second store, is accelerating activities for the first specialty store opening in Indonesia, and is pursuing partnerships in untapped markets. A 2025 collaboration event with popular local group VVUP in Jakarta drew 5,000 attendees over 2 days and successfully expanded local brand awareness.

1. Domestic Retail: Full-year direct-to-consumer (D2C) directly operated store revenue grew 18% year-over-year (YoY). In Q4 FY2025, Domestic Retail revenue reached 654 million yen, an increase of 113 million yen YoY, representing 52% of total Q4 revenue. Japan's overall revenue contribution increased 3.0 percentage points YoY amid a challenging market. For FY2026, Domestic Retail is projected to grow 20.7% YoY driven by same-store growth and full-year contribution from prior-year new store openings.
2. China: Business launched in FY2025, with 3 stores (including the Beijing flagship store) opened by the end of the period. China is in a growth phase, with continued active store development planned for FY2026. China is positioned as the core growth driver for the firm's global strategy.
3. South Korea: Wholesale revenue declined YoY due to order cancellations from product delivery delays and product recalls. South Korea's revenue contribution decreased 3.3 percentage points YoY. For FY2026, South Korea wholesale is projected to decline 32.1% YoY as the business undertakes structural reform focused on profitability rather than revenue growth.
4. Overseas Wholesale (Southeast Asia): Revenue saw a temporary decline due to a partner change following the establishment of a new joint venture, but this decline was fully offset by growth in the Taiwan business. Taiwan has continued steady growth after opening 2 stores in FY2024.
5. ASEAN: Opened the first permanent store in Vietnam in FY2025, and advanced local brand awareness activities including a high-attendance collaboration event in Jakarta, Indonesia.

• FY2026 (ending December 2026) Full-Year Guidance: Management targets 2.1% YoY revenue growth to 4.965 billion yen, 8.1% YoY gross profit growth to 3.179 billion yen, 93.8% YoY operating profit growth to 115 million yen, 87.5% YoY ordinary profit growth to 120 million yen, and 89.4% YoY net profit growth to 66 million yen, projecting an operating margin of 2.3% and delivering net revenue and net profit growth.
• D2C revenue share is projected to increase 8.9 percentage points YoY to 70.7%, with continued focus on this metric as a key indicator of sustainable growth driven by expanded touchpoints with loyal customers. Gross profit margin is targeted to increase 3.5 percentage points YoY, driven by the higher-margin D2C mix and supply chain reforms.
• Medium-Term Growth Target Adjustments:
  • Revenue compound annual growth rate (CAGR) target revised down from 15%+ to 7%+, a change made to prioritize sustainable growth that does not erode brand value.
  • Retains existing targets of 40%+ CAGR for operating profit, 10%+ operating margin, and 8%+ ROE.
  • Adds a new target of 65%+ gross profit margin, to be achieved via accelerated supply chain reform.
• Medium-Term Strategic Guidance: After a period of upfront investment in new store openings, global expansion, and supply chain building, the firm will shift to a phase of harvesting returns on past investment from FY2026 onward, focusing on strengthening the profit base via global strategy and supply chain-centered structural reform.

• The overall global golf apparel market has stabilized to pre-COVID levels after the COVID-era boom, creating a challenging operating environment, particularly in South Korea where market size has contracted post-COVID.
• In FY2025, Cube experienced unexpected product recalls in South Korea that caused order cancellations and delayed revenue recognition, leading to full-year revenue falling 6.5% short of the initial forecast. E-commerce revenue also declined more than expected due to a combination of planned in-store expansion investment and unanticipated bad weather.
• The Chinese business launch was slightly behind the initial schedule in FY2025, due to extended time needed to analyze and align domestic inbound Chinese customer data and local Chinese in-store customer data.
• South Korea's current store and inventory levels were planned based on the COVID-era boom market, and require structural adjustment to align with the current smaller market size.

Q: What is the progress of the China business?

A: In FY2025, progress was broadly in line with plan, with 3 stores including the flagship opened, though the rollout is slightly behind the initial schedule due to time spent analyzing Chinese inbound and local customer data. A 4th store opening at a Beijing golf course is confirmed for March 2026, and preparations are ongoing. Going forward, Cube will accelerate store development based on completed customer data analysis, and also advance strengthened digital marketing as well as localized products and merchandising that align with Chinese customer preferences.

Q: What is the current status and outlook for the South Korea business?

A: The South Korean golf market is returning to pre-COVID conditions and remains challenging, but partner sales have stopped declining in the current environment. However, inventory and store count planned for the boom market need to be rationalized. Cube already has strong penetration among female customers in South Korea, with more stores than in Japan, and will leverage South Korea's unique strengths while strengthening communication between Japan and South Korea to jointly implement structural reform.

Q: For FY2025 results, what went according to plan and what was unexpected?

A: What went according to plan was the advancement of upfront growth investment, including retail store openings and China business expansion, as well as progress on direct trade system implementation for supply chain reform. What was unexpected: the decline in e-commerce revenue was larger than anticipated, as unseasonable weather compounded the expected impact of in-store expansion, and cost cutting could not fully offset the revenue decline. Additionally, product recalls in both domestic and international markets in Q4 caused unexpected delays and order cancellations that prevented Cube from recognizing planned revenue.

Q: What is the background and rationale for the FY2026 revenue and profit growth guidance?

A: Cube targets steady expansion via advancing global strategy and domestic store development: accelerating China business expansion globally, and continuing planned development of the high-performing domestic retail business. On the profit side, supply chain reform and the shift to direct trade will compress cost of goods sold and continue driving gross margin improvement. For domestic selling, general and administrative expenses (SG&A), Cube will pursue aggressive upfront growth investment while improving cost efficiency for personnel and advertising via digitalization, to properly control the SG&A to revenue ratio and achieve operating profit growth.

Q: What are the specific initiatives to improve gross profit margin in FY2026?

A: First, Cube will continue growing the relatively high-margin domestic retail business, increasing the D2C revenue share to approximately 70%, which directly lifts the overall gross margin. Second, Cube will continue advancing the shift to direct trade to further increase the direct trade penetration rate. In total, gross profit margin is targeted to increase 3.5 percentage points YoY.

Q: Can the strong double-digit growth of domestic retail continue, and how does Cube view the current domestic market environment?

A: The domestic golf apparel market has stabilized after the COVID boom and has been roughly flat from 2024 to 2025. Amid this environment, Cube's market share increased 3.1 percentage points YoY in FY2025, with steady share growth driven by rising direct store sales. This growth is supported by strong demand from wealthy golfers for Cube's unique luxury brand positioning. Going forward, Cube will continue to deliver products that meet the expectations of enthusiastic loyal customers, and pursue carefully selected, disciplined new store openings to continue driving growth.