7119.T

• Market Environment

  • Seniors (aged 50+) hold over 82% of Japan's total financial assets, and this concentration is increasing; senior household consumption expenditure has recovered much faster than general households, growing 6.5% vs 0.5% for overall households, creating a positive market backdrop for the firm's senior-focused strategy.
  • The overall magazine market is shrinking, but Harumeku magazine has maintained its circulation and leading position. The overall e-commerce/retail mail-order market continues growing at a high single-digit rate, but generalist e-commerce/mail-order is struggling while niche specialist mail-order is growing at an 11% CAGR.

• Core Company Strengths

  • A base of 1.37 million highly engaged fans of the Harumeku brand.
  • In-house product and service development capabilities focused on senior customer needs.
  • Multi-channel customer touchpoints spanning analog, digital and physical retail, suited to the mixed analog-digital usage patterns of the current senior population.

• Mid-term Strategic Goals

  • Target annual revenue growth of 2.5 billion yen, reaching 35.0 billion yen this fiscal year, 37.5 billion yen next, and 40.0 billion yen in FY2028; target operating profit of 15.0 billion yen this fiscal year, rising to 25.0 billion yen in FY2028. Target ROE of 15% by FY2028, maintain a 35% target payout ratio, and raise annual dividend per share from 20 yen last year to 30 yen this year, 40 yen next, and 50 yen in FY2028.
  • Age-segmented strategy: Maintain stable growth for the core 65+ active senior segment while gradually increasing digital penetration, and pursue proactive pre-investment to grow the smaller 50-64 pre-senior segment.

• Segment-specific Operational Updates

  • Information Content: Maintain magazine circulation as a core fan acquisition tool, reinvest magazine profits into growing new business lines. Continue pre-investment in the digital HALMEK up service for pre-seniors, expanding mobile-friendly video content while refining the product ahead of full-scale customer acquisition.
  • Merchandising: Shifting from a generalist to a specialist mail-order model to reverse slowing growth; expand in-store locations in department stores to acquire new customers and build brand loyalty, growing from 18 to 22 locations as of the quarter. Cut low-margin low-price low-value-added products, and expand high-price high-value-added products to grow average order value (AOV), leveraging the strong purchasing power of the firm's senior customer base and the closure of many local department stores that previously offered high-quality premium goods. Initial trials of 150,000 yen premium products have received very strong customer demand.
  • Kotose Merchandising: Resumed profitability-focused customer acquisition advertising after resolving prior inventory sell-out issues, targeting full-year breakeven in the current fiscal year dependent on Q3 results, and will increase group synergy with the wider Harumeku business.
  • Community Business: Expanding high-value experience/consumption services to the general public (previously only offered to existing customers); launched the new "Harumeku events" website to open event sign-ups to external customers, and expanded high-ticket premium events, which have already sold out completely in initial trials.
  • Corporate Business: Steady growth via cross-platform integrated marketing that combines digital and analog channels, supporting senior-focused client marketing with offerings like LINE-based digital support.
  • M&A: M&A is a key strategic priority; the firm is actively targeting two types of targets: companies that add new product categories for Harumeku's existing customer base, and companies that bring new senior customer segments to sell Harumeku's existing products to. Multiple targets are currently in due diligence, though no deals have been announced yet.

• Management maintained the full-year FY2026 (ending March 2026) consolidated guidance unchanged from prior estimates: full-year revenue target of 35.0 billion yen, full-year operating profit target of 15.0 billion yen. The dividend guidance is also maintained at 30 yen full-year dividend per share (15 yen interim, 15 yen final), with an expected payout ratio of 36.7% (35% target), and an expected dividend yield of up to 6.5% including shareholder benefits.
• After Q2 (first half) results came in 1.3% below revenue guidance at 16.779 billion yen but beat operating profit guidance at 689 million yen vs a 650 million yen target, management maintained the guidance for the second half of 18.0 billion yen revenue and 850 million yen operating profit.
• Management noted that full-year results are heavily seasonal, with the majority of annual revenue and profit generated in Q3 (November-December), and stated that the full-year target remains achievable, though the final outcome will depend on Q3 holiday season sales performance.

1. Information Content Business (Magazine): Revenue increased by 28 million yen year-over-year, profit increased by 18 million yen year-over-year, maintained circulation and grew profit on the back of price increase effects, holding the top domestic position for its target segment. 2. Information Content Business (Web): Still in pre-launch refinement phase, no material revenue contribution; expanding video streaming services for pre-senior audiences with ongoing product improvements. 3. Harumeku Merchandising Business: Net revenue increased by 220 million yen year-over-year, but overall profit decreased year-over-year. The underperformance of the large fashion category cut profit by 110 million yen, and new store opening costs further weighed on earnings; innerwear and cosmetics categories delivered strong growth. Active customers increased by 40,000 year-over-year. 4. Kotose Merchandising Business: Revenue decreased by 640 million yen year-over-year due to reduced customer acquisition advertising investment, but narrowed operating losses by 40 million yen year-over-year, improving profitability. Active customers decreased by 90,000 year-over-year. 5. Community Business: No full segment profit/loss disclosed; launched high-ticket premium events, which sold out well, and expanded access to general customers via a new dedicated website. 6. Corporate Business: Steady growth in both revenue and profit year-over-year, delivering consistent positive contributions. 7. Pre-investment projects: Narrowed losses by 50 million yen year-over-year.

• The company's overall consolidated revenue growth has been on a gradual downward trend, and reversing this trend depends on the successful execution of its merchandising transformation, M&A execution, community business growth, and magazine circulation growth.
• Harumeku merchandising has seen weak performance in its largest category (fashion), which dragged segment profit down by 110 million yen in the first half, creating a key near-term profitability headwind.
• Kotose merchandising has seen large customer declines from reduced advertising investment, which pulled overall group active customers down from 1.39 million to 1.34 million year-over-year, and the segment still remains unprofitable, with full-year breakeven dependent on strong Q3 results.
• The overall magazine market is in a long-term structural decline, which creates ongoing pressure to maintain circulation over time.
• The shift from generalist to specialist mail-order carries execution risk, including potential reduction in cross-category impulse purchases, and requires major changes to product development and catalog strategy to be successful.

Q: How will the shift from generalist to specialist mail-order change how the company produces catalogs? / A: Management confirms that current generalist catalogs, which operate like a general merchandising store, will be reformatted. The company plans to split catalogs into separate category-specific editions that each highlight the distinct brand world for each product category, such as a standalone catalog for Harumeku fashion. While catalogs still make up a large share of current sales, the company is developing channel-specific product offerings for EC and physical stores as well, and will gradually roll out this format shift over time.

Q: What is the company's strategy for growing overall customer count, and which segment will drive this growth? / A: The base goal for magazine is to maintain current circulation by replacing departing readers with new subscriptions, but management believes there is room to grow magazine readership: only about half of the target senior audience is aware of the Harumeku magazine, so new outreach to non-awareness audiences can grow readers. The company will also work to increase the conversion rate of magazine readers to paying mail-order customers. For non-magazine customer acquisition, the company will focus on profitability, prioritizing channels and products with higher repeat purchase conversion rates instead of chasing low-quality new customers.

Q: Will shifting to specialist mail-order reduce cross-category impulse purchases, and how will management address this risk? / A: Management acknowledges that generalist catalogs do drive more unplanned cross-category purchases, but internal data shows most customers already concentrate their purchases in one or a few specific categories, so specialization will cut unnecessary marketing costs. To retain cross-category sales, the company will run targeted cross-promotions: for example, it will promote cosmetics to existing fashion customers, using targeted outreach to convert existing customers to new categories without the inefficiency of a generalist catalog. This approach will allow efficient customer growth without reducing overall purchase breadth.

Q: What caused the weak fashion performance in the first half, and what are the corrective actions? / A: Two core factors drove the weakness. First, the company added more low-price entry products to acquire new fashion customers, but these new customers did not convert to repeat purchases of the company's regular higher-priced products, creating a price mismatch that wasted marketing spend. Second, the company's fashion offering lacked a clear brand identity and distinct product identity: while product quality was good, the items were too generic to stand out to customers. This is a core medium-term issue that will be addressed by building clearer, more differentiated product concepts aligned with specialist brand strategy.

Q: Is the full-year earnings guidance still achievable after the first half revenue miss? / A: Management states that the full-year target remains fully achievable, as most of the company's annual sales and profit are generated in the Q3 November-December holiday season, when the company runs its major annual sales events. The final outcome depends on the performance of this key selling period, but the target is not impossible to hit, and no changes to guidance are needed at this stage.