7134.T

Overall Financial Performance

• Full year 2025 March fiscal year set all-time company records for total revenue and profit. Revenue grew 11.3% year-over-year to 13.981 billion yen, operating profit grew 8.3% year-over-year to 1.044 billion yen. Operating profit slightly missed company guidance, but net profit grew 22.9% year-over-year, beating guidance by 10.4%, driven by a reassessment of deferred tax asset recovery potential and tax credits from the wage increase promotion tax scheme. The company increased its year-end dividend by 3 yen to 32.5 yen per share, an upward revision from prior plans.
• Selling, general and administrative expenses were effectively controlled, with the SG&A rate falling to 32.4% from the prior year level despite higher personnel costs tied to revenue growth.

Long-Term Strategic Targets

• The company's long-term goal is to become the core service provider for mobility parts in a circular economy, with a target to reach 10 billion yen in operating profit and 100 billion yen in market capitalization between 2035 and 2040, a roughly 10x increase from current levels. To reach this goal, the company is focusing on three core strategic pillars:
  • Market Expansion: Continue domestic store expansion, accelerate international store expansion starting with the U.S. (the first U.S. store opened last year and is performing well, with a second store in preparation), and expand product assortment beyond cars, motorcycles, and bicycles to all wheeled goods to grow the total addressable used mobility parts market.
  • Circular Model Efficiency & Enhancement: Strengthen corporate purchasing to add a new high-volume source of inventory alongside existing consumer in-store purchasing, enhance the company's member app to improve user experience and add social features for customers to share their vehicles and parts, and add rental services for short-use goods leveraging the company's core reuse expertise.
  • Human Capital Strengthening: Invest heavily in talent to support growth, including initiatives to promote women in the workplace (a female employee feedback event was held last year and will be expanded this year), next-generation leadership training programs, and improved working environments for the growing share of foreign employees. This year, the company increased new graduate starting salaries from 220 thousand yen to 300 thousand yen (including implicit overtime pay) and revised the pay structure for early-career staff to attract and retain young talent.

Operational Updates

• The Upgarage app has surpassed 400 thousand downloads as of period end, with steady membership growth since launch. The studless tire rental service launched in 2022 is performing very well, and has been upgraded to full online reservation to improve operational efficiency. A cashless purchase and sales pilot is running at one Cycle's location to test operational efficiency improvements. Overseas e-commerce sales were down year-over-year as a strategic choice: the company deprioritized cross-border online sales to prevent high-quality inventory from permanently leaving Japan's circular supply chain, and prioritized local in-store buy-resale models which are the company's core profitable competency. The first U.S. store is performing well, with 80% of inventory sourced locally.

• For the 2026 March fiscal year, the company guides 10.9% year-over-year revenue growth to 15.5 billion yen, and 25.9% year-over-year operating profit growth to 1.315 billion yen, targeting significant profit expansion.
• Planned store openings: 5 new direct Upgarage stores, 10 new FC Upgarage stores, 5 new Cycle's bicycle stores, and 1 new U.S. store (planned to open before the end of the calendar year, currently in final contract negotiations). The company will target faster decision-making on site selection to avoid the opening delays that caused missed targets last year.
• The company will raise franchise royalty rates from 3% to 3.8% and increase franchise fees by 10% starting in the second half of the fiscal year, to fund required additional system investment for future growth.
• The company targets a full year dividend of 36.5 yen per share, representing a 4 yen increase, with a payout ratio of 33.9%. The company has a medium-term target to gradually increase the payout ratio to 40% by the 2029 March fiscal year, and has delivered consecutive dividend increases since listing, which it plans to continue.
• The company plans to expand product assortment to include more mobility parts, and expand handling of bicycles and baby strollers, while expanding add-on services like tire warranty (offering insurance-backed warranty for used tires matching new tire service standards) to improve profit margins.

1. Reuse Business Segment: This segment focuses on in-store purchase and resale of used mobility parts centered on Upgarage branded locations. Revenue was driven by growing customer foot traffic from increased consumer demand for affordable reuse goods amid rising inflation, and a recovery in studless tire sales following a return to normal winter weather after a previous warm winter. Direct operated stores performed strongly, with existing same-store sales growth and rising average transaction values. Existing franchise (FC) locations also delivered strong same-store sales at 106.3% of the prior year level. However, new FC store openings missed the target of 10 locations, only hitting 5 openings, leading to lower-than-planned revenue from fixtures and construction for new locations. Overall store openings for the segment were 3 new direct Upgarage stores, 5 new FC Upgarage stores, and 3 new Cycle's (bicycle reuse) stores. 2. Distribution Wholesale Business Segment: This segment includes new product wholesale and the Nexlink web-based wholesale platform, and delivered strong double-digit revenue and profit growth. Both the Tire Distribution Center and the Nexlink platform saw significant revenue increases, with 13 new Tire Distribution Center locations opened. The segment's full year result was solid, though Q4 revenue saw a minor decline due to a large one-off bulk tire wholesale transaction in the prior year Q4 that created a tough comparable base. Nexlink was the primary driver of growth, with increased sales from both new member partners and existing partners expanding their order volume, pushing up average revenue per partner. Revenue contribution for each segment was not explicitly broken out in absolute terms in the transcript, while overall consolidated company revenue for the full year was 13.981 billion yen, with operating profit of 1.044 billion yen.

• New store opening delays: Last year, the company missed new FC and direct store opening targets due to delays from waiting for existing tenants to vacate second-hand properties, even when suitable sites were identified. This led to operating profit coming in slightly below plan.
• U.S. tariff policy risk: Following renewed trade policy changes under the new U.S. administration, the company notes that risk is limited because 80% of inventory for the U.S. store is sourced locally, the company does not plan to expand cross-border e-commerce sales, and any applicable tariffs on imported goods are passed through to end consumers. There is currently no expected material impact on company earnings.

No full question and answer section was included in the provided transcript excerpt.