7460.T

Overall Financial Performance Highlights

• Consolidated first half revenue was 39.54 billion yen, up 0.6% year-on-year (an increase of 230 million yen), with a small overall revenue gain as Material segment decline was fully offset by growth in the other three segments.
• All profit tiers saw significant year-on-year growth, driven by improved gross margin from unprofitable business streamlining and selling price adjustments; first half recurring profit reached 1.71 billion yen, up 630 million yen year-on-year, and interim net income per share increased 113 yen to 199.49 yen.
• Standalone second quarter revenue grew 2.4% year-on-year (a strong result for a quarter typically weighed down by low-margin summer products), and second quarter recurring profit grew 130% year-on-year, with recurring margin improving 2 points to 3.6%, marking the second consecutive year of margin growth.
• The balance sheet remains strong: total assets increased only 370 million yen despite higher inventory and fixed assets, equity ratio rose 1.8 points to 56.3%, maintaining a high level.

Corporate Value Improvement Initiatives

• Management identifies a PBR below 1x as a key issue to address from a capital efficiency perspective (the low PBR reflects accumulated net assets from over 130 years of operations and is not a sign of poor financial health).
• Two core initiatives to improve PBR: 1) deepen segment-level management, review unprofitable/low-efficiency businesses and transactions to prioritize profitability; 2) update dividend policy to a minimum 35% payout ratio starting this fiscal year, and introduce an interim dividend.
• Management targets ROE improvement via both profit and equity adjustments, and targets PER improvement via stronger IR activities including expanded disclosure and investor dialogue, to ultimately lift PBR.

Segment Strategic Priorities

• Material: Strengthen development and sales of textiles centered on the eco-friendly UNITO brand, drive production base reform incorporating end-user perspectives, and accelerate global strategy via overseas hubs.
• Lifestyle: Expand and streamline production infrastructure to cut costs, and increase planning capabilities to expand into new business areas.
• Apparel: deepen relationships with existing clients, pursue growth in new areas including global markets to expand revenue.
• Brand & Retail: strengthen organizational structure, improve domestic store efficiency and accelerate global expansion to drive further growth of the TATRAS brand.

Recent Operational Updates

• Opened 3 new direct TATRAS stores in Fukuoka, Hiroshima, and Sendai.
• Participated in the Premiere Vision Paris international textile trade show.
• Will consolidate dispersed Tokyo locations and move the Tokyo headquarters to Akasaka Trust Tower in Minato-ku, Tokyo in spring 2026, to improve employee creativity and productivity in preparation for future growth.
• Launched a recycling collaboration project with Aino University.

• Management maintains the original full year 2026 March fiscal year guidance unchanged, with targets of 90 billion yen in total revenue, 3.6 billion yen in operating profit, 3.8 billion yen in recurring profit (which would mark the second consecutive year of record high profit), and ROE of 6% or higher.
• First half revenue progress reached 43.9% of the full year target, which is slightly behind historical average progress due to the Material segment decline, but profit performance is well ahead of plan and group-wide margin improvement is progressing steadily, putting the full year target on track for achievement.
• Expected full year growth drivers include revenue contributions from newly opened TATRAS stores (3 new stores in the first half plus the 2024 Ginza flagship), expanded focus on high-priority growth areas in Apparel, and company-wide expansion of overseas sales that will support second half performance.

1. マテリアル (Material) Segment: Decreased revenue and decreased profit year-on-year. Sales of sustainable raw materials centered on organic cotton performed well amid the launch of the UNITO project, but existing core products in dust control and synthetic fibers saw prolonged weak performance from production and inventory adjustments. Revenue contribution proportion not explicitly stated, but the segment's decline was offset by growth in other segments. 2. ライフスタイル (Lifestyle) Segment: Increased revenue and increased profit year-on-year. Cosmetics and general merchandise sales were weak due to declining inbound demand and inventory adjustments at previously high-performing key customers, but the towel sub-segment delivered steady revenue and profit growth via selling price adjustments and strengthened e-commerce sales. 3. アパレル (Apparel) Segment: The largest segment by size, achieved increased revenue and increased profit year-on-year. Growth came from new customer development via trade show participation, expanded product lines for extreme heat, stronger relationships with clients and factories that reduced quality complaints and waste, and lower logistics costs. This segment is a high margin contributor to group profit growth. 4. ブランド・リテール (Brand & Retail) Segment: Increased revenue year-on-year, while remaining in a seasonal red ink position that matches its structural earnings profile (core brand TATRAS focuses on winter heavy outerwear, so first half is typically unprofitable). Growth came from expanded summer product lines and in-store customer acquisition initiatives that increased paying customer traffic. Higher rent from new store openings offset some of the benefit from revenue growth, and segment profit remained flat year-on-year.

• External market uncertainty remains due to U.S. trade policy shifts, elevated raw material prices, and exchange rate volatility.
• The Material segment faces prolonged headwinds from ongoing production and inventory adjustments for core synthetic fiber and dust control products, and the fabric sub-segment faced delayed fall season sales launch due to prolonged high temperatures.
• Higher personnel costs from base pay increases and rising rent create downward pressure on overall profit.

Q: What drove the large 3 percentage point improvement in gross margin from the prior year second quarter? / A: The main driver is a deliberate shift in Apparel segment business mix between two transaction types. Proper trading (where Yagi controls pricing and bears procurement risk) tends to see margin compression in high-cost environments, so the company rebalanced the mix to increase the share of finance trading (which handles collection and settlement for clients/suppliers under fixed terms), which preserves overall profitability. Additional improvements come from unprofitable business pruning, stronger client relationships, and a Material segment shift away from low-margin basic yarn toward higher-margin differentiated yarn, lifting overall group gross margin.

Q: What explains Yagi's stock price outperformance relative to the Nikkei Average and TOPIX? / A: Outperformance stems from two core factors: sustained strong earnings growth, and the company's expanded and more transparent IR activities. Starting this fiscal year, Yagi has begun publicly releasing full earnings call content, and increased proactive disclosure and investor dialogue, which has deepened investor understanding of Yagi's business strategy and earning power, leading to higher market valuation. The company will continue this approach to drive further corporate value improvement.

Q: First half revenue progress is 43.9%, which lags historical progress rates. What is the full year earnings outlook? / A: While first half progress is slightly slower than average, management still targets achievement of the original full year revenue and profit plan. Downside support for full year performance will come from expected revenue contributions from newly opened TATRAS stores (the 2024 Ginza flagship plus three new first half 2025 stores), expanded high-priority growth initiatives in the Apparel segment, and company-wide expansion of overseas sales.

Q: Why is Yagi introducing an interim dividend starting this fiscal year? / A: The new dividend policy (minimum 35% payout ratio plus interim dividend) was adopted to provide more flexible and stable returns to shareholders. Adding an interim dividend alongside the full year dividend clarifies management's commitment to shareholder returns, and incentivizes long-term shareholders to continue holding Yagi stock.