DOSHISHA CO.,LTD. Q2 FY2026 earnings call

Overall Financial Performance

• Against a backdrop of sustained yen depreciation and rising raw material prices, Doushisha delivered record-high interim revenue of 58.9 billion yen, +8.2% YoY, with record growth in both top-line and all profit metrics. Gross profit reached 18.0 billion yen, +14.6% YoY. Operating profit and ordinary profit both grew more than +30% YoY, driven by improved profitability and more efficient selling, general and administrative (SG&A) expenses.
• Gross margin improved 1.7 percentage points YoY to 30.6%, supported by new product launches, reduced excess inventory (a key part of cash flow management), and fewer discounted loss sales. SG&A expense ratio fell 1.0 percentage points YoY to 20.2%, with logistics cost ratio improving 0.4pp, personnel cost ratio improving 0.2pp, and other SG&A cost ratio improving 0.4pp.

Channel Performance

• Discount stores (D.S.) grew 17% YoY to 8.2 billion yen, G.M.S. grew 17% YoY to 4.1 billion yen. Home appliance mass retailers and amusement facility channels also saw strong growth, with the latter boosted by inbound demand. One-price and online retail channels posted steady performance, while supermarkets (S.M.) and watch/apparel specialty stores saw sales declines.

Growth Strategy (Development-focused Business Model)

• The model focuses on uncovering unmet consumer needs, creating new markets through products that combine functionality with novelty and humor. The hit Gorilla series, led by the Gorilla Hitotsukami calf care massager, has surpassed cumulative sales of 1 million units, driven by viral social media engagement from its accessible pricing, clear functionality, and playful branding. The company is expanding the line into daily goods with spin-off products, and will launch a new high-power Gorilla Hitohuki hairdryer in mid-November.

Growth Strategy (Wholesale Business Model)

• Gift business operates on two pillars: deepening existing business and developing new business. In the shrinking formal gift (Chugen/Seibo) market, the company provides one-stop fulfillment support for retailers covering product planning, store setup, ordering and shipping, and is expanding upstream to take on product processing work for suppliers starting from this year's year-end gift season. The company is capturing remaining profit as competitors exit the still-large 1+ trillion yen market. For new business, the company is building year-round revenue streams from branded sweets, casual gifts, and hometown tax-related gifts, leveraging existing infrastructure, product development, and social media marketing capabilities.
• Famous brand business uses a flexible portfolio strategy that integrates procurement, promotion, and in-store planning, tailoring brand assortments to store location and customer demographics. It is strengthening both offline and online channels to boost brand value, expanding the wearable product line, and progressing with rollout of global brands from the Movado Group in Japan.

Balance Sheet Strategy

• As of the end of October 2025, PBR exceeds 1.0x, up from 0.88x at the end of the prior fiscal year, while ROE of 7.5% already exceeds the cost of capital. The company aims to maintain ROE above the cost of capital and sustain PBR above 1.0x through the combined push of three core strategies and constructive engagement with investors. The company maintains a target dividend payout ratio of ~50%, plans a full-year dividend of 100 yen per share (50 yen interim, 50 yen year-end), marking 6 consecutive years of dividend increases.

ESG Strategy

• The company has established a formal sustainability policy, governance structure, identified 5 material issues, and set human resources strategy targets, and is advancing initiatives to contribute to a sustainable society, with details published on its corporate website.

1. Development-focused business model: 34.1 billion yen in revenue, +15.3% YoY; contributed 57.9% of total consolidated interim revenue, and was +1.62 billion yen (+5.0%) above the May 2025 forecast. Strong growth was led by home appliances, household goods, food/alcohol, and AV lighting product lines. 2. Wholesale business model: 23.5 billion yen in revenue, +1.3% YoY; contributed 39.9% of total consolidated interim revenue, and was -0.74 billion yen (-3.0%) below the May 2025 forecast. Within this segment, famous brand sales saw a minor -0.1% YoY decrease, while NB processed sales grew +2.0% YoY. 3. Other segment (non-core business and consolidated subsidiaries): -13.5% YoY revenue decrease, driven by lower sales at manufacturing and sales subsidiaries in China.

• The company upgraded its full-year FY2026 March term profit guidance following a stronger-than-expected interim performance, while keeping the full-year revenue target unchanged at 120.0 billion yen.
• Gross profit guidance was revised upward from 33.9 billion yen to 34.8 billion yen (108% of prior year actual). Operating profit guidance was raised from 9.8 billion yen to 10.8 billion yen (120% of prior year actual). Ordinary profit guidance was raised from 10.0 billion yen to 11.1 billion yen (118% of prior year actual).
• The mid-term management plan's quantitative target of 10.0 billion yen consolidated ordinary profit (for this FY2026, the plan's final year) was also revised upward to 11.1 billion yen, and the company remains focused on achieving this updated target.

The provided transcript does not contain explicit discussion of material operational, financial, or market risks, nor does it document any operational failures.

The provided transcript only contains management's prepared remarks and does not include a question and answer section.