UORIKI CO.,LTD. Q2 FY2026 earnings call

• External Environment & Consumer Trends

  • Ongoing seafood price inflation driven by poor catches of wild fish, higher feed costs for farmed fish, and climate-related disruptions (red tide, oyster mortality), with price increases expected to continue. Consumer inflation has strengthened savings behavior, leading to lower store foot traffic (96.8% of prior year for April-October 2025) but successful price pass-through pushed average customer spending to 105.3% of prior year. Higher sales are now dependent on increasing items purchased per customer, as items per customer fell to 98.6% of prior year.
  • Urban department store and terminal station stores are seeing growing sales driven by wage increases and higher consumer purchasing power, while suburban supermarket and small stores face declining sales due to price-focused consumer behavior and new competition from multi-format supermarket competitors.

• Core Strategic Initiatives

  • Merchandising & Purchasing: Target competitive purchase prices via strategic negotiation, activate buyer operations by adding dedicated buyers to strengthen core products with manufacturer partnerships, and develop private brand products to secure priority access to high-quality seafood.
  • Sales & Operations: Prioritize friendly customer service to build customer loyalty, invest in employee technical training (group training, on-the-job training) to ensure food safety, and tailor product assortments to local customer needs with a focus on high-value items (sushi, prepared side dishes, sashimi) to become the top local seafood retailer.
  • Store Development: Aim for profitable growth and a sustainable store network. Continue the existing scrap-and-build strategy, pursue new developer relationships to expand site opportunities, and test a new casual seafood dining format (海鮮食堂 とと市場). The first test location adjacent to an existing Uoriki store in Akiruno, Tokyo will open in December 2025, offering affordable seafood set meals to build long-term customer base among younger consumers.

• Post-Acquisition Integration: 50-store Mogami Suisan (Kyushu/Chugoku region) has delivered strong performance since acquisition, with the new Gia Outlet Kitakyushu location (opened July 2025, with combined seafood retail and dining) tracking to become one of the chain's top-performing stores. Integration of internal control reforms across the entire Uoriki group is ongoing. Mogami Suisan benefits from improved purchasing stability via combined access to Toyosu and Fukuoka markets.

• Human Resources: Hiring for sales operations is on track, with a balanced mix of new graduates and mid-career hires, and strong inflow of experienced hires from competitors due to past wage increases and work hour reforms. The company is building a comprehensive training program from new hires to management, including fieldwork visits to producers and processors to build practical product knowledge, and is advancing initiatives for gender diversity and improved work environment.

• Wholesale & International Expansion: Domestic wholesale is facing headwinds from consumer savings behavior and high seafood prices. For the second half of the year, the company will target growth via promotional events for major supermarket clients. In Thailand, the CP-Uoriki joint venture remains strong, with 25 stores open and a target of 30 stores by end of 2025. The venture recently launched a new hub-and-spoke supply model for 7-Eleven Thailand, with a central hub kitchen producing sushi/sashimi for 21 retail locations, and plans to expand this model.

• Internal Control Remediation: The company has launched a business reform project led by an external expert to address previously identified material weaknesses in internal control over financial reporting, stemming from errors in the FY2024 consolidated financial statements. Key actions include: recruiting an experienced external CFO and head of accounting (currently in candidate interviews), optimizing the accounting department organization via hiring additional skilled managers and training, and updating formal accounting closing process manuals with the support of the external audit advisor. This is the top priority initiative for the group to ensure accurate FY2026 financial disclosure.

1. Uoriki Core Retail Segment: Core 6-month cumulative sales increased by 493 million yen (3.2%) year-over-year, driven by a 2.6% increase in existing store sales after accounting for store openings/closings. 2. Mogami Suisan Wholesale & Retail Segment: Acquired as a consolidated subsidiary in March 2025, contributed 2.932 billion yen in 6-month cumulative sales to the total consolidated revenue, and contributed 1.268 billion yen to gross profit. The segment has a higher selling, general and administrative (SG&A) expense ratio than Uoriki's core business. 3. Uoriki Shoji Wholesale Segment: Sales increased by 151 million yen (8.8%) year-over-year. Gross profit increased by 8 million yen year-over-year, driven by both sales growth and improved gross margin.

• The company downward revised its full-year 2026 (March fiscal year) consolidated guidance.
  The new full-year targets are: 43.7 billion yen revenue, 1.2 billion yen operating profit, 1.8 billion yen ordinary profit, and 950 million yen net profit.
• Guidance is downgraded because existing store sales are tracking below initial plan despite outperforming prior year, and the company expects to record impairment losses on some underperforming stores as a special loss.
• Relative to the original 2nd year targets of the 2024-2026 mid-term management plan, the new revenue guidance is 108.1% of the original plan (driven by the Mogami Suisan acquisition, hitting the sales target), while operating profit is 65.9% of plan, ordinary profit is 88.2% of plan, and net profit is 72% of plan, as profitability has not yet hit original targets.

• Ongoing seafood price inflation driven by poor catches, climate change impacts, and higher feed costs is squeezing margins and reducing consumer foot traffic due to savings behavior.
• Suburban stores face growing competition from multi-format discount supermarket competitors, leading to weaker-than-expected sales performance.
• Material weaknesses in internal control over financial reporting were identified in prior year financial statements, requiring costly organizational and process remediation.
• Rising occupancy and operating costs for new stores in developer-owned commercial properties are pressuring profitability for new store openings.

Q: How has the shareholder benefit program changed stakeholder relationships, and what is management's response to calls from institutional investors for higher dividends or share buybacks instead of benefits? / A: Uoriki has very few active institutional investors, and the company has not received direct feedback calling for shifting capital allocation from benefits to dividends/buybacks. Over the medium term, the program has steadily grown the number of individual shareholders who are also existing customers, with over 20,000 total individual shareholders and a rising trend of repeat long-term holders. Management sees the "customer = shareholder" model as a net positive for share price stability and stakeholder loyalty, with no major downsides to the current approach. The program will continue.

Q: What differentiates the new Seafood Shokudo format from Uoriki's existing dining concepts, and what are the plans for road-side expansion? / A: Unlike Uoriki's existing night-focused, higher-end seafood dining concepts like izakaya, the new format targets casual daytime and family dining, focusing on affordable set meals of grilled/boiled fish to introduce younger consumers to seafood and build a long-term customer base. It avoids late-night operations to improve labor conditions and ease hiring, which is a major challenge in the seafood dining industry. The first 1-store test will open in Akiruno in December 2025 to test the concept; no further expansion plans have been finalized yet.

Q: What is the target price range for the new Seafood Shokudo format? / A: Very low price points of 500-600 yen are not feasible under current cost conditions. The format will center most offerings below 1,000 yen, with higher-end items in the 1,200-1,300 yen range, to maintain an accessible, value-oriented price point for consumers.