TAY TWO CO.,LTD. Q1 FY2026 earnings call

Overall Financial Performance

• Achieved record 1Q revenue driven by stable operating conditions and strong contribution from growing business segments
• Operating income, ordinary income, and net income all exceeded year-ago levels, despite rising selling, general and administrative costs (SG&A) from new store investments and higher general expenses, as cost reduction efforts offset cost increases
• Profit recovered rapidly: rising used trading card and hobby market prices lifted average selling prices and improved inventory turnover, driving strong profit growth

Store Network Expansion

• Cumulative total of 40 stores opened in shopping malls, which deliver strong customer traffic and improved brand awareness, with early profitability making them a key contributor to group profit; the company will maintain a stable annual store opening target for this format
• A new 300-tsubo suburban roadside store will open in Kurayoshi, Tottori Prefecture, focused on increasing reuse product procurement from individual customers; this location will serve as a test case for large-format local roadside expansion
• Total network stands at 173 stores (including directly operated and franchise locations) as of the end of May, with approximately 40 franchise stores. The company has prioritized directly operated stores to enable rapid policy adjustment, and will pursue expanded franchise development going forward

Product and Operational Initiatives

• Product diversification is being rolled out at 14 larger-format stores, expanding beyond traditional entertainment-related (manga, anime, game) reuse products to increase future strategic options
• Store digital transformation (DX) for buyout operations is ongoing, with system adjustments being refined for near-term launch
• 27,000 trading card events are held annually across all stores (primarily on weekends), with the current pace to be maintained and expanded as new stores open to build customer community
• A tablet search tool is scheduled to be rolled out across all directly operated stores by the end of the current fiscal period: this will reduce frontline staff workload, prevent shoplifting loss, eliminate price tag re-labeling work, and free up sales floor space to grow other product categories, with operational know-how to be leveraged for BtoB strategy

E-commerce and BtoB Development

• The company's own e-commerce site "Furuichi Online" has completed infrastructure buildout and achieved full-year standalone profitability; future growth will rely on group-wide product procurement capability, with initiatives including new roadside store openings and pilot trial of mail-in buyout programs
• Subsidiary Yamatoku will focus on EC business efficiency via hub consolidation and new product development
• The patented TAYS trading card reading and assessment tool now supports over 20 trading card types; the company is expanding the range of supported titles to meet BtoB customer demand
• The Furuichi BtoB network added a new corporate customer in Okinawa Prefecture in 1Q, expanding coverage to 44 of Japan's 47 prefectures, with plans to further deepen and expand network coverage
• The company is building follow-up infrastructure to support franchise partners, leveraging its product, store operation, system, and logistics expertise to drive growth in franchise outsource transactions

Global and Strategic Initiatives

• The company opened its first overseas location in July in Taipei, Taiwan, a collaborative "Furuichi x Manga Exhibition" shop with partner TORICO. Early performance has been very strong, with inventory restocking from Japan barely keeping up with customer demand
• The company will build on this initial launch to develop overseas supply routes for Japanese inventory, pursue synergies from global expansion and IP business development in partnership with TORICO and other industry players
• The company continues to advance M&A strategy, human capital development, and SDGs-aligned initiatives under its "Furuichi 360 Reuse" strategy, which aligns corporate activity with social impact to deliver value to all stakeholders

Overall consolidated sales for the 1Q reached 8.5 billion yen, the highest 1Q revenue since February 2012. Used product overall revenue share increased 3 percentage points year-over-year. Used trading cards (トレカ) saw a 4 percentage point increase in revenue contribution year-over-year, with stable market prices driving strong sales growth, improved inventory turnover and higher average selling prices. New games saw a 3 percentage point year-over-year decline in revenue contribution due to pre-launch pull-ahead demand for new game hardware. New trading cards performed slightly below year-ago levels, primarily due to very strong new title launches in the prior year period, with current market conditions improving following new recent title releases from manufacturers. The BtoB reuse segment saw growing inbound inquiries for the patented TAYS trading card assessment tool, as trading card market conditions stabilized, with a near-term target of 0.1 billion yen in annual profit contribution from this segment.

• Full-year 2026 (ending February 2026) consolidated guidance is maintained at 40.0 billion yen in revenue and 1.1 billion yen in operating income, unchanged from the prior full year earnings announcement
• The medium-term target for the 2029 fiscal year (ending February 2029) is 50.0 billion yen in revenue and 2.5 billion yen in operating income
• Dividend guidance is maintained: the company targets a continued stable dividend of 4 yen per share

The provided transcript is incomplete, and no explicit discussion of material operational risks or failures is included. Rising SG&A from new store investment and general cost inflation is noted as a headwind, but the company states it is offsetting this pressure with active cost reduction initiatives.

The provided transcript is incomplete, and the full question and answer text is not available. The planned topics for the Q&A section are: challenges and responses related to trading card operations, causes of weak new game performance, drivers of SG&A growth, and the relationship between 1Q results and full-year guidance.