HIDAY HIDAKA Corp. Q2 FY2026 earnings call

• Core Operational Performance

  • Existing store same-store sales and customer traffic have exceeded year-ago levels for 45 consecutive months, and average customer spend has exceeded year-ago levels for 15 consecutive months following the May 2024 price increase, driven by continued affordable pricing relative to competitors.
  • Monthly same-store sales have hit year-over-year record highs for 30 consecutive months, with both Q1 and Q2 2026 posting all-time high revenue and operating income for their respective periods.
  • Extended operating hours to midnight at 21 additional stores during the period, reaching 203 total stores open until midnight by August end, to recapture demand lost during COVID-era operating restrictions.

• Mid-Term Strategic Priorities (2025 Hiday Challenge)

  • Pushed planned Vietnam market entry to pending status after assessments found high rent in prime areas matching Japanese levels, and insufficient local supply chain infrastructure to maintain Hidakaya brand quality; company will prioritize domestic market expansion for the near term while keeping overseas expansion as a long-term goal.
  • Targets 100 new stores in under-penetrated regions including northern Kanto, Hokuriku, and Tohoku, with long-term potential for over 200 additional stores across 1-metro-3-prefecture core areas and these new regions, and a total target expansion to 700 stores in the broader region.
  • Entered into the company's first external franchising partnership with Ocean System for Niigata Prefecture, an area requiring specialized snow-region operational know-how the company does not hold internally; the first franchised store is scheduled to open in April 2026, marking the company's first attempt to train an external partner from scratch on its operational system.
  • Expanding production capacity at the Gyoda central kitchen to support 700-store operations, currently searching for adjacent land to build an additional facility to supplement the existing 600-store capacity site.

• DX and Labor Efficiency Initiatives

  • Completed touch panel order system installation at 405 stores, delivering slight improvements in average check size and revenue while improving accessibility for female and non-Japanese speaking customers; deployment will continue.
  • Deployed 66 serving robots, added rice robots and self-service water stations, and is testing self-checkout at 7 stores, where 95% of customers use the self-checkout option, cutting checkout wait times; self-checkout is not planned for high-turnover station front stores in the near term due to layout and alcohol customer handling challenges.
  • Point schemes and cashless payment options, including addition of Rakuten Point to existing dPoint, helped recover customer traffic after the December 2024 price increase, which saw an initial drop of 10,000 customers per day that has now recovered to pre-announcement levels.

• Capital Allocation (5-year plan 2026 February Term to 2030 February Term)

  • Expects 350 billion yen in total cash inflow over the 5-year period, allocating 95 billion yen to store development, 20 billion yen to DX-related investment, 50 billion yen to factory expansion and capacity upgrades, and 180 billion yen to M&A, overseas investment, and shareholder returns including share buybacks.

Hiday Hidaka operates a single core restaurant segment centered on its Hidakaya brand. For the 2026 February Term Interim period, the segment reported total revenue of 30.7 billion yen, a 14.4% increase year-over-year, marking an all-time high for the interim period. Operating income reached 3.6 billion yen, a 31.8% increase year-over-year, also a new interim period record, with an operating margin of 11.9%. Both revenue and all profit metrics beat management's previous guidance published on April 11. The gross cost ratio came in at 30.3%, a 1.3 percentage point increase year-over-year driven by 920 million yen in total raw material and ingredient price increases, half of which came from rice, with additional pressure from eggs, draft beer, and pork. Selling, general and administrative (SG&A) expense ratio was 57.8%, a 2.8 percentage point decrease year-over-year due to positive operating leverage from revenue growth. As of the end of the interim period, the company operates a total of 471 locations: 465 directly owned stores and 6 franchised stores, with 11 new openings and 1 closure during the period.

• Full year 2026 February Term guidance is maintained unchanged from prior announcements; management expects strong full year top-line results given the strong interim performance, but continues to monitor rising and elevated ingredient prices for rice, pork, and eggs closely. Hiday Hidaka reaffirms its full year target of 60 billion yen in revenue and 10% operating margin for 2026 February Term, on track to hit this goal as of the interim period.
• Long-term 2030 targets are maintained: 75 billion yen in revenue, 10% operating margin, and ROE of 17% or higher.
• Shareholder return guidance is maintained: the company targets a 40% payout ratio, will actively pursue dividend increases aligned with performance, and will conduct share buybacks opportunistically. For 2026 February Term, the interim dividend is raised 1 yen to 23 yen per share, and the year-end dividend is also guided to a 1 yen increase to 23 yen per share.

• Rising raw material and ingredient prices, particularly for rice, pork, and eggs, have pushed up the company's cost ratio, and continued price increases or sustained high prices will put pressure on profitability going forward.
• Rising construction costs are increasing the company's capital expenditure requirements for new store openings and factory expansion, raising total planned investment outlays.
• Increasing rent adjustment requests from landlords are pushing up occupancy costs, which increased 110 million yen year-over-year in the interim period.
• Wage inflation and hourly rate increases for part-time staff are driving higher personnel costs, which increased 722 million yen year-over-year, even as labor efficiency improvements from automation cut personnel costs as a percentage of revenue.
• The company lacks operational experience in snowy regions and untapped large markets outside the 1-metro-3-prefecture core, requiring reliance on franchising partnerships to enter these regions. There is no guarantee that new franchised locations will perform as expected.

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