Citizen Watch Co.,Ltd. Q1 FY2026 earnings call

Consolidated Overall Performance

• Total consolidated revenue came in at 75.2 billion yen, a 0.8% decrease year-over-year, as Device segment revenue decline offset Machine Tool segment growth.
• Operating profit reached 4.6 billion yen, a 0.3% increase year-over-year, driven by profitability improvements in the core Watch and Machine Tool segments despite negative yen appreciation foreign exchange impacts. Operating profit margin was 6.2%.
• Ordinary profit was 6.1 billion yen, a 16.1% year-over-year decrease due to lower foreign exchange gains. Net profit attributable to parent company shareholders hit 9.1 billion yen, a 7.5% year-over-year increase, driven by gains from selling investment securities.

Watch Segment Operational Highlights

• Regional performance: Domestic revenue declined as domestic and inbound demand missed expectations, though the Crossée ladies brand saw steady growth. Asia overall (including China) saw continued sales weakness despite solid performance in Thailand and India. North America grew revenue, with both Citizen and Bulova brands performing well across specialty stores, department stores, and direct-to-consumer e-commerce; new Attessa and Series Eight models posted strong sales growth. Europe grew revenue, with new mechanical watch products from TSUYOSA performing well in the UK and France.
• Brand performance: The Bulova brand grew revenue in North America, supported by marketing for its 150th founding anniversary. Mechanical movements saw steady growth while analog quartz movements stagnated.
• New product and marketing initiatives: Launched 30th anniversary limited edition models of The Citizen in July 2025, featuring a high-precision Eco-Drive movement and Super Titanium construction. Also launched 40th anniversary limited edition models of Promaster Aqualand, with a marketing event in Italy that received positive media coverage. Added a small 37mm women's model to the popular TSUYOSA line, which has already contributed to Q1 sales growth after a global advance launch. The company will continue to focus on the growing mechanical watch market, and leverage sub-brands to improve Citizen's global brand value in line with Mid-Term Management Plan 2027.

Machine Tool Segment Operational Highlights

• Regional performance: Domestic revenue declined, as demand from the key automotive sector remained weak, while semiconductor and construction machinery demand stalled. Overseas revenue grew, with strong sales to medical and job shop customers in the Americas, steady medical sector demand in Europe, and growing sales in China and India across Asia.
• Order trends: Overall total order volume increased 10% compared to 3 months prior, indicating a gradual recovery. Domestic orders rose 39% compared to 3 months prior, led by replacement demand amid growing semiconductor-related demand. Orders in Asia grew, with semiconductor-related activity in other Asian markets and growing job shop demand in China. US orders fell 13% compared to 3 months prior, as solid medical demand was offset by cautious capital investment in other sectors. European orders saw a small increase, with steady demand from medical and job shop customers. Year-over-year, orders fell below 2024 levels from March to May due to the 2024 pre-price-hike pull-forward demand, but returned to year-over-year growth in June.
• New service initiatives: Launched the AI-powered Citizen Estimation Support Service in July 2025, which generates optimal cost estimates from customers' historical drawing and estimation data. The service reduces estimation workload, frees up staff time for higher value-added work, improves customer productivity, and expands the company's offerings beyond machine tool sales to support pre-processing workflow improvements. The company aims to expand market share by offering total solutions that drive innovation in customer manufacturing workflows, aligned with Mid-Term Management Plan 2027 priorities.

Device Segment Operational Highlights

• Auto parts grew revenue, as domestic automaker production normalized and the US and Chinese markets remained steady. Small motor sales declined amid uncertain market conditions. Ceramic products grew revenue, led by solid performance of submount products. Printer sales declined due to the lap after a large photo printer order in the year-ago quarter, despite steady POS and barcode printer sales in Japan and Europe.

1. Watch Segment: Revenue of 41.5 billion yen, a 0.3% decrease year-over-year; operating profit of 4.4 billion yen, an 18.6% increase year-over-year; operating profit margin of 10.6%. It contributes 55.2% of total consolidated revenue. 2. Machine Tool Segment: Revenue of 18.9 billion yen, a 6% increase year-over-year; operating profit of 1.5 billion yen, a 15.1% increase year-over-year. It contributes 25.1% of total consolidated revenue. 3. Device Segment: Revenue of 14.7 billion yen, a 9.6% decrease year-over-year; operating profit of 0.4 billion yen, a 66.8% decrease year-over-year. It contributes 19.5% of total consolidated revenue. Total consolidated revenue for the quarter is 75.2 billion yen.

• Full-year 2025 consolidated and segment-level guidance remains unchanged from the May 13, 2025 public release, with no upward or downward revision.
• If the current US tariff regime of 15% on Japanese products and 30% on Chinese products remains in place through the end of the fiscal year, the Watch segment expects to incur an additional 1 billion yen in costs beyond prior estimates. Management currently expects this additional cost can be fully absorbed by already implemented price increases in the North American market, so no change to full guidance is needed.

• Ongoing uncertain outlook from US trade policy and tariff changes, with the potential for additional cost impacts if the current tariff regime persists.
• Continued weak sales conditions in China and broader Asia for the Watch segment.
• Domestic machine tool demand remains weak, particularly in the automotive sector, while US capital investment across non-medical sectors remains cautious.
• Persistent negative foreign exchange impacts from yen appreciation that pressure overall profitability.
• General ongoing macroeconomic uncertainty across key regional markets.

No full Q&A exchanges are included in the provided transcript snippet, only a reference to a fifth Q&A section focused on the Machine Tool business. No usable question-and-answer content is available for summary.