7823.T

• Mid-term Management Plan Progress

  • This is the final year of the "Artnature Advance Plan" mid-term management plan, focused on three core themes: value creation, sustainability promotion, and dialogue with the market.
  • A typhoon in November of the prior year reduced operating rates at Artnature's Philippines factory and surrounding contractors, leading to extended delivery lead times that depressed Q1 sales for both segments. Production has now returned to normal operation, and deliveries have recovered steadily through the interim period, resulting in full interim revenue growth.

• Value Creation Initiatives

  • Men's segment: The company is expanding beyond traditional advertising-focused response marketing to add new customer acquisition channels. Recent successful initiatives include personalized SNS targeting, and upfront transparent pricing for flat-rate services on the corporate website to reduce customer price barriers. For the second half, the company will further expand digital and SNS outreach, and push differentiation via exclusive high value-added products to raise average selling prices.
  • Women's segment: Growth of the long-running hit custom wig Feelin has moderated, so the company is pursuing new value creation. It opened the new flagship Gran Salon Ginza location in September to address growing hair concern demand from senior consumers and deliver a premium customer experience. The ready-to-wear segment launched the Disney Wig Collection in October, leveraging Artnature's technical capabilities to offer character wigs for all age groups to attract new customers. For the second half, the company will strengthen operations and promotion around Gran Salon Ginza, and expand the Disney wig collection to drive overall segment growth. The Julia Auge sub-brand has seen success from expansion into untapped markets like Hokkaido and event collaborations with commercial facilities.

• Sustainability & Operations

  • A new factory in Bangladesh is under construction to分散 production risk and expand production capacity, and is on track for completion at the end of November. The company is currently prioritizing staff training to support planned production launch.

• Shareholder Engagement & Return

  • A new point-based shareholder benefit program, the "Artnature Premium Benefit Club," has been launched this fiscal year, for shareholders holding 700+ shares as of the end of September. The program aims to boost the attractiveness of Artnature's stock, grow individual shareholder numbers and increase trading volume over time. The company maintains ongoing IR engagement via institutional investor briefings and monthly individual investor events, and will iteratively improve the benefit program based on shareholder feedback. The company maintains its planned dividend payout of 14 yen interim dividend and 14 yen year-end dividend, for a full-year 28 yen per share dividend.

• The company maintains its original full-year consolidated guidance, with no upward or downward revision, targeting full-year sales of 47.623 billion yen and operating profit of 2.778 billion yen, representing year-over-year growth in both revenue and profit.
• The 45% full-year plan progress rate for revenue in the interim is slightly behind schedule, primarily due to underperformance of new custom wig sales in the women's segment. Management expects to fully recover this revenue shortfall in the second half via new female customer accumulation, expanded non-advertising customer response, and launch of fall new products.
• Delivery lead time extensions from Q1 are expected to be fully resolved by the second half. The full-year sales plan includes projected revenue from new business areas, which the company is actively working to secure to hit the full-year target.
• For operating profit, management will continue to control expenses to land within the full-year plan range, while allocating sufficient resources to strategically important areas.
• The company targets to lift ROE to double-digits as soon as possible, while continuing to maintain and expand positive equity spread.
• Full-year dividend guidance is maintained at 28 yen per share, split evenly between interim and year-end payouts.

Consolidated total interem sales: 21.485 billion yen, up 1.7% year-over-year. Operating profit: 1.382 billion yen, up ~200 million yen year-over-year. Recurring profit: 1.464 billion yen, up 368 million yen year-over-year.

1. Men's segment: Interim sales were 0.8% higher year-over-year, ending two consecutive periods of declining revenue. Both new and repeat sales increased, and custom wigs and hair thickening products both posted year-over-year sales growth. This segment accounted for approximately 49.6% of total standalone sales.

2. Women's segment: Interim sales were 3.6% higher year-over-year, marking continued record high sales. New sales underperformed expectations, but repeat sales from existing customer replacement demand grew, and the Julia Auge sub-brand also posted growth. Custom wigs and hair thickening products both increased year-over-year. This segment accounted for approximately 50.4% of total standalone sales.

• Extended delivery lead times from the Q1 typhoon-related production disruption negatively impacted Q1 sales for both men's and women's segments, though this issue has mostly recovered and is expected to be fully resolved in the second half.
• New customer acquisition in the women's custom wig segment has underperformed plan, leading to a slight overall delay in interim revenue progress against full-year targets.
• Total customer visits to stores have declined year-over-year for both segments (98.8% for men's, 96.1% for women's). For women's segment, this decline stems from extended customer visit cycles, slower new customer onboarding, and the impact of record hot weather.
• No new area business deals have been closed or realized in the interim period, creating execution risk for the full-year sales target which includes planned revenue from this segment.
• Higher expenses from DX depreciation, wage increases for employee pay improvement, new factory preparation, and the new shareholder benefit program have created downward pressure on profit.

Q: Why is management not revising the full-year earnings guidance after the weaker-than-planned interim performance? / A: Men's segment performed as expected in the interim and current orders for the second half are on track. Women's custom wigs started slow, but management is confident new second-half products will drive a recovery, with other women's lines already performing well. No new area deals have closed yet, but management will continue pushing to secure them. Profit is expected to land within the original plan range, so no guidance revision is needed at this time.

Q: Can the women's segment recover its underperforming new sales in the second half to hit full-year targets? / A: Management confirms recovery is achievable. Fall/winter is the peak selling season for the company's core response-based sales model. The company will drive customer interest with new product launches, including the recent Jasmine One release, and expanded promotional activities. It will also continue rolling out new initiatives like the Disney character wig collection to drive new customer growth and contribute to segment recovery.

Q: What is the current progress of new area business that is included in the full-year sales plan? / A: Management notes that no deals are ready for public announcement at this time, but the company is actively reviewing and vetting a large pipeline of potential opportunities. The gap between the prior year's "other sales" result and this year's target is mostly accounted for by planned new area business, and management remains committed to pushing progress to hit the full-year target.