Scroll Corporation Q2 FY2026 earnings call

Strategic Transformation Progress

• The company has made gradual progress in its long-term goal of diversifying away from reliance on the mail order business, with the solution business now driving top-line growth.
• The period reported an overall 4% increase in consolidated revenue (165.5 million yen increase to 42.569 billion yen), but lower year-over-year profit: operating profit fell to 3.069 billion yen, ordinary profit fell 19.1% to 3.297 billion yen, and net profit attributable to parent company shareholders fell 44.4% to 1.537 billion yen, mainly due to goodwill impairment and other extraordinary losses.

FY2025 Key Priorities by Segment

• Solution Business: Prioritize improving profitability, as revenue share within the group has gradually risen but profitability has not yet caught up to growth.
• Mail Order Business: Focus on long-term adjustments to adapt to 5-10 year changes in customer behavior, business structure, and co-op market trends, including new value creation, new product planning, and catalog restructuring.
• e-Commerce Business: Correct long-term overplanning, control gaps between plans and execution to minimize losses, and identify and nurture new growth opportunities during restructuring.

Corporate Value Improvement Initiatives

• The company recognizes current valuation challenges: PBR is just above 1.0x but below 1.1x, PER has stagnated, and share price has not seen sustained growth.
• Set 2029 (90th anniversary of founding) quantitative targets: consolidated net profit of at least 6 billion yen, ROE of at least 15%, and total payout ratio of approximately 60%.
• Optimize the business portfolio, centered on e-Commerce restructuring, using an ROIC spread framework to evaluate business continuity and improve overall profitability.

Shareholder Return Enhancements

• Introduced a progressive dividend policy to guarantee stable dividends to shareholders, and approved up to 1 billion yen in share repurchases to be completed by the end of the current fiscal year.
• Kept full-year dividends unchanged at 59 yen (29.5 yen interim, 29.5 yen year-end) despite lower profit, as the decline stemmed from the special factor of goodwill impairment.
• Announced a modification to the shareholder benefit program to reflect the company's ongoing BtoC business shrinkage, which has limited product availability for single-unit shareholders.

1. Solution Business: Revenue was 17.304 billion yen, up 24.2% year-over-year, contributing 40.6% of total consolidated revenue. Segment profit was 564 million yen, up 50.3% year-over-year. All sub-services (logistics outsourcing, payment outsourcing, marketing support, BPO) grew steadily, with improvements in deferred receivable collection lifting results above initial plans. 2. Mail Order Business: Revenue was 19.171 billion yen, down 7.6% year-over-year, contributing 45.0% of total consolidated revenue. Segment profit was 2.676 billion yen, down 24.1% year-over-year. Weak summer season outer apparel sales and early excess inventory clearance pressured costs and earnings. 3. e-Commerce Business: Revenue was 6.641 billion yen, down 5.3% year-over-year, contributing 15.6% of total consolidated revenue. The segment reported a net loss of 70 million yen, as the business is still undergoing inventory and structural restructuring.

• Consolidated full-year guidance: revenue of 87 billion yen, operating profit of 5.4 billion yen, ordinary profit of 5.8 billion yen, net profit of 3.1 billion yen, and ROE of 8.4%.
• Solution Business: Full-year revenue guidance revised upward by 2 billion yen to 36.3 billion yen (5.076 billion yen increase year-over-year); full-year profit guidance revised upward by 300 million yen to 1.5 billion yen (610 million yen increase year-over-year).
• Mail Order Business: Full-year revenue guidance revised downward by 1.4 billion yen to 36.8 billion yen (2.193 billion yen decrease year-over-year); full-year profit guidance revised downward by 700 million yen to 4 billion yen (1.21 billion yen decrease year-over-year).
• e-Commerce Business: Full-year revenue guidance revised upward by 1.1 billion yen to 14.7 billion yen (581 million yen decrease year-over-year); full-year profit guidance revised upward by 90 million yen to 250 million yen (86 million yen increase year-over-year), with management expecting a return to full-year net profit driven by holiday events including Black Friday.
• Management will review and consider further shareholder return enhancements including DOE target adjustments and payout ratio increases alongside next year's business plan, with announcements to be made promptly after board approval.

• The e-Commerce business has unresolved issues with legacy excess inventory and suboptimal business structure, which have suppressed revenue and profit during ongoing restructuring.
• Mail order apparel sales are heavily exposed to weather volatility; while current winter demand trends are positive, unforeseen weather shifts could impact full-year results.
• Stagnant PER and PBR have kept the company's share price from rising to reflect improvements in its business portfolio, creating ongoing pressure to improve profitability and valuation.

Q: What types of acquisition targets is the company considering for its solution business? / A: Management prioritizes M&A targets that can expand or strengthen the company's existing solution service lines, which currently include logistics outsourcing, payment outsourcing, marketing support, and BPO. This strategy aligns with the business's core goal of growing its scale and profitability faster than organic growth alone.

Q: What factors are driving the expected upward earnings surprise for the e-commerce business in the second half? / A: Management notes that disaster preparedness products are seeing unexpectedly strong demand, which is contributing to higher earnings. The business has also built a more profitable base after years of inventory compression, with sales now bottoming out, though the overall contribution of this positive demand trend to full-year profit remains small at this stage.

Q: What is the outlook for apparel sales in the mail order business during the second half? / A: Colder temperatures have arrived earlier than last year, and thermal innerwear has already started seeing stronger sales. Management expects demand to flow from innerwear to outer apparel, and forecasts that full winter season orders will be up compared to last year. However, the outlook still carries some uncertainty due to the inherent sensitivity of apparel sales to unpredictable weather conditions.