TOHO Co.,Ltd. Q4 FY2025 earnings call

• Company Position and Core Business

  • Toho is the only listed commercial food wholesaler for the food service industry on the Tokyo Stock Exchange Prime Market, and is recognized as the industry leader in Japan, with a current domestic market share of only 5.5%, leaving significant room for growth.
  • The company completed full exit from the Food Supermarket Business in November 2024, and now focuses on three core segments supporting the food service industry: DTB, C&C, and Food Solution. It covers the entire Japanese market, operates nearly 100 commercial food specialty stores west of the Kanto region, and has expanded into overseas markets.
  • The Kanto region accounts for 43% of Japan's total food service market, but Toho's current market share there is only 3.6%, so the company identifies Kanto as a key priority for future market expansion.

• Full-Year 2025 January Term Consolidated Financial Performance

  • Consolidated revenue totaled 246.465 billion yen, an increase of 0.6% year-over-year: revenue decline from Food Supermarket exit was offset by strong sales growth to the domestic food service industry driven by booming inbound tourism demand.
  • Operating profit totaled 7.496 billion yen, a decrease of 4.1% year-over-year: the decline was driven by lower gross profit from Food Supermarket exit and yen depreciation impacts on Food Solution imported equipment, partially offset by lower overall operating expenses after exit, though rising logistics costs offset some savings.
  • Net income attributable to parent shareholders totaled 4.485 billion yen, an increase of 24.4% year-over-year, primarily due to the absence of the prior year's goodwill impairment loss on overseas subsidiaries.
  • Balance sheet and cash flow: Total assets increased slightly to 88.32 billion yen, total liabilities decreased by 3.532 billion yen, equity increased by 3.555 billion yen, and the equity ratio rose 4 percentage points to 34.8%. Operating cash flow generated 6.49 billion yen in inflow, while investment and financing cash flow recorded 2.16 billion yen and 4.634 billion yen in outflows respectively.
  • Dividend: The company plans a year-end dividend of 70 yen per share, a 15 yen increase, bringing full-year 2025 dividend to 125 yen per share.

1. Distributor Business (DTB): Revenue was 184.037 billion yen, an increase of 6.5% year-over-year. Operating profit was 6.224 billion yen, an increase of 6.1% year-over-year, marking a new segment record high profit. It contributes approximately 74.7% of total company revenue. 2. Cash and Carry (C&C) Business: Revenue was 44.86 billion yen, an increase of 3.1% year-over-year. Operating profit was 1.707 billion yen, a decrease of 6.6% year-over-year, as higher labor and logistics costs offset gains from increased private brand (PB) sales and revenue growth. It contributes approximately 18.2% of total company revenue. 3. Food Solution Business: Revenue was 12.917 billion yen, a decrease of 3.6% year-over-year, driven by delayed product switching for some imported commercial cooking equipment. Operating profit was 0.399 billion yen, a 51.0% decrease year-over-year, as yen depreciation pressured gross margins. It contributes approximately 5.2% of total company revenue. 4. Food Supermarket Business: All stores ceased operations on November 21, 2024, and the business exited. Revenue was 4.651 billion yen, a 69.3% decrease year-over-year. Operating loss expanded by 0.147 billion yen year-over-year to 0.835 billion yen. It contributes approximately 1.9% of total company revenue. Overall, private brand product revenue as a percentage of combined DTB and C&C revenue reached 9.73%, up 0.44 percentage points year-over-year following targeted sales expansion.

• Full-Year 2026 January Term Guidance: Management projects all core metrics (revenue, operating profit, ordinary profit, net income attributable to parent shareholders) will hit record all-time highs. Revenue is forecast to increase 2.7% year-over-year to 253 billion yen; operating profit is projected to increase 9.4% to 8.2 billion yen; ordinary profit is projected to increase 7.9% to 8.3 billion yen; net income attributable to parent shareholders is projected to increase 4.8% to 4.7 billion yen.
• The forecast assumes continued growth in existing core businesses driven by inbound tourism expansion, fully offsetting the loss of Food Supermarket revenue, and accounts for continued upward pressure on labor and other operating costs, with improved profitability from Food Supermarket exit driving overall earnings gains.
• Capital expenditure guidance: Planned capital expenditure for 2026 January Term is 4.234 billion yen, up from the 2025 actual of 3.677 billion yen. Investments are earmarked for new and relocated DTB hubs, new and relocated/renovated C&C stores (under the A-Price brand), and system upgrades.
• Dividend guidance: Toho plans a full-year 2026 dividend of 150 yen per share, marking the fifth consecutive year of dividend increases.
• Medium-term plan "SHIFT-UP 2027" guidance: Management upwardly revised financial targets for the final 2027 January Term: the revenue target was raised from 265 billion yen to 270 billion yen, and the net income attributable to parent shareholders target was raised from 4.5 billion yen to 4.8 billion yen.

• Ongoing cost inflation: Labor and logistics costs have increased in the 2025 term, and continued upward pressure on these expenses is expected in the 2026 term, which could pressure operating margins if cost increases are not fully absorbed.
• Foreign exchange risk: Yen depreciation negatively impacted gross margins for imported commercial cooking equipment in the Food Solution segment in 2025, and continued yen weakness could create further margin pressure for the segment.
• Market concentration risk: Toho's low current market share in the large Kanto region means that expansion plans carry execution risk, and failure to grow share in this key market could limit long-term growth.

Q: What is driving the upward revision to the SHIFT-UP 2027 medium-term financial targets? / A: The upward revision reflects stronger-than-expected performance of the core distributor and cash and carry businesses, driven by booming inbound demand for food service and successful expansion of higher-margin private brand products. The full exit from the money-losing food supermarket business has also improved overall group profitability, enabling management to raise long-term targets.

Q: What strategies does Toho plan to use to expand market share in the Kanto region? / A: Toho plans to expand distribution hubs and cash and carry store locations in the region, invest in targeted marketing to food service operators, and leverage its broad product assortment and full-suite support services for food businesses to gain share against smaller competitors. Kanto's large market size gives significant room for growth despite the company's low current share.

Q: What is the outlook for private brand penetration, and which PB products are performing well? / A: PB penetration rose to 9.73% in 2025, up from the 8% range of prior periods, and management expects continued gradual growth as the company expands PB SKUs and prioritizes PB sales. High-demand PB products include core staple commercial ingredients, where the company can offer competitive pricing versus national brands while maintaining consistent quality, which resonates with cost-conscious food service operators.

Q: What are the plans for A-Price (Cash and Carry) store openings and capital expenditure going forward? / A: Toho plans to open new A-Price stores, along with planned relocations and renovations of existing locations as part of its 4.234 billion yen capital expenditure plan for 2026. The company also plans system-wide investments to improve in-store operations and inventory management across the C&C segment.