TOHO Co.,Ltd. Q2 FY2026 earnings call

• Company Overview & Market Position

  • Toho is the only publicly listed prime market player in Japan's food service wholesale industry, and considers itself the industry leader, with a total domestic market share of 5.3%, leaving significant room for growth.
  • The Kanto (Tokyo/Capital) region accounts for 43% of Japan's total food service market, but Toho only holds a 3.5% share here, so the company prioritizes further market expansion in this region.
  • Core strengths include nationwide coverage of food service wholesale, nearly 100 specialty food stores west of Kanto, overseas market expansion, and end-to-end support for food service businesses including IT, quality management, and kitchen equipment, which no competitor matches at this scale.

• Consolidated 1H (2Q cumulative) Results

  • Total consolidated revenue was 123.092 billion yen, up 1.6% year-over-year: the exit from the food supermarket business in the prior year created a drag on revenue, but strong inbound demand drove solid growth in domestic food service sales that offset this drag.
  • Total operating profit was 3.454 billion yen, down 0.5% year-over-year: the exit from the unprofitable supermarket business contributed to higher earnings, but lower gross margins at overseas subsidiaries and higher domestic logistics/packaging costs offset these gains.
  • Net income attributable to parent shareholders was 1.793 billion yen, down 21.4% year-over-year, due to goodwill impairment at overseas subsidiaries and fixed asset disposal losses from facility relocation, which were recognized in the first half.
  • 1Q saw a 0.201 billion yen operating profit decline year-over-year, but 2Q standalone recovered to a 0.184 billion yen operating profit increase year-over-year.
  • Total selling, general and administrative expenses fell 0.722 billion yen year-over-year, with the expense ratio down 0.86 percentage points, driven by cost cuts from the supermarket exit and a comparison to prior year headquarter repairs. However, higher logistics costs and depreciation from new capital investments created upward pressure on expenses.

• Key Operational Updates

  • Sankyo Shokucho joined the Toho Group in September 2025, aligning with the company's M&A growth strategy.
  • The new Yokohama Distribution Center (DC), established to support Kanto region expansion, stabilized operations in the first half and will launch full-scale sales activities in the second half.
  • A new A-Price store will open on Miyakojima Island (Okinawa) following the successful model of the Ishigaki Island location, to serve the rapidly growing tourism market in the region.
  • The Singaporean agricultural subsidiary obtained food safety management system certification in July 2025, which opens opportunities for new contracts with major hotel and food service chains.

1. Distributor Business: Revenue of 94.585 billion yen, up 6.0% year-over-year; contributed 76.8% of total consolidated revenue. Operating profit was 2.534 billion yen, down 16.3% year-over-year. 2. Cash and Carry Business: Revenue of 22.054 billion yen, up 3.1% year-over-year; contributed 17.9% of total consolidated revenue. Operating profit was 0.653 billion yen, down 17.1% year-over-year. Private brand (PB) products for these two segments reached a 10.03% revenue share as of the 2nd quarter, up from the 8% range of the past decade. 3. Food Solution Business: Revenue of 6.454 billion yen, down 3.2% year-over-year; contributed 5.2% of total consolidated revenue. Operating profit was 0.267 billion yen, up 75.4% year-over-year, driven by a favorable comparison to the prior year period which included large headquarter renovation costs.

• Management revised lower full-year 2026 January term projections for revenue, operating profit, and ordinary profit from original guidance, due to first half underperformance in profit driven by overseas weakness and commodity price pressure.
  • No revision was made to the projected net income attributable to parent shareholders, as the company still expects to recognize a fixed asset sale gain in the second half that offsets the earlier-than-expected first half losses.
  • Even after revision, the full-year projection for revenue and all profit metrics remain on track to hit all-time record highs for the company.
  • All three business segments are projected to deliver revenue growth for the full year.
  • Total annual capital expenditure is projected at 2.823 billion yen, with 1.205 billion yen allocated to the second half for facility openings/relocations and system replacements.
  • The dividend forecast is maintained: an interim dividend of 75 yen per share (up 20 yen from prior year), and a full-year dividend of 150 yen per share.

• Weak performance at overseas subsidiaries, primarily in Singapore, where new competition reduced sales at the agricultural subsidiary, and seafood price volatility lowered gross margins. Goodwill impairment was also recognized on these operations in the first half. - Rising domestic logistics and packaging costs have increased operating expenses, creating pressure on margins. - Persistent industry-wide labor shortages in Japan also act as a headwind for performance. - Low current market share in the large Kanto region leaves the company vulnerable to stronger competitors in this high-potential market.

Q: After the latest guidance revision, the first half profit progress rate is lower than expected. Is another full-year guidance revision coming, and can the full-year target be recovered in the second half? / A: Toho's business naturally has a higher proportion of profit and revenue in the second half. First half operating profit came in 0.45 billion yen below original forecast, but the revised guidance already includes a higher planned second half sales base that will generate incremental profit. Management confirms the revised full-year guidance is achievable.

Q: What caused the poor performance at overseas subsidiaries, and what is being done to fix it? / A: Weakness is concentrated in Singaporean subsidiaries: one agricultural business saw lower sales from new competition, while a seafood business saw margin compression from commodity price volatility. The agricultural subsidiary obtained global food safety certification in July, which will allow it to pursue new contracts with major hotel and food service chains to recover sales. Seafood prices have now stabilized, so margins are expected to improve going forward.

Q: What is the target for private brand (PB) product revenue share, and does higher PB share improve overall profit margins? / A: The target is to reach a 12% PB revenue share by the final year of the current mid-term management plan (next fiscal year), up from the current 10.03%. Higher PB share does improve profit margins: Toho prices its PB to ensure appropriate margins, with higher value products earning strong returns and value products priced in line with market rates to maintain healthy profitability.

Q: What is the update on the company's mid-term strategy for overseas expansion and M&A? / A: Overseas expansion and M&A remain core priority strategies as originally planned, though no tangible expansion results have been delivered yet to date. The recent addition of Sankyo Shokucho to the group in September completed the first M&A under this plan, and management will continue working to deliver further results aligned with the existing strategy.