AOKI Holdings Inc. Q4 FY2025 earnings call

• Overall Mid-term Plan Progress

  • The first year of the 3-year "RISING2026" mid-term management plan ended with both revenue and operating profit exceeding initial forecasts, putting the firm on track to hit final year 2026 targets. ROIC, ROE, and PBR have all shown improving trends, with ROE now exceeding the cost of equity for the first time in years after the COVID-19 downturn.
  • Capital allocation is on track with the 3-year plan: cumulative planned allocation targets are 300 billion yen for store openings/capital expenditure, 200 billion yen for shareholder returns, and 100 billion yen for new business investment, with all spending tracking to plan through the first year.

• Segment Strategic Progress

  • Fashion Business: The segment is transitioning from a focus on men's formal wear to a "LIFE&WORK STYLE" positioning targeting a 40/30/30 sales split between business, casual, and women's apparel. Casual and women's lines have delivered strong growth in the first year.
  • Entertainment Business: Growth is focused on expanding fully private locked room locations for "Kaihatsu CLUB" in central urban and station front areas, while also expanding content to meet growing demand for indoor amusement at suburban locations to broaden the customer base. The segment hit a record profit in the 2025 fiscal year.
  • Bridal Business: The segment is diversifying beyond wedding events to grow non-wedding revenue, specifically targeting MICE (corporate meetings, incentives, conferences, and events) business. The renovated Omotesando and Minatomirai Yokohama flagship stores have already seen strong positive reception for MICE offerings, and non-wedding sales share is growing on track.

• Corporate Governance & Capital Strategy

  • The firm is advancing governance reforms: the 2025 annual general meeting will propose a board where outside directors hold a majority, after strengthening the oversight function of outside directors and the nomination/remuneration committee.
  • Sustainability initiatives are progressing with 6 materiality themes defined with 2030 KPIs, with 2024 results to be published once finalized.

1. Fashion Business: Revenue of 102.6 billion yen (up 2.6% YoY), operating profit of 8.6 billion yen (up 7.5% YoY), contributing 53.3% of total consolidated revenue. The segment achieved 4 consecutive years of revenue and profit growth, with gross margin improving 0.6 percentage points driven by discount controls and proper pricing.
2. Entertainment Business: Revenue of 76.0 billion yen (up 0.7% YoY), operating profit of 5.9 billion yen (up 9.8% YoY), contributing 39.5% of total consolidated revenue. The segment achieved 4 consecutive years of revenue growth and hit a record high segment profit, with gross margin improving 1.0 percentage points from price optimization for services and food and beverage.
3. Anniversaire Bridal Business: Revenue of 11.7 billion yen (up 14.2% YoY), operating profit of 0.5 billion yen (up 400 million yen YoY), contributing 6.1% of total consolidated revenue. Revenue and profit grew driven by the return to operation of the renovated Omotesando store and lower renovation costs compared to the prior year.

• Consolidated Guidance for 2026 March Fiscal Year: The firm expects 2.8% YoY revenue growth to 198.0 billion yen, and 8.6% YoY operating profit growth to 17.0 billion yen, which would mark 5 consecutive years of revenue and profit growth, exceeding the mid-term plan's second year target.
• Segment Guidance:
  • Fashion Business: 2.5% YoY revenue growth to 105.2 billion yen, 5.9% YoY operating profit growth to 9.1 billion yen, targeting 5 consecutive years of growth, driven by continued new openings of ORIHICA stores and product expansion.
  • Entertainment Business: 2.6% YoY revenue growth to 78.0 billion yen, 11.8% YoY operating profit growth to 6.7 billion yen, expecting to update the record high segment profit, driven by expansion of fully private locked rooms for Kaihatsu CLUB and labor saving initiatives.
  • Bridal Business: 5.0% YoY revenue growth to 12.3 billion yen, 29.2% YoY operating profit growth to 0.7 billion yen, driven by stronger flagship store performance and expanded MICE business uptake.
• Shareholder Return Guidance: The firm maintains a mid-term plan target of either a 50%+ payout ratio or 3%+ DOE (dividend on equity), whichever is higher, with a 70%+ total payout ratio over the 3-year plan period. For 2026 fiscal year, annual dividend per share is planned to increase 5 yen to 80 yen, in line with the return targets.

• The macroeconomic environment outlook remains uncertain, with ongoing impacts from raw material price inflation, foreign exchange volatility, and broad-based price increases that could pressure consumer demand and margins.
  • The underlying bridal market is expected to face a long-term structural decline in the number of weddings, creating pressure for the core wedding business of the Anniversaire Bridal segment, even as MICE diversification progresses.
  • The full earnings and strategic impact of the mid-term plan's transformation initiatives is still dependent on successful execution in the remaining two plan years, despite the strong first year start.

Q: What is the firm's outlook on growing demand for indoor amusement and how will it adjust strategy? / A: Management confirms that demand for indoor amusement at entertainment locations has risen notably post-COVID, especially at suburban Kaihatsu CLUB stores. The firm will continue to develop new menu, seating, and service options tailored to this demand to capture more demand and broaden customer demographics, while keeping the focus on expanding high-margin private locked rooms in urban core areas. This dual focus is expected to drive another year of record profit growth for the segment.

Q: How much traction has the bridal segment captured in the MICE business so far, and what is the outlook for this new revenue stream? / A: Management states that the two recently renovated flagship stores (Omotesando and Minatomirai Yokohama) have already received strong positive feedback for MICE event bookings from corporations and industry groups. MICE demand remains robust, and the firm will continue to actively target this non-wedding demand to offset the long-term decline in core wedding volumes and diversify the segment's revenue base, with non-wedding sales share growing on track to hit mid-term targets.

Q: How is the fashion business progressing on its transformation to casual and women's apparel, and what are the remaining challenges? / A: Management confirms that the shift from traditional men's formal wear to a broader LIFE&WORK STYLE lineup is progressing as planned, with casual and women's apparel delivering stronger than expected sales growth in the first year of the mid-term plan. The segment will continue expanding product ranges, optimizing store networks, and advancing digital initiatives to solidify this shift, with continued growth in both revenue and margin expected for the 2026 fiscal year.