Kintetsu Department Store CO.,Ltd. Q4 FY2026 earnings call

Core Competitive Advantages

• Extensive store network covering nearly the entire Kinki region, with a dominant position as the only department store in three prefectures, all stores located in high-convenience prime station-front locations.
• Flagship store Abeno Harukas Kintetsu Main Store, Japan's largest department store (100,000 sqm sales floor) in a major transport hub with 680,000 daily visitors, accessible to Kansai International Airport and Itami Airport within 30 minutes.
• Food category is the largest sales share segment, with a highly trusted basement food hall serving daily needs for the adjacent large residential catchment, differentiated with unique concepts like Haruchika Marche.
• Flexible mixed operating models: a shift from traditional tenant lease/consignment models to franchising and in-house operations, growing the franchise business to 20 billion yen in annual sales, which improves profitability and allows tailored store structures for local market needs.

2026 February Term Core Operational Results

• Strong performance from the core department store business, with significant revenue and profit growth driven by the Osaka-Kansai Expo official store outpost.
• Achieved the 6.5 billion yen consolidated operating profit target (for final mid-term plan year 2028) two years ahead of schedule, reaching 6.718 billion yen in 2026.
• ROE improved to 8.8%, nearing the 9.0% target.
• Cost structure reform reduced selling, general and administrative expenses by 6.8% compared to pre-COVID 2019, despite 3.27 billion yen in incremental Expo-related costs.

2027 February Term Key Strategic Initiatives

• Evolve to "Hyakkaten (Hundred Values)" Business: Focus on large-scale remodeling of the Abeno Harukas Kintetsu Main Store. Remodel 30% of the food section, with early remodeling of the confectionery section already driving 7% year-over-year sales growth, and a target of 10% sales growth for the newly renovated delicatessen section. The full food section remodeling targets 40 billion yen in sales (25% growth from 2024) by 2028.
  • Launch the monthly "Harukas Nippon Expo" event, a deep-dive prefecture-focused experience combining product sales, workshops, and cultural content to drive repeat visits.
  • Remodel upper floors to add new concepts: a beauty and wellness zone, gender-neutral next-generation fashion floor, experiential children's floor, and a personal concierge service.
• Maximize Abeno-Tennoji Area Appeal: Develop the combined 130,000 sqm "Harukas Town" across the main store, Hoop, and shopping centers, opening Japan's first CAPCOMIX themed entertainment facility in Hoop to attract younger consumers, which has already driven a 20% increase in foot traffic.
• Strengthen Foreign Business: Launch a dedicated young wealthy customer acquisition team, diversify the sales team with more young and female representatives, expand offerings to include Kintetsu Group products (real estate, hotels, etc.) leveraging group customer data, and integrate digital outreach.
• Regional Store Transformation: Restructure regional stores to focus on food and self-operated concepts on lower floors and attract complementary tenants/services to upper floors, with targeted concept introductions matched to each store's market (e.g., Hands, drugstores, local specialty markets) to improve profitability.
• Seed New Business Portfolio: Scale in-house agricultural business (already producing strawberries, launching mango cultivation and sixth-industry processed goods) and leverage Expo retail experience to grow original merchandise development and B2B corporate merchandise business, targeting 7 billion yen in incremental new revenue by 2030. Secure the official store contract for the 2027 International Horticultural Exhibition. Expand subsidiary business lines: grow Kinsou interior construction revenue from 7 billion yen to 10 billion yen by 2030, expand ready-to-eat food operations and enter new food service formats by 2028.
• Capital and Shareholder Focused Management: Target a 5.0%+ consolidated operating margin and 9.0%+ ROE, maintain a 20 yen per share dividend for 2026 and 2027 while investing in growth to enable future dividend increases, added online shareholder discount usage for remote shareholders, and achieved Tokyo Stock Exchange listing distribution requirements ahead of schedule.

• Wholesale and Retail (includes Sterne Kintetsu automobile business): Revenue of 15.024 billion yen, a 1.0% increase year-over-year. Operating profit of 0.196 billion yen, a 47.5% decrease year-over-year due to margin declines at Sterne Kintetsu.
• Interior Construction (Kinsou Co., Ltd.): Revenue of 4.47 billion yen, a 10.7% increase year-over-year driven by strong hotel construction orders. Operating profit of 0.788 billion yen, a 9.7% decrease year-over-year due to lapping high-margin projects from the prior year.
• Real Estate: Revenue of 0.34 billion yen, a 16.6% increase year-over-year following the July 2025 opening of the Abeno Wellness Terrace medical mall. Operating profit of 0.241 billion yen, an 11.5% increase year-over-year.
• Other: Revenue of 2.446 billion yen, a 14.3% decrease year-over-year, following the deconsolidation of subsidiary K Support in Q3 of the prior year. Operating profit of 0.057 billion yen, a 13.8% decrease year-over-year.

• For the full 2027 February Term, consolidated guidance is: 115 billion yen in revenue, 5.4 billion yen in operating profit, 5.2 billion yen in ordinary income, and 3.7 billion yen in net income attributable to parent shareholders, in line with prior mid-term plan expectations, with core profit (excluding Expo one-off benefits) expected to remain solid.
• For the 2027 February Term half-year, consolidated guidance is 56 billion yen in revenue, 1.8 billion yen in operating profit, 1.7 billion yen in ordinary income, and 1 billion yen in net income attributable to parent shareholders.
• Individual (parent-only) 2027 February Term full-year guidance is: 93 billion yen in revenue, 4.7 billion yen in operating profit, 4.3 billion yen in ordinary income, and 3.2 billion yen in net income (a 3% increase year-over-year).

• Inbound demand outlook is uncertain due to rising geopolitical risk, particularly after the deterioration of Sino-Japanese relations in late 2025. While inbound-related tax-free sales only account for 4.6% of total sales, limiting material impact to overall performance, near-term volatility is expected.
• Geopolitical instability creates macroeconomic uncertainty that may impact consumer spending and planned investment returns.
• Large-scale remodeling and new business initiatives carry execution risk that may impact planned revenue and profit targets.

No substantive question and answer exchange text is included in the provided transcript.