MARUI GROUP CO.,LTD. Q2 FY2026 earnings call

Long-Term Vision and 'Supporting What You Love' Core Strategy

• Marui Group's vision is to build an 'economy driven by what you love', defined broadly to include all personal passions (pets, sports, culture, hobbies, etc.) not just celebrity fandom, with the goal of aligning profit and positive social impact.

• The strategy is built around three core pillars: themed cards, events, and original goods, with two key moats against imitation: integrated retail-fintech experiential value, and a unique corporate culture that enables cross-department collaboration and bottom-up innovation.

• 'Supporting What You Love' Themed Cards: Number of card programs grew from 88 to 130 in one year, with membership increasing from 1.01 million to 1.26 million. These cards have 2x-7x higher lifetime value (LTV) than standard cards, driven by a 61% younger demographic composition, 58% main-card rate (11 points higher than standard cards), and large untapped potential in regional markets outside the Tokyo metropolitan area (current regional share is just 5%, vs 16% in Tokyo area, for 9 million potential new members). Long-term target is 3 million members by 2031.

• 'Supporting What You Love' Events: First half sales grew 46% year-over-year to 5.2 billion yen, with new card acquisitions up 39% to 60,000. Average customer spend is 2.3x the store average, and daily new member acquisitions are 17x that of standard events. The company will shift focus from increasing total event count to expanding high-margin large-format events, targeting to more than double the number of 'Supporting What You Love' events by 2031 while cutting total overall event count to 80% of current levels.

• 'Supporting What You Love' Goods: First half total sales hit 5.2 billion yen, with full year guidance of 10 billion yen. In-house designed original goods reached 0.2 billion yen in first half sales, with full year guidance of 0.5 billion yen and a targeted gross margin of ~75%. The company enforces a strict 120% inventory sell-through policy (100% sell-through at in-store events, excess demand filled via e-commerce) to avoid past mistakes with private label inventory, targeting 12 billion yen in original goods sales by 2031 including wholesale and international expansion.

Strategic Updates

• The company will open up business ideation to external participants, launching the first open 'Supporting What You Love' contest in March 2026 to source ideas from creators, startups, students, and global participants.
• Prioritize increasing main-card adoption of themed cards: currently 85% of themed card members use them as secondary cards, with just 25% main-card penetration (compared to 58% for first-card themed members). The company will leverage lessons from the high-performing Epos Pet Card (40% main-card rate for originally secondary card users) and develop custom digital user experiences to increase main-card adoption, targeting an overall Epos card main-card rate of 35% by 2031, up from 22% today.
• Capital allocation: 23.7 billion yen of 24.1 billion yen in base operating cash flow was allocated to growth investment (10.9 billion yen) and shareholder returns (3.2 billion yen in buybacks, 9.6 billion yen in dividends). 5 billion yen was allocated to human capital investment, accounting for 28% of total personnel expense. Individual shareholder ratio reached a record 13% as of September 2025, and PER rose to 21.6x following a secondary offering of 10.28 million existing shares to individual investors.

1. Retail Segment: Reported operating profit of 5.1 billion yen, representing a 1.9 billion yen year-over-year increase, which exceeded pre-COVID-19 profit levels. The profit increase was driven by +0.8 billion yen from the tenant business (due to reduced vacant space and rising rent per tsubo), +0.6 billion yen from the 'Supporting What You Love' event business, and +0.2 billion yen from related businesses. As of September 2025, non-product sales tenants account for 65% of total retail space, up 3% year-over-year, continuing the shift to experience-focused tenants. 2. Fintech Segment: Reported operating profit of 25.4 billion yen, a 3.1 billion yen year-over-year increase (1.1 billion yen of this increase is organic, excluding the impact of accelerated securitization), marking the highest first-half operating profit in company history. Credit card transaction volume hit an all-time high of 1.2252 trillion yen, the merchant fee rate rose to 1.22% after an increase in foreign currency settlement fees in July 2025, and installment/revolving credit fee income grew 7% year-over-year to 31.5 billion yen. Total card members reached a record 8.11 million, with 1.26 million belonging to 'Supporting What You Love' themed cards; premium/gold cards plus these themed cards account for 62% of total membership.

• Full year 2026 March fiscal year guidance is maintained from initial plans: consolidated operating profit is forecast to grow 12% year-over-year to 50 billion yen, net profit is forecast to grow 5% to 28 billion yen, and recurring profit is forecast to grow 5% to 42 billion yen. All three core KPIs (EPS, ROE, ROIC) remain on track to meet initial targets.
• Segment full year guidance is also unchanged: Retail operating profit is forecast to grow 28% year-over-year to 11 billion yen, while Fintech operating profit is forecast to grow 7% to 47 billion yen. The company noted that higher-than-expected first half performance in tenant and event income will be offset by planned strategic expense investment in the second half to drive future growth, so full year guidance remains unchanged.
• The accumulated full year profit impact from the installment/revolving fee rate increase is forecast to be 10 billion yen, with 4 billion yen of impact recognized in FY2026 and 6 billion yen of impact expected in FY2027, with no change to this forecast.
• A 20 billion yen share repurchase authorization is maintained for the second half, to be used opportunistically if the share price does not reflect future earnings potential.
• Long-term 2031 targets: 35% overall main-card rate, 10 trillion yen in total group transaction volume, and a PBR of 3x-4x.

• Rising interest rates increase financial expenses, which have already risen 1.4 billion yen year-over-year in the first half; management continues to monitor interest rate movements closely.
• Smartphone contract payment penetration has underperformed expectations, as major carriers prefer to retain this business with their own installment plans, leading to stagnant or declining share in this category for Marui.
• While the 'Supporting What You Love' business has grown quickly, most of the current growth is concentrated in anime/gaming/character categories that require copyright holder approval, which imposes operational constraints on expansion.

Q: What high-potential fields is the company focusing on for future growth of the 'Supporting What You Love' business, given the strong performance of Epos Pet Card? / A: Currently the business is centered on anime, game, and character categories due to the company's historical background. The most promising new growth area is non-copyright 'love' categories, like pets. Unlike copyrighted content, non-copyright categories have no licensing requirements or constraints, making it much easier to develop events and original goods. Marui will leverage its retail heritage to focus on goods development in non-copyright categories, and expand into wholesale and overseas sales, taking advantage of strong global demand for Japanese content and culture.

Q: How does the current progress of main-card penetration align with the company's long-term goal of maximizing household share, and which categories are outperforming or underperforming expectations? / A: A main-card user is defined as a customer who uses Epos for more than 33% of their household spending. The largest driver of main-card growth has been rent payment via rent guarantee services, which is the largest household expense for most consumers and difficult for other card providers to offer, so this category has outperformed all expectations. The main underperforming area is smartphone contract payments, as major carriers prioritize their own in-house installment plans, so share has been lower than expected. The fastest growing current area is insurance premium payments, which benefits all three parties (cardholders get points, insurers reduce their payment processing costs, Marui gains household share), so the company is prioritizing this category along with other recurring payments like taxes to continue expanding household share.

Q: What is the gross margin target for in-house original 'Supporting What You Love' goods, and what is the growth outlook for this business? / A: The long-term gross margin target for original goods is 80%, up from the current ~75%. Marui applies lessons from its failed past private brand expansion, which suffered from large inventory write-downs, so it enforces a strict sell-first inventory policy to ensure high margins without excess waste. The company is targeting aggressive growth from 0.5 billion yen in full year FY2026 sales to 12 billion yen by 2031, which includes expansion into wholesale and international markets. Wholesale opportunities include partnerships with existing retail chains that sell niche anime and character goods.

Q: What is the company's approach to share buybacks and capital optimization after this new repurchase authorization, and is shareholder return expected to increase after 2026? / A: The new 20 billion yen repurchase authorization is opportunistic: it will only be used if the share price fails to reflect the company's future earnings potential. The separate 30 billion yen capital optimization target for after 2026 is a planned program to reduce excess capital as profits accumulate, which will go forward as scheduled. Shareholder return will increase gradually as excess capital builds up, with the timing and size of returns dependent on the company's capital position and profit growth.