BOOKOFF GROUP HOLDINGS LIMITED Q4 FY2025 earnings call

• Overall 2025 Fiscal Year Consolidated Results

  • Consolidated sales: 119.25 billion yen; operating profit: 3.448 billion yen; ordinary profit: 3.903 billion yen, which marked a new all-time high, exceeding the 3.8 billion yen record set in 2012; net profit: 2.101 billion yen
  • The first quarter was boosted by cost cuts from pausing non-essential activities during an internal special investigation into a reported fraud incident, while the second quarter saw profit decline due to a sharp drop in purchase volumes after the incident was publicized. The third and fourth quarters delivered stable profit as purchase volumes recovered.
  • Operating cash flow reached 3.062 billion yen, with a slight decline driven by special investigation costs, while inventory management remained solid.

• Domestic Bookoff Business Strategic Initiatives

  • Continued store portfolio optimization: strategically closed smaller high-risk stores (100-150 tsubo) and replaced/opened new larger-format stores (average ~400 tsubo, with 1,000 tsubo superstore formats). 52 existing stores were renovated during the period, and overall sales per store and sales per tsubo improved steadily.
  • Improved customer experience and digital initiatives: Launched convenience features including after-hours purchase lockers, online purchase price lookup, and convenience store drop-off for mail-in purchase. App membership exceeded 9.32 million, with a target of 1.2 million; new POS system rollout was completed, and continued investment will focus on expanding purchase functionality.

• Premium Service Business Updates

  • Revised the 100-store by 2028 target to an open-ended long-term target, shifting focus to improving existing store performance over rapid opening. Completed a rebranding from BOOKOFF General Purchase Counter to Rehello, to better target first-time reuse customers for higher-value household goods, integrating in-store purchase and online sales under a unified brand.

• Overseas Business Strategic Initiatives

  • Two core segments: BOOKOFF USA targets 100 stores by 2033, expanding from coasts to large US megacities, and adding specialized anime stores to capitalize on strong demand for IP content. US book demand is growing, and BOOKOFF USA has seen parallel sales growth for books plus additional growth from hobby/IP categories. Jalan Jalan Japan, which sells Japanese-sourced reusable goods, targets 70 stores (up from an initial 50-store target) by 2028, across Malaysia and Kazakhstan, with a 100-store target by 2033. Switched from a joint venture to a franchise model in Kazakhstan to accelerate expansion.
  • Developed the R-LOOP platform to collect unused goods from Japanese consumers and businesses in partnership with local governments and third parties, to supply product for Jalan Jalan Japan expansion.

• New Business & Sustainability

  • New seed businesses: trading card specialty chain Japan TCG Center and organzing/estate cleanout services are both growing revenue but still operating at a loss, with a target to reach profitability within 3 years.
  • Advanced sustainability initiatives: endorsed TCFD for climate action, set carbon neutral targets, improved DEI and human capital practices, and ran community reuse programs including book donations to children's facilities.

All three core segments achieved year-over-year revenue growth:

1. Domestic Bookoff Business: Delivered revenue and profit growth, with direct operated existing stores achieving 104.6% of prior year sales. Stable sales from core books and soft media provided a base, while non-core categories (especially trading cards and hobby goods, driven by inbound demand) grew to exceed 20% of sales contribution. Inbound sales reached 161.6% of prior year levels, accounting for roughly half of total domestic revenue growth. The segment was the main driver of consolidated profit growth in the 2025 May fiscal year.
2. Premium Service Business: Achieved revenue growth (105.7% year-over-year purchase volume) but delivered lower profit than the prior year. Accelerated new store openings increased upfront staffing and opening costs, underperforming purchase volumes at new locations, and low selling efficiency for purchased apparel products pushed up costs, leading to the profit decline.
3. Overseas Business: Achieved revenue growth from new store openings but delivered lower profit than the prior year. BOOKOFF USA remained profitable and performed well, but early-stage startup losses from the new Kazakhstan operation and disrupted operations at existing Malaysian stores following rapid new store expansion dragged down overall segment profit.

• 2026 May Fiscal Year (current fiscal year) guidance:

  • Forecast consolidated sales of 127.0 billion yen, operating profit of 3.8 billion yen, ordinary profit of 4.0 billion yen, net profit of 2.2 billion yen, representing continued revenue and profit growth.
  • The dividend forecast is increased to 30 yen per share from the prior 25 yen per share, representing a dividend increase.
  • Overseas business is expected to be the main driver of profit growth, while domestic Bookoff business will see limited profit growth due to higher depreciation from new system investment and additional costs for fraud recurrence prevention measures.
  • The group plans to open more than 30 new stores across all business segments in the 2026 fiscal year.

• Mid-term 2028 May Fiscal Year guidance:

  • Upwardly revised the original target of 130.0 billion yen in sales and 4.5 billion yen in ordinary profit to 135.0 billion yen in sales and 5.0 billion yen in ordinary profit. The revision is driven by stronger than expected performance from the core domestic Bookoff business.
  • Maintains the target of 9% ROA (return on assets) to meet cost of capital thresholds.

• A past reported fraud incident led to an internal special investigation, a temporary sharp drop in purchase volumes in the first half of the 2025 fiscal year, and additional investigation costs that reduced operating cash flow. Additional prevention costs will continue to weigh on profit in the 2026 fiscal year.
  • For the Premium Service Business: increased competition from other purchase stores has made it harder to hit purchase targets, and low-margin low-value apparel has pressured profitability.
  • For Overseas Business: Rapid new store expansion in Malaysia disrupted existing store operations and caused performance declines; US expansion faces higher store fit-out costs due to inflation, and Trump administration tariffs on Japanese-sourced store fixtures increase upfront investment costs. While current strong IP demand offsets most pressure, changes in US consumer demand for IP goods or changes in tariff policy could impact profitability.
  • Domestic Bookoff Business faces rising minimum wages that increase labor costs for labor-intensive book and soft media operations, and the domestic primary book distribution market continues to face long-term headwinds that limit core sales growth.

Q: After the upward revision to the 2028 ordinary profit target of 5 billion yen, how does management expect profit growth to break down across segments, and what is the outlook for domestic Bookoff business?

A: The upward revision was driven by stronger than expected performance from domestic Bookoff. Going forward, domestic Bookoff is expected to focus on maintaining stable profits rather than delivering large profit growth, due to rising labor costs from accelerating minimum wage increases and ongoing headwinds in the domestic primary book market. Management will continue store conversion to larger formats to stabilize earnings. Premium Service Business will first focus on returning to its prior profit level of 300 million to 400 million yen by improving existing store performance before pursuing larger growth. Overseas business is expected to deliver meaningful profit growth via increased store openings centered in the US and Malaysia. Turning the currently unprofitable new businesses (trading card stores and organizing services) profitable is also a key part of hitting the 5 billion yen target.

Q: What impact could US tariffs from the Trump administration have on the US business, and what are the key risk factors for the US operation?

A: Most goods sold by BOOKOFF USA are purchased locally, so only a small share of total sales come from Japanese-sourced goods, meaning tariffs have minimal impact on ongoing product costs. The main impact is on investment costs: the company exports efficient Japanese-made book fixtures to US stores, and these fixtures are subject to high Trump-era tariffs that increase upfront opening costs. Rising local inflation also adds to investment costs. Management will mitigate pressure by adjusting local pricing to reflect costs while capitalizing on strong existing demand for IP and anime goods, so tariffs will not change the core US store expansion strategy. The company will continue to monitor tariff developments and adjust flexibly.

Q: What is the biggest change between this record ordinary profit and the 2012 record, what is the main driver of the current result?

A: The biggest change is the business portfolio transformation. In 2012, Bookoff relied almost entirely on core domestic book and soft media sales. Today, the company has expanded into new non-core categories (including trading cards, hobby goods, apparel, and luxury goods) within domestic stores, and built out two new high-potential growth segments: Premium Service for higher-income customers and overseas business. Inbound demand recovery has also boosted sales of non-core categories, helping deliver a new record profit even amid long-term headwinds for core book sales.