9837.T

• Overall 2025 November Full Year Results

  • Revenue increased 17.2% year-over-year, gross profit increased 23% year-over-year, gross profit margin increased 1.5 percentage points year-over-year to 30% (the first time the company hit this full-year target), operating income increased 16.2% year-over-year to 3.333 billion yen. Revenue, operating income, and ordinary income all hit all-time records.
  • The 8th Mid-Term Management Plan's operating income target of 3 billion yen was achieved ahead of schedule, driven by structural reform results, new consolidation of two acquired subsidiaries (Ms.ID and Mitsuboshi Corporation), organic sales growth at existing businesses, and improved gross profit margin.
  • Net income included negative goodwill gain from the acquisition of Mitsuboshi Corporation recorded in Q3, and a goodwill impairment charge for Morito Scovill Americas taken to prepare for future risks. Goodwill impairment was done despite improving profitability, amid uncertain U.S. consumer demand and accelerating localization of apparel production.

• 8th Mid-Term Management Plan (2022 November Term – 2026 November Term) Progress

  • Structural Reform: In 2022, the original operating company Morito Japan was split into three separate business companies (Apparel, Product, Transportation), which clarified business challenges, drove review of unprofitable/sales-only focused businesses, changed evaluation frameworks, revised sales terms, and greatly improved gross margin, operating income, and internal awareness of inventory and cash management. Free cash flow has improved sharply since the 2023 November term, and the "build a lean profit structure" core pillar progressed faster than expected. The second core pillar "proactive investment for the future" is also progressing steadily, including increased capital expenditure and two M&A deals completed in 2025.
  • Environmental Initiatives: The company's Rideeco environmental program, centered on full domestic waste fishing net utilization product MURON, hit 860 million yen in revenue in 2025, in line with expectations. Collaboration across industries since 2022 has increased outreach beyond apparel brands, and the company targets 1 billion yen in revenue for this business in 2026 with ongoing new product development.
  • BtoC Business Focus: Consolidation of Ms.ID grew BtoC revenue to nearly 4x the previous level, and the company will pursue synergy between Ms.ID's sales expertise and existing BtoC brands going forward.
  • Investment Strategy: Land was purchased for expansion of the company's own factory in Vietnam. Cumulative investment from the 2024 November term in kitchen equipment service facility upgrades (land, buildings, equipment) totals 1.85 billion yen, equal to over 70% of the planned investment quota. Two M&A deals were completed, shareholder returns are delivered consistently, and generated cash is reinvested to improve ROE.

• Capital and Shareholder Return

  • The company's estimated cost of equity is 6.4% per CAPM/earnings yield models, and management recognizes the market expects an 8% return. ROE improved annually from 2020 to hit 7.4% in 2025, and the company targets early achievement of 8% ROE. PBR is currently above 1x, but further improvement requires maintaining/improving PER and increasing ROE further.
  • The company is pursuing ROE improvement via post-merger integration of the two 2025 acquisitions to improve capital efficiency, margin, and create synergy, and will expand IR activity to communicate growth prospects to investors. The company will also explore expanding operating income and utilizing interest-bearing debt in the next mid-term plan to reduce WACC and increase ROIC.
  • Dividend policy is based on three pillars: stable and continuous dividends, 50%+ payout ratio target, 4% DOE target. The 2026 November full year forecast dividend is 72 yen per share, up 2 yen year-over-year, marking 6 consecutive years of dividend increases.
  • The company approved a new share repurchase program, driven by the view that the current share price remains undervalued and to control net assets to improve ROE.

• For 2026 November full year, management forecasts revenue of 63 billion yen, operating income of 3.5 billion yen, and net income of 3 billion yen. This is significantly above the original 8th Mid-Term Management Plan targets of 60 billion yen revenue and 3 billion yen operating income.
  • Operating profit margin is expected to remain at the same level as 2025, despite upward pressure from increasing personnel costs. Revenue and operating income are both expected to hit new all-time highs.
  • Gross profit margin is targeted to stay at or above 2025 levels. Mitsuboshi Corporation will pursue synergy via intra-group procurement to improve its gross profit margin.
  • By segment growth outlook:
  • Apparel Related Business: Demand for sports-related products is expected to increase due to large-scale sporting events (soccer, baseball). Demand for workwear materials (including air-conditioned workwear) will remain solid, and full-year consolidation effect of Ms.ID (including planned new store openings for its silver accessory brand TEN.) is expected to add growth.
  • Product Related Business: Game-related products, heatwave countermeasure products, and kitchen equipment services are expected to remain solid. Snowboard-related products are expected to recover year-over-year driven by the Winter Olympics and strong ski resort activity from heavy snowfall. The company will continue reviewing its supply chain while monitoring procurement risk from China-U.S. tensions.
  • Transportation Related Business: Inquiries leveraging the Mexico facility are increasing driven by U.S. trade policy, and the company is building capabilities to win new domestic production projects from Japanese automakers. While the overall business environment remains challenging, the company targets results above 2025 levels.
  • The next mid-term management plan is currently being developed for disclosure around summer 2026.

By product business segment:

1. Apparel Related Business: Revenue increased 34.3% year-over-year, driven by new consolidation of Ms.ID and Mitsuboshi Corporation. Strong performance in Japan across sports/outdoor goods, department store apparel sub-materials, silver accessories, uniform related materials, and bear repellent spray. In Asia, casual wear sales decreased slightly due to specification changes, but workwear accessories for Europe/North America and Vietnam sales remained solid. This segment accounts for 54% of total consolidated operating profit.
2. Product Related Business: Overall revenue increased 2.6% year-over-year. The active sports category (led by snowboard related products) struggled, but game-related products (such as controller storage cases), heatwave countermeasure products (such as battery cases for air-conditioned workwear), and kitchen equipment related services were strong. The segment has a sub-segment Product M (acquired product businesses), which holds 16% of total operating profit; combined the entire Product Related segment accounts for approximately 36% of total operating profit.
3. Transportation Related Business: Revenue decreased amid external headwinds. North American operations are in an expansion trend, but sales to Japanese automakers in China were sluggish, and the segment was impacted by a withdrawal from some European operations for efficiency gains. This segment accounts for 10% of total consolidated operating profit, and the European withdrawal had a positive impact on profitability.

By region:

• Japan and Europe/North America: Revenue increased
• Asia: Revenue decreased slightly, driven by lower Transportation Related sales centered in China

• U.S. consumer demand uncertainty and accelerating localization (local for local production) in the apparel industry are long-term risks for Morito Scovill Americas, leading to a full goodwill impairment charge in 2025 even as profitability improves.
  • Stagnation in the women's apparel market, impacts of warm winter, production cuts by U.S. brands driven by U.S. trade policy, and unclear inbound demand are downside risks for Apparel Related Business.
  • Procurement risk from geopolitical tensions related to China remains, requiring ongoing supply chain review.
  • China's business environment for Transportation Related Business remains challenging, and order reductions driven by U.S. trade policy and automaker specification changes in North America are expected.
  • The global geopolitical and trade environment remains highly uncertain, leading management to take a conservative approach to 2026 forecasting.

• Q: Regarding the Tokyo Stock Exchange's TOPIX review, there is a possibility the company could be removed from the index. What countermeasures is the company pursuing now and in the future?

A: The company has implemented all standard expected measures for maintaining index inclusion. Regardless of TOPIX inclusion outcome, management will focus on growing the full business, achieving 8% ROE early, improving corporate recognition, and expanding IR activity to help investors properly value the company. TOPIX inclusion is just one outcome of the company's broader focus on growth and shareholder value creation.

• Q: Which of the three business segments will be the main growth driver in 2026? Outside of the two newly consolidated acquired companies, which existing businesses will contribute meaningfully?

A: Apparel Related Business will deliver the largest growth, and already makes up over 50% of total revenue, so it will be the most important driver. Both newly acquired companies are part of the Apparel Related segment. Outside of the acquisitions, management expects particular contribution from workwear materials such as air-conditioned wear for hot weather, sports-related materials, and the kitchen equipment related service business within the Product segment.

• Q: What is the breakdown of revenue growth contribution between existing businesses and the two newly consolidated companies? Did existing businesses also deliver strong growth?

A: On average, existing businesses delivered 3% year-over-year revenue growth, with the remaining growth coming from the two M&A deals.

• Q: What are the key priorities for the next mid-term management plan that management can share already?

A: First, amid accelerating localization of production and sales, the company will focus on global manufacturing, sales, and procurement against a backdrop of ongoing Japanese population decline. Achieving 8% ROE early is a mandatory priority for capital cost and share price focused management. Second, ongoing supply chain review remains an important priority given increasing geopolitical risk.

• Q: What is causing the stagnation in the women's apparel market, and will it impact Ms.ID?

A: Stagnation is driven by factors including population decline and warm winter, which may cause some slowdown in the supply of women's apparel sub-materials (the company's existing exposure to women's apparel). However, Ms.ID sells finished silver accessory products, so it has little direct connection to the women's apparel sub-materials market. Ms.ID is currently expanding overseas sales of its silver accessories, and management will continue developing countermeasures as needed.

• Q: What does the note about potential full-year consolidation impact from Mitsuboshi Corporation mean for 2026? Could it push down group gross profit margin, and is a flat full-year group margin a reasonable expectation?

A: Mitsuboshi Corporation's business is assembling and supplying mixed component sets to customers, which includes both high and low gross margin products. Its overall average gross margin is slightly lower than Morito Group's current average, which is a known fact that both sides are addressing. The company is actively pursuing margin improvement via intra-group procurement. The 2026 forecast incorporates a cautious view that accounts for risks from the highly uncertain global geopolitical and trade environment.

• Q: What is the current profitability status of Morito Scovill Americas?

A: While individual specific numbers are not disclosed, operational efficiency has improved, the business is profitable (not in deficit), and profitability is improving. However, management expects apparel manufacturing will continue to localize away from the U.S. for cross-border supply chains, so the business is being managed appropriately to account for this long-term trend.

• Q: What caused the strong growth of Apparel Related Business amid broader weak apparel market conditions? Was it driven by BtoB or BtoC, and was it due to strong customer matching?

A: The new consolidation of Ms.ID contributed the largest portion of the numerical growth, and core growth is driven by BtoB. The company has gained new customers, who increasingly recognize the added value Morito provides. Growth of the Apparel segment is driven by new customer acquisition plus new opportunities from collaboration with Mitsuboshi Corporation that open up new fields and customer segments.

• Q: Is Morito Scovill Americas expanding its black ink or is it already profitable?

A: It can be understood that the business is expanding its profitable operations.

• Q: What is the achievement probability of the 2026 targets, and what specific initiatives support growth?

A: Growth will be delivered based on individual strategies for each business and group company. The two newly acquired companies were not consolidated for the full 2025 fiscal year, so full-year consolidation in 2026 will add additional revenue. Existing businesses are expected to deliver 3% to 5% year-over-year organic growth in 2026.