Tokyo Lifestyle Co., Ltd. Q4 FY2022 earnings call

• Successfully completed Initial Public Offering in January 2022 and listed on NASDAQ.
• Actively expanded business by adding more stores and wholesale customers.
• Implemented strict COVID-19 prevention measures.
• Generated record revenue despite COVID-19 impact.
• As of August 15, 2022, had 11 directly operated physical stores in Japan, 5 in Hong Kong, 25 online stores, etc.
• Continue to expand business broadly and optimize international warehouse operations in North America.
• Focus on diversifying products and providing more options for customers.
• Remain focused on high-quality products and invaluable service to attract new customers.

For fiscal year 2022, total revenue was $228.4 million, an increase of 3.1% from the previous year. Revenue from directly operated physical stores decreased by 53.3% to $10.8 million. Revenue from online stores increased by 8.7% to $121.2 million. Revenue from franchise stores and wholesale customers increased by 19.1% to $96.4 million. Gross profit decreased slightly by 2.3% to $39.1 million, with an overall gross margin of 17.1%. Operating expenses increased by 11.5% to $32.7 million. Net income was $3.3 million, and basic and diluted earnings per share were $0.10. Directly operated physical stores contributed approximately 4.73% to total revenue, online stores contributed approximately 53.06%, and franchise stores and wholesale customers contributed approximately 42.21%.

• Expect to achieve approximately 11% increase in revenue in fiscal year 2023 for overseas e-commerce business.
• Confident in the flexibility and resilience of the business model and strategic development initiatives.

• Uncertainties and challenges caused by COVID-19 affecting the business.
• Potential low transportation costs, high advertising expenses, and facility-related costs.

Q: What are the approaches for the company to optimize international warehouse operations in North America?

A: Currently negotiating with potential partners regarding overseas established warehouses, plan to build several large integrated warehouses in the US, Canada, etc., to quickly supply goods to franchise stores and wholesalers, and made the same strategic arrangement in Hong Kong.

Q: What do you expect to see the business of the physical stores and the outlook for the next fiscal year?

A: Excited about tourism recovery in Japan, believe physical store sales will pick up gradually, working to attract more customers by developing live streaming income business, setting up spaces for live streaming in stores, reassessing business model, and taking measures like adding billboards and promotional activities.

Q: Does the company plan to expand product lines besides beauty and healthy products?

A: Working hard to enrich product offering, currently sole retailer to offer trendy toys and rail lines, developing private label products like shampoo, shower gel, etc., and an experienced expert in medical device field joined to develop more new products.

Q: Could you please elaborate the company's initiatives to improve the profitability?

A: Enhance brand awareness, refine product management, reduce shipping costs, optimize operations, diversify marketing, invest in advertising campaigns, expand physical stores, import Japanese inventory management system to overseas warehouses, contract with job recruitment agents to recruit experienced employees, diversify sales channels and market development, expand EC channel in UK and Southeast Asia, open new warehouses and franchises in North America, and develop wholesaler customers.