BEAUTY GARAGE (3180) FY2026 Q3 Earnings Report

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Executive Summary

The cumulative results for the nine months ended April 2026 showed higher revenue but lower profits, with the key feature being that revenue growth failed to offset the decline in profit margins. Revenue was ¥278.4B (+13.8% YoY), Operating Income was ¥8.9B (-11.9%), Ordinary Income was ¥8.9B (-12.6%), and Net Income was ¥6.1B (-8.6%). The gross margin declined by approximately 1.2pt to 24.1%, and the improvement in the SG&A expense ratio (20.9%, an improvement of approximately 0.2pt) was insufficient to offset this decline, which was the primary cause of the decrease in profit.

Factors Affecting Results

【Revenue】Revenue was ¥278.4B, maintaining double-digit growth of +13.8% YoY. By segment, GoodsSales (Merchandising Business) generated ¥230.3B (+12.9%, 82.7% of revenue), StoreDesign (Store Design Business) generated ¥26.5B (+13.4%), and OtherRelatedSolution (Solutions Business) generated ¥22.3B (+25.6%); all segments recorded revenue growth. Cosmetics and other products drove revenue in the Merchandising Business, while the Solutions Business posted the highest growth rate.

【Profit and Loss】Operating Income was ¥8.9B (-11.9% YoY), Ordinary Income was ¥8.9B (-12.6%), and Net Income was ¥6.1B (-8.6%), representing declines in all three measures. The gross margin declined from 25.3% in the same period of the previous year to 24.1%, with the increase in the cost-of-sales ratio being the primary cause of the decline in profit. By segment, Operating Income in GoodsSales deteriorated to ¥7.9B (-6.9%, margin of 3.4%), while StoreDesign declined significantly to ¥0.4B (-66.1%, margin of 1.6%). Only OtherRelatedSolution secured higher profit, at ¥2.5B (+6.6%, margin of 11.0%). Extraordinary income, including a gain on the sale of fixed assets of ¥0.2B, partially boosted Profit Before Tax; however, the divergence between Ordinary Income and Net Income was primarily attributable to the portion belonging to non-controlling interests (¥0.5B), and the impact of temporary factors was limited. In conclusion, the Company recorded higher revenue but lower profits.

Segment Analysis

GoodsSales (Merchandising Business) is the core business, accounting for 82.7% of revenue. While revenue increased by +12.9%, Operating Income declined by -6.9% (margin of 3.4%, down YoY), making it the primary cause of the deterioration in the overall profit margin. StoreDesign (Store Design Business) grew revenue by +13.4%, but Operating Income declined by -66.1% (margin of 1.6%, down significantly from 5.3% in the previous year), making it the business with the greatest deterioration in profitability. OtherRelatedSolution (Solutions Business) was the only one of the three businesses to achieve both higher revenue and higher profit, with revenue up +25.6% and Operating Income up +6.6% (margin of 11.0%), while maintaining a relatively high profit margin. Overall, growth has spread across all three businesses, but profit growth is limited to the high-margin Solutions Business.

Key Financial Metrics

【Profitability】The Operating Income margin was 3.2%, down approximately 1.0pt from 4.2% in the same period of the previous year, while the Net Income margin remained at approximately 2.2%. The primary cause was the decline in the gross margin to 24.1% from 25.3% in the previous year; this was not offset by the improvement in the SG&A expense ratio to 20.9% from 21.1%.【Cash Flow Quality】Although extraordinary income of ¥0.2B, consisting of a gain on the sale of fixed assets, was recorded, its ratio to Profit Before Tax was small, and there was no significant divergence from the recurring earnings structure. Non-operating income and expenses were approximately balanced (income of ¥0.4B and expenses of ¥0.4B), indicating limited reliance on sources of profit outside the core business.【Investment Efficiency】Annualized ROE was 9.9%, achieved alongside a relatively high Equity Ratio of 48.3%. Tangible fixed assets increased significantly from the previous year, and the monetization of investments will need to be monitored through future trends in profit margins.【Financial Soundness】The Equity Ratio was 48.3% (approximately 48.4% in the previous year), remaining nearly flat. Although long-term borrowings increased, the Company maintained a structure in which current assets significantly exceeded current liabilities.

Cash Flow Analysis

As the cash flow statement has not been disclosed, funding trends are assessed based on changes in the balance sheet. Cash and deposits were ¥32.3B, down from ¥44.5B in the previous year, while tangible fixed assets increased significantly, suggesting that funds were invested in capital expenditures. At the same time, long-term borrowings increased to ¥24.7B, indicating that investments were advanced through the use of external financing. Trade payables declined, potentially contributing to the decrease in cash by reducing funding obtained through trade liabilities. Current assets remained substantially above current liabilities, preserving short-term financial flexibility.

Earnings Quality

The current period’s profit was generated largely from recurring business activities, with a limited impact from non-recurring items. Extraordinary income of ¥0.2B, consisting of a gain on the sale of fixed assets, was small relative to Profit Before Tax of ¥9.1B and was not large enough to materially distort earnings quality. Non-operating income and expenses nearly offset each other, at income of ¥0.4B and expenses of ¥0.4B, indicating limited reliance on non-business income such as foreign exchange gains and interest income. Meanwhile, the structural change in profitability represented by the decline in the gross margin was the primary cause of the decrease in Operating Income. This is not a temporary factor but relates to the profitability structure of the business and therefore requires close monitoring. The increase in inventories from the previous year may also affect future cash-generation capacity as an indication of inventory accumulation relative to revenue growth.

Earnings Forecast and Guidance

Progress against the full-year earnings forecast was 72.9% for Revenue (forecast of ¥381.9B), 59.3% for Operating Income (forecast of ¥15.1B), and 58.9% for Ordinary Income (forecast of ¥15.1B). Revenue was nearly in line with a standard progress rate (approximately 75%), but progress on profit was behind schedule, requiring a significant improvement in the profit margin during Q4. The full-year forecast itself anticipates a -5.3% YoY decline in Operating Income, indicating that management’s plan assumes a temporary decline in profitability. There were no revisions to the earnings forecast or dividend forecast during the quarter.

Shareholder Returns

The Q2 dividend was ¥8.00 per share, while the full-year forecast dividend is ¥16.00. Based on forecast full-year Net Income of ¥10.11B, the forecast Payout Ratio is approximately 19.8%, substantially below the general sustainable benchmark of approximately 60%. Given the financial foundation of net assets of ¥82.9B and an Equity Ratio of 48.3%, the current dividend plan can be characterized as placing a relatively light burden on earnings. No disclosure regarding share repurchases was made, and this report presents the Payout Ratio as dividends only.

Risk Factors

1. Deterioration in profitability due to the decline in the gross margin: The gross margin declined by approximately 1.2pt from 25.3% in the same period of the previous year to 24.1%, while the Operating Income margin narrowed to 3.2%. Product mix and fluctuations in procurement costs are at levels that have a significant impact on company-wide profit.

2. Deterioration in the profitability of the Store Design Business: Operating Income declined by -66.1% against revenue growth of +13.4%, and the profit margin plunged from 5.3% to 1.6%. Improving project-level profitability and construction cost management will be key challenges.

3. Expansion of capital expenditures and increase in borrowings: Long-term borrowings increased significantly YoY alongside a substantial increase in tangible fixed assets, while cash and deposits declined. If the monetization of investments is delayed, the impact on capital efficiency may persist.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (trading)

Profitability and Returns

The Company’s profitability is slightly below the industry median.

Growth and Capital Efficiency

The Revenue growth rate is significantly above the industry median, representing a high growth pace within the industry.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Revenue increased across all three businesses, securing double-digit growth of 13.8%. At the same time, Operating Income and Net Income declined by double digits, making the divergence between growth and profitability the structural feature of the current results.

2. Only the Solutions Business achieved both higher revenue and higher profit, while securing a high profit margin of 11.0%. Expansion of this business and improvement in the profitability of the core Merchandising and Store Design Businesses will be key to improving the company-wide profit margin.

3. Progress against the full-year Operating Income forecast was 59.3%, a significant gap from the Revenue progress rate of 72.9%. The trend in the profit margin during Q4 will be the key determinant of whether the full-year plan is achieved.

Theoretical Share Price (Reference Value)

Sensitivity: ¥695–¥737 at Cost of Equity ±1%, and ¥714–¥718 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing gap relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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