BEAUTY GARAGE Inc. FY2027 Q1 Earnings Report

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Executive Summary

In addition to revenue growth, operating leverage from improved gross margin and restrained SG&A expenses resulted in substantial profit growth, which was the defining feature of the quarter. Revenue was ¥10.25B (+13.7% YoY), operating income was ¥0.48B (+98.4%), ordinary income was ¥0.46B (+88.2%), and net income attributable to owners of the parent was ¥0.29B (+67.6%). While expansion of the core WholeSaling business and strong growth and improved profitability in Solution drove results, higher non-operating expenses and a ¥0.02B extraordinary loss somewhat restrained the growth rates of ordinary income and net income.

Factors Behind Performance Changes

【Revenue】Revenue increased 13.7% YoY to ¥10.25B. The core WholeSaling business, accounting for 84.5% of the total, grew 14.4% to ¥8.66B and drove overall growth, while Solution posted the strongest growth of 25.0% to ¥0.84B. In contrast, StoreDesign continued to decline, down 2.6% to ¥0.75B.

【Profit and Loss】The gross margin improved from 24.1% in the same period of the prior year to 25.0%. Since revenue growth of +13.7% exceeded the +8.3% increase in SG&A expenses, operating income rose substantially by 98.4% to ¥0.48B. Ordinary income increased 88.2% to ¥0.46B, constrained by the shift in non-operating income and expenses from net income in the prior year to net expenses in the current period. In addition, the recognition of a ¥0.02B extraordinary loss resulted in net income of ¥0.29B, up 67.6%, slightly below the growth rate of operating income. The company achieved both revenue and profit growth, with operating leverage from gross-margin improvement and SG&A control serving as the primary drivers.

Segment Analysis

WholeSaling generated revenue of ¥8.66B (+14.4%), operating income of ¥0.45B (+92.3%), and an operating margin of 5.2%, making it the core contributor to consolidated earnings. Solution generated revenue of ¥0.84B (+25.0%), operating income of ¥0.09B (+63.3%), and an operating margin of 11.2%, making it the most profitable segment and contributing to an improved company-wide business mix. StoreDesign generated revenue of ¥0.75B (-2.6%) and recorded an operating loss of ¥0.01B, with losses continuing and a recovery in profitability remaining a key issue. Against company-wide operating income of ¥0.48B, the adjustment for company-wide expenses and other items was -¥0.06B.

Key Financial Indicators

【Profitability】The operating margin was 4.6%, improving 1.9pt from 2.7% in the same period of the prior year. Together with a net profit margin of 2.7%, profitability remains at a level still undergoing improvement relative to the industry. The gross margin was 25.0% (24.1% in the prior year), while the EBIT margin was 4.6%.

【Cash Quality】While accounts receivable decreased by ¥0.25B YoY, inventories increased by ¥0.13B, requiring continued monitoring of the consistency between inventory turnover and revenue recognition. Accounts payable decreased by ¥0.31B, with the reduction in trade payables tending to somewhat increase working capital requirements.

【Investment Efficiency】Annualized ROE was 13.2%, with improved profit margin making the largest contribution among the three components of the DuPont analysis: net profit margin, total asset turnover, and financial leverage. Annualized total asset turnover was approximately 2.2x, indicating asset efficiency characteristic of a distribution-oriented business.

【Financial Soundness】The equity ratio was 48.6% (45.2% in the prior year). Interest-bearing debt was primarily long-term borrowings of ¥2.04B, Debt/Capital remained low, and interest coverage was also high, indicating a sound financial base.

Cash Flow Analysis

Although direct data from the cash flow statement is unavailable, an analysis of funding trends based on balance sheet movements indicates that cash and deposits stood at ¥3.29B, down from ¥3.54B in the same period of the prior year. Accounts receivable stood at ¥3.73B, down ¥0.25B YoY, indicating progress in collections, while inventories increased by ¥0.13B to ¥3.86B, including a ¥0.07B increase in work in process. Accounts payable decreased by ¥0.31B to ¥2.61B, and the reduction in trade payables may have created additional working capital requirements. Advances received stood at ¥1.16B, an increase of ¥0.06B, indicating higher cash receipts associated with orders. Long-term borrowings decreased by ¥0.20B to ¥2.04B, trending toward a modest reduction in financial leverage.

Quality of Earnings

The gap between operating income of ¥0.48B and ordinary income of ¥0.46B resulted from non-operating expenses of ¥0.03B, including ¥0.01B in interest expense, exceeding non-operating income of ¥0.01B. The shift from net non-operating income in the prior year to net non-operating expenses in the current period warrants attention when assessing earnings quality. The ¥0.02B extraordinary loss was a temporary factor, while the effective tax rate of 32.8% also contributed to the reduction from pretax income of ¥0.44B to net income of ¥0.29B. Increases in inventories and work in process are accrual-related factors requiring consistency with future revenue recognition. The simultaneous decreases in accounts receivable and accounts payable should also be monitored continuously when evaluating the quality of cash conversion. Comprehensive income was ¥0.30B, approximately in line with net income attributable to owners of the parent of ¥0.27B, and no significant divergence arose from valuation differences on other securities or foreign currency translation adjustments.

Earnings Forecast and Guidance

The full-year forecasts are revenue of ¥43.15B (+13.0%), operating income of ¥2.22B (+46.0%), and ordinary income of ¥2.20B (+46.0%), with no revisions as of the current quarter. Q1 progress rates were 23.8% for revenue, 21.4% for operating income, and 20.2% for profit attributable to owners of the parent, all below a simple 25% run rate. In particular, the Q1 operating income growth rate of +98.4% substantially exceeded the full-year plan of +46.0%; whether this high pace of profit growth can be sustained throughout the year will be the key focus for achieving the full-year targets.

Shareholder Returns

The full-year dividend forecast is ¥18.0 per share, representing a planned increase from the prior-year dividend of ¥8 (combined interim and year-end dividends). There has been no revision to the dividend forecast. The payout ratio based on forecast EPS of ¥107.71 and dividends only is 16.7%, representing a conservative level of shareholder returns that is substantially below benchmarks such as 60%. Retained earnings of ¥7.20B provide a meaningful base of internal reserves supporting dividends. The company holds ¥0.23B in treasury shares, but no data on share repurchases during the current period is available. Accordingly, the 16.7% figure is the payout ratio, not the total return ratio.

Risk Factors

1. Segment concentration risk: WholeSaling accounts for 84.5% of revenue, meaning that a slowdown in demand, higher procurement prices, or intensifying competition in this business would have a significant impact on company-wide performance.

2. StoreDesign profitability: Revenue declined 2.6% YoY and the segment continues to report an operating loss of ¥0.01B. If improvement in project profitability is delayed, it could constrain the scope for improving the company-wide profit margin.

3. Absolute level of profitability: Both the operating margin of 4.6% and net profit margin of 2.7% are below 5%. If the gross margin declines or SG&A growth accelerates again, there is a risk that the thin profit margins will be compressed rapidly.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (trading)

Profitability and Returns

The operating margin is slightly above the industry median, while the net profit margin is below the median, indicating that profitability at the non-operating and tax stages compares unfavorably with that of the industry.

Growth and Capital Efficiency

The revenue growth rate substantially exceeds the industry median, positioning the company among the industry’s high-growth businesses.

Source: Compiled by the company

Key Takeaways from the Earnings Release

1. The background to the substantial increase in operating income of +98.4% against revenue growth of +13.7% was operating leverage resulting from gross-margin improvement of +0.9pt and an SG&A expense growth rate of +8.3%, both of which lagged revenue growth.

2. Solution is contributing to an improved company-wide business mix through high growth in both revenue and profit and an operating margin of 11.2%. At the same time, the continued losses at StoreDesign and high revenue dependence on WholeSaling (84.5%) are structural characteristics of the business portfolio.

3. Q1 progress toward the full-year operating income forecast was 21.4%, slightly below an even run rate. Whether the high profit growth rate observed in Q1 can be sustained will be a key factor in determining the likelihood of achieving the full-year plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥813–¥862 at a ±1% change in the cost of equity, and ¥834–¥842 at a change of ±0.1 in ω.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).
• Since 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: 2026-08 / 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 future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release 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, and you should consult a professional advisor as necessary.

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