Marui Group Co., Ltd. (8252) Earnings Call Transcript & Summary

Since it is time, we will now begin the Marui Group Company Limited financial results briefing for the second quarter of the fiscal year ending March 2026. Thank you for joining us today despite your busy schedule. Today's materials are available for download from our corporate website. Please refer to the summary of second quarter financial results for the fiscal year ending March 2026. Regarding today's agenda, we will provide an approximately 30 minutes of presentation followed by a Q&A session. To provide a detailed explanation of the progress and future direction of our business supporting Suki, materials related to business performance are included in appendix. Please note this briefing is being streamed from the Co-Creation Lounge, a collaborative communication space opened at Marui Group headquarters this September. Recording of this session will be available on our company website at a later date. Today's presenters are Director, Senior Managing Executive Officer and CFO, Hirotsugu Kato, he will be explaining about the financial results and the business progress. Next, regarding the progress of the business that supports Suki and the outlook, it will be presented by our President, Representative Director, Representative Executive Officer, Hiroshi Aoi. In addition to these 2 people, we will have Udaka, our IR Director, that will be answering during the Q&A session. These would be the topics that we will be covering today. Our CFO will first explain.

Hi, this is Kato speaking. I will be explaining about the overview of the financial results briefing for second quarter of FY ending March 2026 as well as the progress that we've been able to make. Let me first talk about the financial highlights. The total group transaction volume increased by 10% to JPY 2.6137 trillion. The second quarter saw a recovery to double-digit growth, continuing to set new records. Consolidated operating profit rose 23% to JPY 26.4 billion. Excluding the year-on-year impact of securitization, underlying operating profit increased 14% to JPY 24.4 billion. By segment, Retail increased profit by JPY 1.9 billion to JPY 5.1 billion, exceeding pre-COVID levels. FinTech increased profit by JPY 3.1 billion to JPY 25.4 billion, a record high for the first half. Ordinary profit rose 17% to JPY 23.1 billion, steadily expanding the profit margin despite increased financial expenses. Net income rose 22% to JPY 14.8 billion, marking the fourth consecutive quarter of profit growth. Financial indicators. Total group transaction volume reached a record high of JPY 2.6137 trillion, with both operating profit and net income showing significant increases surpassing pre-COVID levels. Nonoperating income and expenses as well as extraordinary gains and losses. Nonoperating expenses increased by JPY 1.4 billion compared to previous year, primarily due to rising interest rates. Ordinary income expanded steadily, increasing by 17%. Extraordinary gains and losses contributed to profit growth driven by factors such as gains from the sales of cross-shareholdings and the absence of impairment losses on stores recorded in the previous year. As a result, net income increased by 22% to JPY 14.8 billion. Trends in segment-specific revenue and operating profit. Retail operating profit exceeded pre-pandemic level, reaching JPY 5.1 billion. FinTech OP also steadily expanded its profit margin, achieving a record high of JPY 25.4 billion. Both segments resulted in increased revenue and profit. Next, the breakdown of changes in operating profit. Retail is plus JPY 1.9 billion, FinTech plus JPY 1.1 billion. Corporate eliminations, minus JPY 0.1 billion. Excluding the impact of debt securitization, underlying operating profit increased by JPY 2.9 billion. The impact of accelerated debt securitization amounted to JPY 2.0 billion, resulting in a JPY 4.9 billion increase in consolidated operating profit. Details will be explained later. Next, update on Retail. Tenant revenue increased by JPY 800 million due to reduced vacant space and higher unit prices. Event revenue rose by JPY 600 million, driven by strong large-scale events. Related businesses also performed well, contributing to an additional JPY 200 million. Overall operating profit increased by JPY 1.9 trillion. Factors contributing to increased tenant revenue. Tenant revenue increased by JPY 800 million due to a decrease in unutilized floor space and an increase in monthly rent per square meter. Status of unoccupied section decreased from 6,800 Tsubo last year to 5,200 Tsubo. The stores that don't sell as of the end of September 2025, the area ratio of non-retail tenants reached 65%, a 3% increase year-on-year driven by the introduction of experiential tenants and other factors advancing to category conversion. We plan to increase the composition of non-retail tenants to 70% by the end of March 2026. We are increasing the number of experiential tenants such as opening Pokémon Center Fukuoka at Hakata Marui in June 2025, and we'll continue to introduce experiential food and service tenants that delight our customers. Next is update on Fintech. Excluding securitization of receivables, core operating profit increased by JPY 1.1 billion due to higher revenues and reduced point expenses. Segment profit rose by JPY 3.1 billion, driven by factors, including the acceleration of securitization activities in response to the increase in installment and revolving loan fee rates implemented in the second half of the fiscal year. Credit card transaction volume reached a record high of JPY 1.2252 trillion. The merchant fee rate for the second quarter increased to 1.22% following the foreign currency settlement fee hike implemented in July 2025. This slide shows the trend in installment and revolving payment fees. In the first half, the total installment and revolving payments increased 11% year-on-year, while fee income grew steadily by 7% to JPY 31.5 billion. This chart shows the year-on-year trend in installment and revolving transaction volume. Even after we announced the fee rate revision at the end of June, transaction volume has remained stable, and we expect fee income to continue expanding in line with our assumptions. Next is the status of new card memberships. In the first half, new memberships totaled 430,000, an increase of 30,000 from the previous year, driven by the continued expansion of the EPOS card that supports Suki. Turning to Gold cards. The number of new Gold Card memberships reached a record high 180,000 in the first half that was supported by our Start from the Gold initiative under which customers using services such as rent guarantees are invited to join as Gold Card members from the outset. As a result, the total number of cardholders reached a record high of 8.11 million. Memberships in the cards that support Suki category reached 1.26 million. And when combined with Platinum and Gold Card members, these now account for 62% of all cardholders, making a continued expansion of the high-grade membership base. Next, on balance sheet and capital allocation. Total assets increased by JPY 85.4 billion from the end of the previous fiscal year to JPY 1.1388 trillion, mainly due to higher operating receivables. The equity ratio declined 1.4 points to 22%. Now the capital allocation. Out of JPY 24.1 billion in basic operating cash flow, JPY 23.7 billion was allocated for growth investment and shareholder returns, JPY 10.9 billion for growth investment, JPY 3.2 billion for share buybacks and JPY 9.6 billion for dividends. Human capital investment totaled JPY 5 billion, accounting for 28%. Next is our initiative to expand the number of individual shareholders and the movement of our PER. In the earnings call in May, we explained that we aim to lower our data value and raise our PER by expanding our base of individual shareholders. In July, we sold 10.28 million shares previously held by 5 cross-shareholding companies to about 10,000 individual investors. Since then, additional purchases have continued. And as of the end of September, the proportion of individual shareholders reached a record high of 13%. Our PER has performed strongly since the offering and reached 21.6x in September. As for ESG, in October 2025, Marui Group received a visionary award from the Women Corporate Directors, WCD, the world's largest organization supporting female Board members becoming only the third country -- company in Japan to receive this recognition. We were commended for promoting diversity in decision-making and establishing an effective governance framework through organizational and cultural reform. Finally, the full year forecast. We expect to achieve our 3 key KPI targets, EPS, ROE and ROIC exactly as planned at the beginning of the year. Operating profit is projected to rise 12% to JPY 50 billion and net income to increase 5% to JPY 28 billion, both unchanged from initial guidance. We will continue to monitor interest rate trends, but ordinary profit is expected to increase 5% to JPY 42 billion, also in line with the plan. By segment, operating profit is forecast to increase 28% to JPY 11 billion for Retail and 7% to JPY 47 billion for FinTech, both unchanged. For the second half, retail expects strategic spending on promotion and marketing, but the full year forecast remains JPY 11 billion as planned. In FinTech, taking into account the positive impact from higher installment and revolving fee rates and the negative impact from reduced receivables securitization, we expect operating profit for the full year to remain on plan at JPY 47 billion. Although we will not conduct securitization in the second half due to the timing of the fee revision, there will be no profit impact because the fee rate revision was implemented earlier than originally scheduled. Lastly, if our share price does not fully reflect our future profitability, we will carry out flexible share buybacks. Following the first half, we have set a maximum buyback limit of up to JPY 20 billion for the second half as well. That concludes my presentation. Thank you.

Next, the presenter will be our President and Representative Director, Mr. Aoi. He will be explaining about the progress as well as the outlook of the business that supports Suki.

I would like to explain about our progress and outlook regarding the business that supports Suki. Our company champions in economy driven by passion as its vision, Suki. And as a strategy to realize this, we are advancing business that supports Suki. The purpose of business that supports Suki is to achieve both impact and profit by expanding consumption for [indiscernible] through Suki into consumption for someone else and for the society. Our definition of Suki is not limited to Oshikatsu. The Suki we support encompasses not only Oshikatsu, but diverse fashions such as pets, mountain, climbing, sports, food culture, art and Japanese culture that are irreplaceable and unique to each individual. Business that supports Suki will primarily develop cards, events and goods that support Suki. Today, I will explain the progress of these 3 businesses. I also would like to explain the corporate culture that underpins them. First, here is the status of the card that supports Suki. The number of projects has expanded from 88 projects a year ago to 130 projects, and the number of members have also increased from 1.01 million to 1.26 million. In 2025, 2 new projects have debuted. I would like to introduce a couple of them. The first is the Licca-chan card. There are 2 types, Retro Licca-chan Reprint edition and Licca-chan who only buys Pink. The castle cards come in 2 types, the castle itself and the stone walls. Many castle fans actually prefer the stone walls over to keep and about 30% of applicants choose this option. If successful, we plan to expand to castles nationwide in the future. Additionally, 0.1% of the purchase amount will be donated to Japan Castle Association, which works on castle preservation and maintenance. Next is the men's volleyball team, the Tokyo Great Bears. You can choose from 2 types, characters and players to select the design of the player you support from among the 14 athletes. Here, too, 0.1% of purchase amount will be donated to the Tokyo Great Bears as funding for developing next-generation players. Here is the breakdown of cards supporting Suki, both in terms of projects and membership numbers, characters and animation dominate. This stems from the fact that the initiative originally launched with a focus on animation projects. In recent years, projects in new genres such as social contribution, creators, sports and arts as well as culture have been increasing. And thanks to all of your support, our donation-linked cards have expanded to 21 programs, reaching 110,000 people, including Pet Cards, museum cards and [indiscernible] cards. The key feature of Suki cards is that the LTV, which is 2x to 7x higher than standard cards. This is because the proportion of the cards is higher due to the notably high proportion of young members among Suki cards compared to general cards, resulting in a main card usage rate of 58%, 11 percentage points higher than the 47% for general cards. Therefore, we will expand recruitment of first Suki card members nationwide through events that support Suki. The share of EPOS Card is 16% in the Tokyo Metropolitan area and 2 neighboring prefectures where Bari stores are concentrated, but only 5% in other regions. Raising this share to the level of Tokyo Metropolitan area in 2 neighboring prefectors would unlock a potential of 9 million new users, a scale exceeding the current membership of 8.11 million. The membership of Suki Support Card aims to reach 3 million members by March 2031 and surpass the number of Gold Card members by the fiscal year ending March 2041. Next, events that support Suki. As a result of our efforts to create an event-filled store, the number of events held annually has rapidly expanded to approximately 6,000 over the past 3 years. Of these events supporting passions account for 1,300, representing over 20% of the total. Sales for the first half of the year at events supporting Suki theme reached JPY 5.2 billion, a 46% increase year-on-year. Animation, games and music artists accounted for the majority of this. New members totaled 60,000, a 39% increase. Both sales and new members for music and artists grew significantly, more than doubling year-on-year. The event status for the music artists focusing on artists like these examples, we held over 70 events in the first half of the year, attracting over 200,000 attendees and gaining over 20,000 new members. Events celebrating Suki achieved an average customer spend approximately 2.3x higher than the store average. They also generate 17x more new members per day compared to regular events, making them the most efficient sales store within Marui store. The operational format are categorized into compact events of approximately 40 Tsubo, focused on merchandise sales and large-scale events of approximately 150 Tsubo, incorporating exhibition ex and experiential space. Large-scale events generate over twice the number of visitors, new members and sales revenue compared to compact events resulting in higher per person productivity. They offer potential admission fee income and will expand our planning of large-scale events going forward. Here's an example of a large-scale event. It featured many creators among animation. In the first half of the year, it held approximately 40x attracting 150,000 visitors and gaining approximately 10,000 new members. We also explore new areas of Suki, the rising in the game scene, we held a large-scale event with fans using funds raised through crowd funding. Additionally, we employed Luna product fair achieved sales of JPY 50 million and attracted 10,000 paying customers. We will continue developing events that support these diverse Suki. Under our policy of creating an event field store, we have focused solely on expanding the number of events held. But going forward, we will review our approach and expand events that support people's passion. The first -- the fiscal year ending March 2031, we will reduce the total number of events held to about 80% of the current level while expanding events that support people's Suki to more than double of the current situation. Sales for the first half reached JPY 5.2 billion with full year sales projected at JPY 10 billion. And our in-house merchandise line launched this fiscal year, it is under active development. First half sales are projected at JPY 200 million with full year sales at JPY 500 million and a gross margin of approximately 75%. For our original merchandise, we established a policy of inventory turnover of 120% based on lessons learned from our previous withdrawal from private brand business. We procure initial inventory, assuming a 100% in-store sell-through, then meet any unfilled demand through online sales, achieving a total sell-through of over 120% versus initial stock. By executing this policy, we are able to maintain a high GP margin. Examples of our original merchandise include light-size standing panels and scene-based acrylic dioramas developed in collaboration with artists and creators. Looking ahead, we aim for sales of JPY 12 billion from our original merchandise by FY 2031, including event linked, e-commerce, wholesale and overseas sales. That concludes our overview of cars, events and merchandise. Next, I will address our competitive advantages and barriers to imitation. Investors often ask whether our business that supports Suki could easily be copied by others. I would like to address this question. To begin with, this business starts with credit cards featuring characters and anime designs that reflect our customers' Suki. This aspect can indeed be replicated and many similar content-based cars already exist in the market. However, our business that supports Suki is not simply about content-themed cars. It represents the entire value of the customer experience created by combining the various elements Marui Group has developed through its retail business, events that let people immerse themselves in the worlds they love, merchandise that physically express those worlds and staff food and share customers Suki in person, providing this unique experiential value through the seamless integration of retail and finance constitutes our first barrier to imitation. The second barrier is our corporate culture. Our distinct corporate culture itself serves as the foundation that enables the creation of the business that supports Suki. As the proverb says, Rome wasn't built in a day. It takes many years to cultivate such a culture and that long-term accumulation heightens our barrier to imitation. Let me explain more. The cars that support Suki are not developed solely by our core fintech team. In fact, roughly half of them are created by divisions outside the fintech, our retail stores, the e-commerce division, the co-creation investment division and the co-creation team with cross-organizational efforts as well as the Suki support contests. The entire group is collaboratively developing these cars. What supports these efforts is the corporate culture that encourages collaboration beyond organizational boundaries. This culture has been fostered through cross-group job rotation transfers, project-based organizational structures and co-creation teams that collaborate directly with investee companies. Another core feature of our culture is that employees proactively propose ideas and take on new challenges grounded in our hand-raising culture. This mindset is nurtured through initiatives like Digital Cup, where employees compete to propose digital transformation ideas, the Suki support contest and the Fail Forward Award, which recognizes those who learn from challenges and failed attempts. Now let me discuss our future direction, focusing on 2 areas: first, opening up business development; and second, promoting main card adoption through Suki. First, business development that will be opened up. Until now, we recruited ideas related to Suki and then the project leaders to commercialize them only from within the company. Going forward, we will open this process to both internal and external participants, inviting ideas and project leaders from outside the company as well. By gathering outstanding ideas and people from inside and outside the organization and supporting them through Marui's unique collaboration framework, we will commercialize business that supports Suki one after another. The driving force will be the open version of the Suki support contest. We will invite not only employees, but also external creators, start-up founders and corporate professionals, students and participants from overseas, anyone who wants to turn their Suki into a business with excellent ideas from around the world. The first contest is scheduled for March 2026. Next, I will discuss promoting main card adoption through Suki. As mentioned, card that supports Suki have a first high proportion of first-time cardholders and a high main card adoption rate, resulting in strong LTV. That is the key strength of the product, but 85% of our members join us their second or later card and the main card usage rate remains low at 25%. By comparison, the main card adoption rate for first card members is 58%, leaving a 33-point gap, our potential area for growth in the future. How can we encourage second card users to make our card their main card? The answer can be found in our highly popular Pet Card. Although 87% of Pet Card holders joined as second card users, their main card adoption rate after enrollment reaches 40%, well above the 25% average for cards that support Suki. When we asked customers why, many said, my beloved pet appears on this card. I will never use any other card. This perfectly captures what Suki truly means. It reminded us that the emotional connection customers feel is powerful enough to change behavior. The power of Suki has the potential to transform the credit card business itself. Traditionally, people use credit cards either because of status or rewards. Our cards that support Suki, however, inspired the third motivation to use the card simply because they love it. By tapping into this emotional motivation, we believe we can create a new market altogether. Accordingly, we will promote main card usage, not only through gold cards, but also via cards that support Suki, the upgraded passion or Suki premium cards and exclusive benefits for premium members. Currently, the overall main card adoption rate for EPOS cards stands at 22%. And through these initiatives, we aim to raise it to 35% by FY 2031. To achieve this, we will strengthen initiatives that go beyond member acquisition, enhancing events and merchandise programs to encourage main card usage. At the same time, we will advance main card adoption through DX. Since establishing the joint venture, UX design company, Muture with Goodpatch in 2022 and launching the UX/UI development firm, Marui Unite in 2024, we have been hiring highly skilled specialists like AI engineers and cybersecurity experts. With them, we have begun improving our lifestyle app, which serves as a key digital touch point with our customers. Here is an example of our UX initiative linked to Suki. For members of the Studio UG card, we changed the app's home screen to feature the character Gokigen Panda. This personalization increased engagement with the apps quest function, which guides users to explore EPOS cards features and services, leading to a higher main card adoption rate. We will continue developing UI/UX designs that connect directly with customers of Suki. Finally, our KPI. By FY 2031, we aim to raise the main card adoption rate to 35%, achieve a total group transaction of JPY 10 trillion and reach PPR of 3x to 4x. That concludes my presentation. Thank you for your kind attention.

We now move on to Q&A. [Operator Instructions] So the first is from Takahashi-San from Mizuho Securities.

This is Takahashi from Mizuho Securities. Thank you very much for the very easy to understand explanations. I have 3 questions. One is for Kato-San and the remaining 2 is for Mr. Aoi. My first question is for Kato-San. As always, , I would like to understand something. I think that the retail business in the second quarter was doing very steady. But for Retail and Fintech, what is the progress against your annual target? Are you slightly behind? Or are you a little bit ahead of the plan is my first question. My second question is for Mr. Aoi. I think that the card that support Suki is great. And I think your explanation was also very easy to understand. The 2 questions that I have is, you mentioned that this is not Oshikatsu. I think it was explained in various areas. You mentioned about Pet Card as an example, you mentioned that this has a very high main card adoption rate. Towards the future, when you think of LTV, in what area would you feel a potential today? And maybe this is something that will become more open and maybe the various ideas will be generated going forward. But I'm sure that you have various antennas that you have allocated in various areas. So I would like to understand what your opinion is around this. My other question is, which is my last question. Your fintech and retail initiative is planned to expand in the regional local areas. As you work on this initiative, what is going to become necessary? Obviously, you need to secure space. But are there any bars in achieving that? Or is this something that is rather easy to execute? You will be expanding to the local areas. So I'm sure that liquidity of human resource is also something that you need to elevate. So when you move people, what are the bars that you may be facing? Or do you not have any challenges in that area is my third question.

So let me answer to your first question. Thank you very much for the question. Our progress against the results or the annual target. We don't disclose the first half target. But to explain about our internal target, both for Retail and Fintech, we have slightly exceeded our target for the first half of the year. Starting with Retail, the areas that we exceeded our target would be the event that support Suki. It was more than what we had anticipated, and so that's a positive upside for us. The related businesses also are a slight surplus. For FinTech, the revenue is steady on track against our plan. It's just that the cost, I think there were some points that were held back. So for both segments, we have been able to surpass the budget, but we don't know how the remaining year is going to unfold. And so we have not changes to our annual -- we have not made any changes to our annual target. I hope that answers your question.

So let me answer to your second and third question. Starting with the second question, from the LTV perspective, what are the future attractive areas that I see, I think, was your question. The business that supports Suki is centered around card. We have events and merchandises, but the animation department was a triggering opportunity for us to expand this initiative. And so I think it's animation-centric, character-centric games as well. But as you have pointed out, Pet Cards would be an example, which is slightly different from Oshikatsu, but for each individual, they are indispensable because it's like a Suki of your family member. And so I think there's an expansion around that. Animation, games, characters and pets and also the castle cards and museum cards, the difference is that are there any rights affiliated to this? So if there are any rights affiliated to some of the assets or properties, we do need a consent or permit. And when we do events and when we sell merchandise as well, there are various restrictions that we need to overcome or consider as we try to generate business, like museum cards. There are various goods that can be invented, I guess, for those that don't have any rights issues like the animals in the zoo, castles as well. And so if we summarize all of those opportunities, anything that does not have any rights that are Suki, they can be cards or translated into goods like we are originally from retail. And so we want to put a lot of focus on merchandise so that from a wholesale perspective and also from overseas sales perspective, I think we have an opportunity. I think the Japanese culture is also very popular from overseas guests. And so these non-rights opportunities like the clay figure is also an example when it comes to museum-related ideas. And so that's something that we would like to look into. The bars that I believe we may be facing when we try to expand to the local areas, we need to secure space. We would like to secure space. We have been working on store openings. And so the real estate development division is already trying to collect various information, so that we can negotiate for space. And so I think in the near future, I think there will be a promising opportunity. On the other hand, when it comes to resource, EPOS Card, we have been able to cover north all the way to south from Hokkaido all the way to Okinawa. We have branches to acquire new users through the EPOS Card proposition. We also work with real estate partners to negotiate to do various business activities. So when it comes to transferring of people, moving people and hiring people, we do have a foundation that we've been able to establish. And so I don't see personnel as a big bar or higher bar. But as we start working on these initiatives, we will be needing people that can be a touch point of new potential customers, and we also need to train people. So I think those are areas that we would like to start putting our efforts around. And so that's something that we've started preparing from the first half of this year. I hope that answers your question.

We'd like to take next question. Daiwa Securities, Shigeoka-San.

This is Shigeoka from Daiwa Securities. Am I coming through? Can I -- can you hear me?

Yes, we can hear you.

Well, I just want to confirm one thing. When it comes to progress in the first half, on a consolidated basis as well, including the corporate eliminations, there was a slight upside overshoot. Is that the right understanding?

Yes. Yes, that's the right understanding.

Understood. That was one thing I wanted to confirm. I have a couple of questions. First question is regarding the retail event-related revenue. Earlier, you explained that there are events that supported Suki that had upside. And in terms of the details of that, more than you expected, larger size event contributed or the compact type merchandise sales performed better than your expectation? And also, you mentioned that you expand those events externally and have they started to contribute to the profit? Can you elaborate on more details? And against your plan in the second half, it seems like you can grow this further. You announced in the first quarter, when you look at the operating profit forecast in the first quarter, it seems like the growth will be milder in the second half. Is there any room for you to grow this business further in the second half? So that was my first question. My second question, can I go ahead with my second question? Or should I wait for your answer for the first question first?

Please go ahead with your second question as well.

My second question is regarding the shareholder return. This time around, you set the upper limit for the share buyback. In terms of how you think about this, you will continue to strengthen the shareholder return. That is the policy, as I understand it. And in this fiscal year, when the share price remain at a low level, you will carry out the share buybacks. And at the same time, you will pay out dividends in a steady manner. And the balance sheet, the ideal balance sheet that you just announced, the JPY 30 billion was mentioned as part of the capital optimization. And basically, those will be executed in FY '26 and onwards. So FY '26 and beyond, the capital optimization will take place and the shareholder return will be strengthened in or after 2026. Is that the right understanding? That's all from my side.