Full-scale PMI contribution from Kanarabo and entry into Oripa business; MiiS targets recovery from 2Q onward with new LIFT BRUSH product and TikTok Shop

Summary

In 1Q FY03/2027, newly consolidated Kanarabo and clinic-related operations drove revenue to JPY 1,317M (+69.3% YoY). Operating loss was JPY -141M, a JPY +20M improvement YoY. Flagship brand MiiS declined -33.3% YoY due to timing shifts in wholesale deals and deteriorating profitability of e-commerce marketplace promotions. Meanwhile, Kanarabo (Fujiko/b idol) saw post-acquisition PMI gain traction, contributing a fresh JPY 54M in segment profit. Full-year guidance (revenue JPY 6,602M, operating income JPY 50M) was maintained. Under an H2-weighted earnings structure, 1Q progress of 19.9% is in line with the prior two fiscal years.

Key Points (Earnings Takeaways and Growth Actions)

• Corporate Strategy and Market Assessment
  • Under Vision 2029, the company targets JPY 1B in operating income next fiscal year and JPY 1.5B thereafter, positioning this as the start of its second growth phase
  • Management explicitly acknowledged that domestic beauty/cosmetics market growth has plateaued, making overseas expansion and M&A-driven portfolio broadening unavoidable
  • Signaled expansion of M&A targets beyond beauty/cosmetics to brand-related businesses broadly, leveraging core SNS marketing capabilities
• Current Business Progress and Drivers
  • MiiS 1Q revenue was JPY 108M (-33.3% YoY), primarily due to timing shifts in large wholesale deals and deteriorating profitability of e-commerce marketplace promotions
  • Kanarabo achieved PMI stabilization within six months post-acquisition, delivering JPY 54M in 1Q segment profit as a meaningful earnings contributor
  • Matsumura Shoten posted a gross profit margin of 47.3% (vs. 41.8% plan), outperforming on the back of e-commerce revenue growth and AI-driven marketing
  • CEO highlighted Fujiko's "Keana Odamari! Cream" as having grown into a staple product on par with the eyebrow tint franchise
• Strategic Initiatives and Inflection Points
  • Oripa Shop launched on July 31; sold-out gacha events have already occurred, indicating a solid start. Full-scale contribution expected from 3Q onward
  • whomee rebrand Phase 1 launched on August 21, rolling out across all 70 PLAZA stores nationwide and on Qoo10
  • MiiS LIFT BRUSH (JPY 39,800 incl. tax) went on general sale August 10, with real demand validated by approximately JPY 14.5M in Makuake crowdfunding support purchases
  • Fujiko's "Keana Odamari! Cream" secured placement in approximately 3,000 major drugstore locations (sequential rollout from September)

Outlook and Strategy

• Full-year guidance (revenue JPY 6,602M, operating income JPY 50M) maintained. Against a 1Q operating loss of JPY -141M, the company plans to accumulate JPY +191M from 2Q onward to reach full-year profitability
• The three main profit contributors from 2Q onward are Kanarabo +172, Matsumura Shoten +115, and HaD +108, totaling an expected JPY +395M
• MiiS is pursuing profitability improvement through reallocation of marketplace-specific promotional spend for mm flora* and leveraging TikTok Shop
• M&A strategy is focused on deals that are immediately EPS-accretive post-acquisition, with emphasis on replicating the Matsumura Shoten model of acquiring B2B companies and transforming them into branded businesses
• The company is exploring investments in higher-growth markets beyond beauty/cosmetics, broadly scanning for sectors where SNS marketing capabilities can be leveraged
• UCI (Middle East fund) partnership has been temporarily stalled due to regional geopolitical conditions, but the company plans to expand existing overseas distribution channels—such as Fujiko's 20% China revenue mix—across other brands

Positive Factors

• Kanarabo PMI delivering meaningful contribution with JPY 54M in segment profit; outperforming plan in both e-commerce and wholesale channels, with upside potential in H2 driven by concentration of major marketplace sales events
• Fujiko 1Q revenue of JPY 517M; "Keana Odamari! Cream" sold approximately 30,000 units within two weeks of launch, with an 87.6% repeat purchase rate
• b idol's "Magic Eyebrow Powder" won double awards in the eyebrow category at VoCE and Biteki; post-award sales surged approximately 230%
• Matsumura Shoten's AI-driven marketing and e-commerce transformation is the most advanced within the group, demonstrating the replicability of the M&A value-up model
• Following the launch of bialne's loyalty program, new membership sign-ups increased approximately 2.4x and dormant member reactivations approximately 2.6x
• Oripa Shop generated sold-out gacha events within two weeks of launch, confirming strong affinity with SNS marketing

Concerns and Risks

• MiiS 1Q revenue of JPY 108M (-33.3% YoY); flagship brand struggling, with risk that deteriorating e-commerce marketplace promotional economics could become a structural issue
• Equity ratio has declined for four consecutive fiscal years due to accelerating M&A and net losses (16.5% as of 1Q FY03/2027), potentially constraining financial headroom and limiting future M&A scale
• Goodwill balance of JPY 2,289M (42.9% of total assets), creating impairment risk if acquired companies underperform
• Divestiture of Rice Curry LS resulted in the Other New Business segment declining -46.3% YoY, shrinking the SNS marketing support revenue base
• Consolidated gross margin declined from 53.0% to 50.6%, with increasing mix of lower-margin businesses pressuring profitability
• Overseas expansion plans stalled by Middle Eastern geopolitical situation; no visible concrete progress on UCI partnership

Performance Highlights

Consolidated 1Q FY03/2027 revenue was JPY 1,317M (+69.3% YoY), with an operating loss of JPY -141M (JPY +20M improvement YoY). Newly consolidated Kanarabo (+JPY 645M) and clinic-related operations (+JPY 178M) drove revenue growth, while WinC (JPY -107M) and brand support/holding company (JPY -152M) were drag factors. Adjusted EBITDA was JPY -63M (JPY +50M improvement YoY).

Segment Performance

• Fujiko 1Q Revenue: JPY 517M
• MiiS 1Q Revenue: JPY 108M (-33.3% YoY)
• b idol 1Q Revenue: JPY 141M (+JPY 23M QoQ)
• bialne 1Q Revenue: JPY 84M
• bialne Subscription Members: 4,749; retention rate 93.0%
• Fujiko Key Product Repeat Purchase Rate: 87.6%
• Matsumura Shoten Gross Profit Margin: 47.3% (vs. 41.8% plan)
• Adjusted EBITDA: JPY -63M (JPY +50M improvement YoY)
• Adjusted Quarterly Net Income: JPY -61M (JPY +24M improvement YoY)

Q&A List

• Q: UCI made an investment at the beginning of the year, but there appears to be no progress since then. Regarding Middle East-related and overseas expansion—isn't the domestic market alone hitting a ceiling?
  A: The background to UCI's investment was Middle East expansion, but the war in the Middle East has put various discussions on hold. That said, building overseas revenue is essential, and I recognize that acquiring niche top brands alone will not deliver breakthrough growth. There are two paths forward from here. First, domestically, there are quite a few niche brands and brand-related businesses where SNS marketing can be effective if we broaden our scope. For beauty/cosmetics brands specifically, the Japanese domestic market is essentially at a plateau, so taking them overseas is necessary—but there are domestically growing sectors as well. I cannot comment at this stage on which specific sectors we are targeting or how we plan to expand, but I do not believe the status quo is sufficient, nor is it our policy to focus exclusively on beauty/cosmetics. We will evaluate future M&A toward higher-growth markets. Kanarabo's Fujiko brand already generates 20% of its revenue in China, so it has established overseas distribution channels to some extent—we plan to leverage those channels for other brands to raise our overseas revenue mix. We are not assessing our growth potential solely as an extension of our current portfolio; rather, we intend to leverage our accumulated expertise to invest in higher-growth markets, pursue overseas expansion, and extend into broader brand production domains to achieve breakout growth. Partnership with the Middle Eastern fund remains in our purview.
• Q: Regarding whether the company purchased securities of Club Corp.
  A: We are unable to comment on that.