Garden Co., Ltd.

Business Details

A multi-brand restaurant chain company operating the ramen business (Ikkakuya, etc.), the udon business (Yamashita Honki Udon), the miso ramen business (Manbaken), the soba izakaya business (Takadaya), and others. Growth is driven by brand acquisition/revitalization through M&A and new directly-operated store openings, with the Ikkakuya brand serving as the core. As of the end of the first quarter of FY2027 (ending February 2027), the total number of stores was 212 (178 directly operated, 1 outsourced, 33 franchised). Overseas expansion is also being pursued through a joint venture company in Thailand.

Recent Overview

Net sales increased, but operating profit fell sharply by 65.1% year on year due to cost increases

In the first quarter of FY2027 (ending February 2027) (March–May 2026), net sales reached ¥4,786 million (up 6.4% year on year), securing an increase in sales. However, cost of sales rose to ¥1,579 million (up 16.0% year on year) and SG&A expenses rose to ¥3,023 million (up 15.8% year on year), leading to a significant increase in expenses and a sharp decline in operating profit to ¥184 million (down 65.1% year on year). Interest expenses also expanded to ¥32 million (up ¥14 million year on year) due to the increase in long-term borrowings (up ¥3,106 million from the end of the previous fiscal year). On the other hand, a gain on transfer of business of ¥70 million was recorded as extraordinary income following the transfer of the Nikuzushi franchise headquarters business. In the first quarter, 17 stores were opened and 4 stores closed, bringing the total number of stores at period end to 212. The Ikkakuya × Aburasoba Sohonten hybrid strategy was launched from late April. There has been no change to the full-year earnings forecast.

Key Products

Growth Drivers

• Strengthening the earning power of existing stores through the dual-brand hybrid strategy of Ikkakuya × Aburasoba Sohonten (planned rollout to 100 stores within 100 days)
• Brand acquisition and revitalization through M&A (improving the earning power of Manbaken and Takadaya and building a foundation for multi-store expansion)
• Continued aggressive new store openings (15 stores had lease agreements signed as of the end of the first quarter, against a full-year opening plan of 21 stores)
• Overseas expansion of Yamashita Honki Udon through the Thai joint venture company (first store opening planned this autumn)
• Generating store visit motivation and increasing customer count through smartphone app campaigns (all-you-can-eat rice, highball fairs, double stamp promotions, etc.)
• Improving store operation quality and employee retention through QSCA enhancement and the use of video and multilingual training

Risks

• Profit margin pressure from continued increases in raw material costs, energy costs, and labor costs (first-quarter operating profit margin fell sharply to 3.8% from 11.7% in the same period of the prior year)
• Increased interest expenses and rising financial leverage (equity ratio down from 44.5% to 36.6%) accompanying a sharp increase in long-term borrowings (up ¥3,106 million from the end of the previous fiscal year)
• Uncertain business environment due to the ongoing weak yen trend and geopolitical risks (Middle East situation, etc.)
• Continued sluggish customer count growth due to consumers' ongoing frugality and selective spending amid rising prices
• Impact on some stores from a significant decline in inbound visitors from China (down year on year in April and May)
• Risk of impairment of goodwill and trademark rights associated with post-M&A integration and brand revitalization (goodwill balance of ¥411 million, trademark rights balance of ¥175 million)
• Difficulty in maintaining store operation quality and securing personnel amid the rapid expansion of the hybrid strategy and new brand rollout