Village Vanguard CO.,LTD.

Business Details

The company operates a "Playable Bookstore" (Asoberu Honya) business format that displays and sells books, sundries, CDs/DVDs, food, apparel, and other items in an integrated manner. Its business is built on three pillars—store business, POPUP business, and EC business—delivering experiential value that engages customers' intellectual curiosity through distinctive sales floors that leverage the individuality of each staff member. It is a single-segment company with over 90% of sales derived domestically. In FY2026 (ending May 2026), net sales declined, but improvement in gross profit margin combined with reduced selling, general and administrative expenses led to a turnaround from an operating loss in the prior period to an operating profit.

Recent Overview

In FY2026 (ending May 2026), net sales declined, but improved gross margin and reduced SG&A expenses drove a V-shaped turnaround to operating profit

In FY2026 (ending May 2026), net sales declined to ¥23,353 million (down 6.4% year on year), but a substantial improvement in gross profit margin (up approximately 7.2 percentage points year on year) expanded gross profit to ¥10,436 million (up 11.5% year on year). Selling, general and administrative expenses were also reduced to ¥9,517 million (from ¥10,298 million in the prior period), resulting in a turnaround to profitability at every stage, with operating profit of ¥919 million, ordinary profit of ¥858 million, and net profit of ¥736 million. On the financial side, the issuance of convertible bond-type bonds with stock acquisition rights (¥1,000 million) increased the cash balance to ¥4,868 million. However, the equity ratio continues to breach financial covenants with financial institutions, and material doubt about the company's ability to continue as a going concern remains. For FY2027 (ending May 2027), the company expects net sales of ¥21,881 million (down 6.3% year on year) and operating profit of ¥504 million (down 45.1% year on year).

Key Products

Growth Drivers

• Improvement in gross profit margin (higher gross margin through strengthened procurement control and optimized product mix)
• Continued reduction of selling, general and administrative expenses (head office cost reductions through staffing reviews and operational efficiency improvements)
• Strengthening and expanding revenue from the POPUP business (creating new store-visit motivations through collaboration with content and events)
• Strengthening and expanding revenue from the EC business (expansion of online sales channels)
• Optimization of inventory (a decrease of ¥1,092 million in the current period), improving asset efficiency and cash flow
• Achieving a high-profitability structure through changes in the sales composition mix across businesses

Risks

• Continued price inflation strengthening consumers' thrift and product-selection orientation, weakening personal consumption sentiment
• Intensifying retail competition that transcends conventional industry and business-format boundaries
• Profit pressure from rising labor costs and other cost increases
• Risk of a demand for lump-sum repayment arising from continued breach of financial covenants (net asset ratio) with financial institutions, which could trigger loss of the benefit of time
• Interest-bearing debt balance (including ¥5,223 million in long-term borrowings due within one year) remains at a high level, and financial leverage remains elevated with an equity ratio of 13.6%
• Impairment loss risk (¥40 million recorded in the current period) and risk of loss on disposal of fixed assets
• Uncertainty over economic and price trends due to the impact of US trade policy and other factors
• Risk of future cash outflow from cumulative unpaid dividends on Class A preferred shares (cumulative total of ¥240 million as of May 31, 2026)
• Uncertainty over the sustainability of the earnings recovery, given that the FY2027 (ending May 2027) earnings forecast anticipates a significant profit decline, with operating profit projected to fall 45.1% year on year to ¥504 million