Kitanotatsujin Corporation

Business Details

The company sells proprietary original-brand cosmetics, health foods, beauty appliances, and other products to general consumers over the internet. The business consists of three segments: the flagship brand "Kitano Kaiteki Koubou" (whose main customer base is aged 40 and above, with approximately 70% of sales coming from subscription customers), the hair care brand "SALONMOON" (targeting customers in their 20s to 40s) operated by subsidiary SALONMOON, and "Karacon Direct," a colored contact lens retailer that became a consolidated subsidiary in December 2025. The company's own EC site and EC malls such as Amazon and Rakuten Ichiba serve as the main sales channels, and it achieves stable revenue through a subscription-based business model.

Recent Overview

New customer acquisition reached a record high, but upfront costs and order backlog led to an operating loss in Q1

Consolidated net sales for the first quarter (March-May 2026) of the fiscal year ending February 2027 rose sharply to ¥3,209 million (up 23.6% year on year). On the other hand, due to the upfront recognition of new customer acquisition costs amid rapid growth in new customer acquisition at "Kitano Kaiteki Koubou," combined with production failing to keep pace with rising demand—resulting in an order backlog of approximately ¥286 million—revenue recognition was pushed back to the second quarter and beyond, leading to an operating loss of ¥102 million. The number of new customers acquired via the company's own website and other channels increased 44% compared to the immediately preceding quarter, marking six consecutive quarters of growth, and both monthly and daily figures reached record highs. The advertising investment balance has remained within a range not exceeding the optimal value of 1.00, confirming that investment has been maintained at a level that preserves profitability. There has been no change to the full-year earnings forecast, and the impact of the order backlog is stated to have already been factored into the forecast.

Key Products

Growth Drivers

• Strengthening the creative production system through the use of generative AI to improve the quantity and quality of advertising and expand new customer acquisition (up 44% versus the immediately preceding quarter, six consecutive quarters of increase, with both monthly and daily figures reaching record highs)
• Building a reproducible product development system based on quantitative survey evaluations (only 13.4% of 127 proposed projects were commercialized; multiple new product launches are planned sequentially from the second quarter onward)
• Continued expansion of EC mall sales (monthly sales on Amazon in March 2026 reached a record high, with EC mall sales maintaining a high level of ¥523 million)
• Entry into the colored contact lens market through the consolidation of Karacon Direct Co., Ltd. as a subsidiary, along with the promotion of PMI initiatives leveraging the company's marketing and operational improvement know-how (early effects such as reduced advertising costs and improved profit margins have begun to appear at some major stores)
• A stable revenue base driven by the subscription-based business model (approximately 70% of sales from subscription customers), and the future effect of accumulating subscription sales resulting from the rapid expansion of new customer acquisition
• In-house accumulation of advertising operation know-how by the approximately 100-member in-house web marketing department, combined with generative AI to accelerate the production and verification cycle

Risks

• The risk that, during a phase of rapid expansion in new customer acquisition, upfront cost recognition and the timing gap between sales and expense recognition caused by order backlog may temporarily depress profit (an operating loss of ¥102 million was recorded in Q1, with an order backlog of approximately ¥286 million arising)
• The risk of declining new customer acquisition numbers due to fatigue in advertising creative content (a phenomenon of viewers growing tired of seeing the same ads), as experienced in the fiscal year before last with a 30% year-on-year decline
• The risk of declining profit margins due to increased advertising expenses (sales promotion expenses, etc.), with Q1 sales promotion expenses exceeding the earnings forecast by ¥33 million to reach ¥1,469 million
• The risk of supply constraints where production cannot keep pace with increased demand for certain products (an order backlog of approximately ¥286 million arose as of the end of Q1)
• The risk of rising procurement costs due to the weak yen, stemming from SALONMOON's high reliance on overseas procurement (in Q1, the company prioritized maintaining profitability over expanding sales scale)
• M&A integration risk related to Karacon Direct (goodwill of ¥259 million is amortized over 7 years, with goodwill amortization of ¥26 million recorded in Q1)
• The risk that promotional activities may not be carried out as planned due to fluctuations in advertising rates within EC malls or intensifying competition
• The risk of demand fluctuation due to intensifying competition in the BtoC-EC market and changes in consumer purchasing behavior amid rising prices