TSURUHA HOLDINGS INC.

Business Details

The Tsuruha Holdings group operates drugstores nationwide as a single-segment business, with pharmaceuticals, cosmetics, sundries, food, and dispensing pharmacy services as its core offerings. Following the business integration with Aeon Wellcia Holdings Co., Ltd. on December 1, 2025, the group became one of the largest drugstore groups in Japan, operating 5,665 domestic directly-managed stores (of which 3,324 handle dispensing pharmacy services) and 37 overseas stores. In the first quarter of FY2027 (ending February 2027) (March 1, 2026 to May 31, 2026), the company recorded net sales of ¥636,886 million and operating profit of ¥24,229 million.

Recent Overview

First ordinary quarter following Aeon Wellcia Holdings integration; net sales up 133.7% year-on-year, though margin declined

In the first quarter of FY2027 (ending February 2027) (March 1, 2026 to May 31, 2026), the company recorded net sales of ¥636,886 million (up 133.7% year on year) and operating profit of ¥24,229 million (up 94.3% year on year), reflecting the effect of the business integration with Aeon Wellcia Holdings on December 1, 2025. However, due to an increase in selling, general and administrative expenses to ¥167,506 million, the operating margin declined to 3.8% from 4.6% in the same period of the prior year. With 36 new store openings and 47 store closures, the number of stores at period-end was 5,665 (a net decrease of 11 stores). As integration synergy measures, the company is promoting the merger of merchandising divisions, development of new private brands, and store development under a nationwide six-block system. There is no change to the full-year earnings forecast (net sales of ¥2,555,000 million, operating profit of ¥99,400 million). Depreciation expense of ¥9,241 million and goodwill amortization of ¥6,173 million increased substantially year on year.

Key Products

Growth Drivers

• Substantial expansion of store count and sales scale (5,665 domestic directly-managed stores) through the business integration with Aeon Wellcia Holdings (December 1, 2025), and phased realization of integration synergies
• Capturing dispensing pharmacy demand based on a network of 3,324 stores handling dispensing pharmacy services, and continued expansion of medical demand driven by population aging
• Increased visit frequency and expanded trading area through expansion of the food category (Drug & Food model)
• Improved gross margin through development of the new private brand 'Karada to Kurashi ni, +1' and cross-introduction of existing private brands
• Improved operational efficiency and enhanced customer convenience across the group through core system integration and customer management data infrastructure development
• Building an optimal group-wide store opening and operating structure under a nationwide six-block system

Risks

• Deterioration of the SG&A expense ratio due to rising labor and logistics costs (Q1 SG&A expenses of ¥167,506 million, representing 26.3% of net sales)
• Intensifying competition within and beyond the drugstore industry (increase in store numbers including from other industries, changes in trading area environment, and progress of cross-industry collaboration)
• Impairment risk related to the goodwill balance of ¥448,420 million (large in scale due to the integration); an impairment loss of ¥242 million was recorded in Q1
• Costs associated with organizational and system integration arising from the business integration, and uncertainty regarding the realization of synergies
• Risk of continued recording of provisions for store closure losses due to accelerated closure of unprofitable stores (net decrease of 11 stores in Q1)
• Risk of valuation losses on investment securities (a decrease of ¥3,010 million in valuation difference on available-for-sale securities in Q1) and increased interest expense due to rising interest rates