IVY COSMETICS CORPORATION

Business Details

The company enters into sales agreements with sales companies nationwide and develops, manufactures, and sells cosmetics, quasi-drugs, Beauty Support Products, and Cosmetic Sundries, etc. Sales to customers are handled by the sales companies, and the company's net sales represent the shipment amount to sales companies and others. Sales offices, BMs (Beauty Managers), and IMs (Ivy Mates) belong to the sales companies, and the company operates a unique door-to-door sales model that enhances the motivation of the sales organization through cashback mechanisms such as sales company refunds and management guidance fees.

Recent Overview

Net sales down 9.8% and operating income down 53.8%, a significant decline in both revenue and profit, but net income rose sharply due to the disappearance of an extraordinary loss

In FY2026 (ending March 2026), the absence of major new products and the sluggish pace of new sales office and BM openings led to net sales of ¥2,641 million (down 9.8% year on year) and operating income of ¥195 million (down 53.8% year on year), representing a substantial decline in both revenue and profit. On the other hand, pre-tax income improved due to the disappearance of the ¥457 million loss on termination of the retirement benefit plan recorded in the prior period, and net income for the period rose to ¥164 million (up 282.5% year on year). A year-end dividend on common stock was resumed at ¥15 per share. For the next fiscal year (FY2027, ending March 2027), the company forecasts net sales of ¥2,640 million, operating income of ¥200 million, and net income of ¥140 million. This is a conservative outlook that assumes the continued closure of the Strait of Hormuz due to the Middle East conflict.

Key Products

Growth Drivers

• New product effects and improved customer satisfaction from "Peeling Lotion" and "Moist Sheet" launched in December 2025 (Reiwa 7), and "Churie Premium Set" launched in February 2026 (Reiwa 8)
• Recovery in shipment volume of the flagship product "Red Power Serum" (18,058 sets, up 0.9% year on year)
• Recovering trend in training mobilization and new customer acquisition within the sales organization
• Strengthened financial base and improved equity ratio to 72.4%, following completion of exercise of the 5th series stock acquisition rights (cumulative funds raised of ¥382 million)
• Stable operating cash flow (¥451 million) secured through a significant reduction in trade receivables (down ¥377 million)
• Consideration of a commemorative dividend and enhanced new product development and sales promotion ahead of the 50th anniversary of the company's founding in FY2027 (ending March 2027)
• Continued cost-reduction policy maintaining fixed cost compression and preserving the profit structure

Risks

• Structural shrinkage of the door-to-door sales market (customer attrition and changes in sales activity due to lifestyle changes)
• Continued sluggish pace of new sales office and BM openings, leading to a mid- to long-term contraction of the sales organization base
• Risk of naphtha supply shortages and rising raw material costs due to the prolonged Middle East conflict and closure of the Strait of Hormuz (cost of sales ratio expected to rise in the next fiscal year)
• Impact on net sales due to unconfirmed raw material delivery schedules for some new and existing products
• Non-redemption of Class A preferred shares (equivalent to ¥1,000 million in combined capital stock and capital reserves) and the recurring annual preferred dividend burden of ¥30 million (constraining returns to common shareholders)
• Bad debt risk associated with the fragile financial base of sales companies (allowance for doubtful accounts: ¥36 million current, ¥60 million fixed)
• Profit margin pressure from the rising trend in cost of sales ratio (30.2% in the current period versus 29.5% in the prior period) and persistently high selling, general and administrative expenses (up 0.2% year on year)
• Difficulty in acquiring new young customers and sales staff, and delayed response to changing consumer needs via the internet