Summary
In 1H FY12/26, all three categories (Hair Care, Beauty Appliances, and Skin Care & Others) posted double-digit YoY growth. Combined with an improved gross profit margin, this delivered higher revenue and profits. The company's full-year operating income guidance, however, is disclosed as a range of JPY 0–1,500M. 1H actual of JPY 2,012M already exceeds the top end, which implies the company plans a heavy allocation of growth investment in 2H. We see two key focal points for 3Q results. First, whether top-line momentum, driven by new SALONIA products and the health food brands, held up in July–September. Second, how quickly 2H investment is starting to flow through SG&A. We will also monitor improvement in overseas profitability and whether one-off costs tied to the special investigation have run their course. The contribution to Net Income Attributable to Owners of Parent Company from making Artemis a wholly owned subsidiary is also relevant. Overall, this quarter will be a test of earnings quality.
Key Points for Next Quarter
| Key Points & Focus | Implications |
|---|---|
Consistency with Full-Year Plan3Q standalone Operating Income and EBITDA levels; pace at which 2H investment is booked | 1H Operating Income of JPY 2,012M exceeds the top end of the full-year plan (JPY 1,500M). Implied 2H operating result is JPY -2,012M to JPY -512M (our estimate). We will compare 3Q standalone against the prior-year JPY 519M to gauge investment progress and how conservative the range is |
Revenue Growth3Q standalone Revenue YoY; cumulative progress against the full-year guidance range | 3Q standalone Revenue was JPY 12,044M in the prior year; the immediately preceding 2Q standalone was JPY 14,315M. Back-calculated 2H revenue growth implied by the plan is +5.8% to +13.3% (our estimate), below 1H's +20.1% |
Earnings StructureGross Profit Margin and SG&A ratio YoY | 1H Gross Profit Margin was 61.3%, up 3.6pt YoY. SG&A, however, rose 29.1%. How much of the gross margin gain is redeployed into investment will determine profit levels |
Overseas BusinessOverseas segment revenue and profit trends | 1H revenue was JPY 989M (+74.6%). The operating loss narrowed to JPY -25M from JPY -51M a year earlier. The key question is whether initiatives such as rollouts at Costco in the US and OLIVE YOUNG in Korea continued in 3Q |
Quality of Net IncomeBreakdown of extraordinary losses; trend in profit attributable to non-controlling interests | 1H extraordinary losses of JPY 283M meant Net Income growth (+13.5%) lagged Recurring Profit (+20.4%). We will confirm whether profit allocation to non-controlling interests ceased from June following the full consolidation of Artemis |
Key Issues from Previous Results (FY12/26 2Q Results)
1H Revenue came in at JPY 26,808M (+20.1%) and Operating Income at JPY 2,012M (+19.2%), with both top and bottom lines up. Alongside the results, the company raised full-year guidance for Revenue, EBITDA, and Operating Income. Because the Operating Income guidance of JPY 0–1,500M sits below 1H actual, the central issue is how to read 2H investment allocation and progress as of 3Q.
1. Full-Year Operating Income Range Reflecting 2H Investment and 3Q Standalone Profit
- Previous Quarter: 1H Operating Income was JPY 2,012M, above the top end of the full-year plan (JPY 1,500M).
- Previous Quarter: 1H EBITDA was JPY 2,891M (+13.5%). Progress against the top end of the JPY 1,700–3,200M full-year plan stands at 90.3% (our estimate).
- This Quarter Check: Management has signaled continued flexible investment in 2H to drive medium- to long-term growth. We will assess how much of this showed up in 3Q SG&A.
- This Quarter Check: The company cited geopolitical risk around the Strait of Hormuz and FX as reasons for issuing a range. We want to confirm whether these assumptions have changed.
- Key Metrics: 3Q standalone Operating Income vs. the prior-year JPY 519M, and where 9M cumulative Operating Income sits relative to the full-year guidance range.
2. Sustainability of Double-Digit Growth Across All Categories
- Previous Quarter: 1H revenue growth was +12.2% in Hair Care, +12.8% in Beauty Appliances, and +52.3% in Skin Care & Others.
- Previous Quarter: 2Q standalone Revenue was JPY 14,315M, accelerating to +27.8% YoY (our estimate).
- This Quarter Check: In Beauty Appliances, we will verify whether new products launched from 4Q 2025 onward, such as the Face Current Pointer, are still contributing.
- This Quarter Check: In Skin Care & Others, we will monitor whether the health food brands launched in 2025 (Teaflex, Befas, Collatein) are sustaining growth.
- Key Metrics: 3Q standalone Revenue vs. the prior-year JPY 12,044M, and 9M cumulative progress against full-year guidance of JPY 55,000–57,000M (47.0–48.7% as of 1H, our estimate).
3. Balancing Gross Margin Improvement and SG&A Allocation
- Previous Quarter: 1H Gross Profit Margin was 61.3%, up 3.6pt from 57.7% a year earlier.
- Previous Quarter: SG&A was JPY 14,430M (+29.1%). The SG&A ratio rose to 53.8% from 50.1% a year earlier (our estimate).
- This Quarter Check: Full consolidation of Artemis aims to strengthen the Beauty Appliances supply chain and improve profitability. We will check whether this is visible in gross margin.
- This Quarter Check: The Domestic segment margin was 14.6%, down slightly from 14.9% a year earlier (our estimate). We will watch how 2H investment shifts this level.
- Key Metrics: 3Q standalone Gross Profit Margin vs. the prior-year 57.6% (our estimate), along with the 9M cumulative SG&A ratio and corporate expense trends.
4. Overseas Expansion and Profitability Improvement
- Previous Quarter: Overseas segment revenue was JPY 989M (+74.6%). The operating loss narrowed to JPY -25M from JPY -51M a year earlier.
- This Quarter Check: We will verify whether BOTANIST at Costco in the US and YOLU at OLIVE YOUNG in Korea continued to build sales in 3Q.
- This Quarter Check: Liquidation of the Chinese subsidiary, I-ne (Shanghai) Cosmetics Co., Ltd., has been completed, with a JPY 24M loss on subsidiary liquidation booked. We will also watch for changes in the overseas operating footprint.
- Key Metrics: 9M cumulative Overseas segment revenue YoY and whether segment profit turns positive.
5. Wind-Down of One-Off Costs and Quality of Net Income Attributable to Owners of Parent
- Previous Quarter: 1H extraordinary losses totaled JPY 283M. These comprised special investigation costs, etc. of JPY 219M, a listing agreement penalty of JPY 33M, a JPY 24M loss on subsidiary liquidation, and a JPY 6M administrative monetary penalty.
- Previous Quarter: Against Recurring Profit growth of +20.4%, interim Net Income Attributable to Owners of Parent Company grew only +13.5%. Profit attributable to non-controlling interests was JPY 125M.
- This Quarter Check: The additional acquisition of Artemis shares (acquisition cost JPY 2,910M) reduced non-controlling interests to zero. We will confirm that profit from June onward accrues entirely to owners of the parent.
- This Quarter Check: We will check for any additional special investigation costs, along with the breakdown of extraordinary items and income taxes.
- Key Metrics: 9M cumulative extraordinary losses, quarterly net income attributable to non-controlling interests, and YoY change in quarterly Net Income Attributable to Owners of Parent Company (prior year: JPY 1,105M).
Key Timely Disclosures During the Quarter
- 2026/10/22SALONIA wins the 2026 Good Design Award; the Cordless Straight Hair Iron surpasses 270,000 cumulative units, reaching 180% of plan. This shows new Beauty Appliances products are shipping ahead of plan. It is a useful data point for gauging the category's revenue contribution in 3Q–4Q.
- 2026/09/17FSA decision to issue an administrative monetary penalty order. A JPY 6M penalty was already booked in 1H extraordinary losses. In 3Q, we will check for any booking of the difference versus the ordered amount and whether governance-related costs are winding down.
- 2026/09/10SALONIA's pen-type facial device surpasses 100,000 cumulative units shipped within six months of launch. This key new product, cited in the earnings release as a 1H revenue driver, continued to gain shipments during 3Q. It offers a read on 3Q standalone sales in Beauty Appliances.
Previous Quarter Results (FY12/26 2Q Actual)
The company plans and develops its own branded products across Hair Care, Beauty Appliances, and Skin Care & Others. It sells them domestically through wholesalers, mass retailers, and e-commerce. Core brands are BOTANIST, YOLU, and SALONIA. Its strengths are "brand creation capability," "OMO," and "IPTOS." Growth pillars are reaccelerating core brands, nurturing new brands, and expanding overseas. In 1H, all categories grew by double digits, and Revenue, Operating Income, and Recurring Profit each rose roughly 20% YoY. However, one-off costs related to the special investigation weighed on growth in interim Net Income Attributable to Owners of Parent Company.
| Item | Amount | YoY | vs. Company Plan | Remarks |
|---|---|---|---|---|
| Revenue | JPY 26,808M | +20.1% | - | Double-digit growth in all categories; Skin Care & Others +52.3%. Progress against full-year guidance range of 47.0–48.7% (our estimate) |
| Operating Income | JPY 2,012M | +19.2% | - | Gross Profit Margin 61.3% (+3.6pt). SG&A up 29.1%. Exceeds full-year plan upper end of JPY 1,500M |
| Recurring Profit | JPY 1,911M | +20.4% | - | FX loss narrowed from JPY 115M to JPY 13M. Full-year Recurring Profit guidance not disclosed |
| Interim Net Income Attributable to Owners of Parent Company | JPY 1,047M | +13.5% | - | Extraordinary losses of JPY 283M (incl. JPY 219M in special investigation costs, etc.). Profit attributable to non-controlling interests of JPY 125M |
| EPS | JPY 58.92 | +11.6% | - | EPS guidance not disclosed |
Guidance Achievement Rate (Operating Income Basis): 134.1% (vs. full-year plan upper end of JPY 1,500M; not calculable against the lower end of JPY 0M) (Prior Year: -)
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