DAIWA CYCLE CO.,LTD.

Business Details

Under its management philosophy of "creating a new normal for bicycles," the company operates 155 directly-owned stores and 4 franchise stores, totaling 159 stores (as of the first quarter of FY2027 (ending January 2027)). Centered on large-format suburban roadside stores, the company sells bicycles, parts, and accessories, and also provides after-sales services such as on-site repair and maintenance services and long-term warranties (Daiwa Support Pack). In addition to NB (national brand) products, the company offers PB (private brand) products and promotes an omnichannel strategy that includes operation of an EC Site (Daiwa Cycle Online Store).

Recent Overview

Q1 net sales up 12.3% and operating profit up 7.3%, with 5 new stores bringing total to 159

In the first quarter of FY2027 (ending January 2027) (February to April 2026), the company held a 150-store anniversary thanksgiving sale timed to seasonal demand, expanded its lineup of helmets, raincoats, and other items in response to the application of the traffic violation notice system to bicycles starting April 1, 2026, and strengthened staff training to meet repair demand. The company opened 5 new stores (1 in Kansai and 4 in Kanto), bringing the period-end store count to 159 (155 directly-owned and 4 FC). Net sales were ¥6,960 million (up 12.3% year on year) and operating profit was ¥656 million (up 7.3% year on year), achieving both higher sales and higher profit. However, due to increases in various costs including store opening expenses, the operating profit margin declined to 9.4% from 9.9% in the same period of the prior year. A foreign exchange loss of ¥7 million was incurred, limiting the growth in ordinary profit to 4.2%. There is no change to the full-year earnings forecast (net sales of ¥24,293 million and operating profit of ¥1,490 million).

Key Products

Growth Drivers

• Expansion of sales scale through aggressive annual store openings (5 stores opened in Q1, 159 stores at period-end, medium-term target of 200 stores)
• Strong sales of e-assist bicycles (approximately 65% of bicycle sales, significantly exceeding the industry average of approximately 48%)
• Strengthened price competitiveness and room for margin improvement through PB product development (33.7% of bicycle sales at directly-owned stores)
• Concentration of demand at large specialty stores due to the decline in independently-run bicycle shops (from 13,784 stores in 1999 to 6,628 stores in 2021)
• Expanding demand for helmets and safety equipment due to the application of the traffic violation notice system to bicycles (from April 2026)
• Differentiation and acquisition of repeat customers through increasing repair and maintenance demand and enhanced staff training
• Strengthening of CRM and omnichannel strategy utilizing the official app (approximately 600,000 registrations)

Risks

• Downward pressure on operating profit margin due to increased store-opening-related costs (depreciation, rent, personnel expenses) associated with accelerated store openings (Q1 operating profit margin declined to 9.4% from 9.9% in the same period of the prior year)
• Risk of rising procurement costs and slowing personal consumption due to prolonged yen depreciation and price increases (a foreign exchange loss of ¥7 million occurred in Q1)
• Risk of declining service quality due to delays in hiring and training personnel capable of supporting store expansion
• High sensitivity to market trends and competitive changes due to sales concentration in e-assist bicycles (approximately 65% of bicycle sales)
• Risk of soaring resource and energy prices due to the impact of US trade policy (tariffs) and the situations in the Middle East and Ukraine
• Importance of cash flow management amid seasonal expansion of working capital, including a significant increase in accounts payable (from ¥911 million to ¥1,588 million)