TAY TWO CO.,LTD. 1Q Earnings Preview

Focus on Used Trading Card and EC Segment Profitability and the Path to 3.8% OPM amid Reversal of New Game Hardware Demand Tailwind

PublishedJuly 13, 2026 at 15:30 GMT+9

Summary

For FY2026/2 (full year), the company delivered revenue of JPY 42.2B (+15.8%) and operating income of JPY 1.4B (+51.1%), achieving profitable growth with OPM improving from 2.5% to 3.3%. The FY2027/2 company guidance calls for revenue of JPY 42.5B (+0.6%) against operating income of JPY 1.6B (+16.1%), clearly targeting margin expansion on a flat top line. The key confirmation item for 1Q is the extent to which used trading cards and Yamtoku's EC revenue can offset the rollover of new game hardware demand that contributed in the year-ago period. This is the quarter to assess whether qualitative shifts in growth strategy are beginning to flow through to the numbers—including continued shopping mall store openings (two stores simultaneously opened in April), consolidation of EC management resources following the closure of Furuichi Online, and trends in external sales of the BtoB tool "TAYS."

Key Points for Next Quarter

Key Points & Focus	Implications
Revenue Growth1Q Revenue YoY Trend and New/Used Product Mix	June monthly group revenue came in at 80% YoY, with new product headwinds materializing. Sustainability of used product revenue at 122% will determine achievability of full-year guidance of JPY 42.5B
Margins1Q OPM YoY Change	Full-year guided OPM of 3.8% (our estimate) requires +0.5pt improvement from last year's 3.3%. Maintaining gross margin above 33.2% and containing the SG&A ratio in 1Q are the key proof points
EC BusinessEC Revenue Post-Resource Consolidation into Yamtoku	Closure of Furuichi Online and consolidation into Yamtoku already announced. 1Q EC revenue trends will indicate progress on intra-group synergies
Store NetworkNew Shopping Mall Openings and Same-Store Sales	Two stores added in April to the prior year-end base of 175 stores. Confirm store opening pace and investment payback efficiency toward mid-term targets (FY2029/2 revenue JPY 50B, operating income JPY 2.5B)
Capital EfficiencyROE Improvement Trend	Prior-year ROE was 13.2% (vs. 8.4% the year before). ROE implied by the current guidance net income of JPY 800M (our estimate: ~11%) is expected to decline, making core operating profitability excluding extraordinary items the key focus

Key Issues from Previous Results (FY2026/2 Full-Year)

FY2026/2 delivered revenue growth of +15.8% and operating income growth of +51.1%, pivoting sharply from the earnings decline trajectory of the prior year. Three pillars drove results: accelerated shopping mall store openings (cumulative 45 stores), a surge in new game sales (+49.0%), and strong used trading card performance (+19.5%). At the same time, investment-phase costs emerged, including an expansion in equity-method investment losses (negative JPY 21M) and JPY 137M in impairment losses. FY2027/2 is positioned as a transition from "volume to quality," with the balance between sustainable margin improvement and growth investment under scrutiny.

1. Reversal of New Game Hardware Demand and Shifts in Product Mix

Prior Year:
New game revenue JPY 10.014B (+49.0%), new product mix at 49.9%
Current Year Confirmation:
Magnitude of 1Q new product revenue decline and degree of offset from used products, hobby, and trading cards
Key Metric:
Monthly sales flash data by new/used product YoY trends

New game revenue expanded sharply to JPY 10.0B (+49.0% YoY) in the prior year, driving total new product revenue to JPY 21.068B (+24.1%). However, monthly new product sales decelerated from 217% YoY in May to 52% in June, clearly indicating the hardware launch cycle has run its course.

2. Upside Potential in Gross Margin and OPM

Prior Year:
Gross margin 33.2%, SG&A ratio 29.9%, OPM 3.3%
Current Year Confirmation:
Gross margin recovery from lower new product mix and offset dynamics against rising labor costs and rent
Key Metric:
Whether 1Q OPM is tracking above the full-year guided 3.8%

Prior-year gross margin edged down to 33.2% (vs. 33.7%) due to rising new product mix, while the SG&A ratio improved to 29.9% (from 31.2%), yielding a 3.3% OPM. Full-year guidance implies an OPM of 3.8% (our estimate) based on operating income of JPY 1.6B on revenue of JPY 42.5B.

3. EC Business Restructuring and Yamtoku's Growth

Prior Year:
Yamtoku completed operational hub consolidation; mail-order buying pilot launched
Current Year Confirmation:
EC revenue trends post-Furuichi Online closure and Yamtoku's revenue growth rate
Key Metric:
EC-related revenue YoY, intra-group logistics cost trends

In the prior year, Yamtoku advanced new hub operations and product category expansion in the reuse EC space, and also launched a pilot mail-order buying service. For FY2027/2, management has explicitly stated its policy to close Furuichi Online and consolidate EC resources into Yamtoku. This is the first year for intra-group EC business optimization to be reflected in earnings.

4. Store Network Expansion and Investment Efficiency

Prior Year:
175 stores at year-end (45 mall stores), tangible fixed asset acquisitions of JPY 784M
Current Year Confirmation:
1Q store opening pace (two stores opened in April) and same-store sales trends
Key Metric:
Revenue and operating income per store, incremental depreciation

In the prior year, nine stores were opened and six closed for a net addition of three (175 stores at year-end). Cumulative shopping mall stores reached 45. Net buildings and structures surged from JPY 563M to JPY 1.607B, and depreciation expanded to JPY 445M (+16.8%). The company plans to continue mall openings and regional roadside store openings this fiscal year.

5. Financial Health and Cash Generation Capacity

Prior Year:
Operating CF JPY 1.9B, equity ratio 48.8%, debt repayment period 1.5 years
Current Year Confirmation:
Whether store investment and interest-bearing debt reduction can be pursued simultaneously
Key Metric:
Net interest-bearing debt at 1Q-end, free cash flow level

In the prior year, operating cash flow reached JPY 1.936B (+32.4%), while interest-bearing debt was reduced (short-term borrowings down JPY 500M, long-term loan repayments of JPY 355M). Debt repayment period improved to 1.5 years and equity ratio to 48.8%. JPY 200M in corporate bonds have been reclassified as due within one year, with repayment expected this fiscal year. Against the backdrop of improved financial health and stronger cash generation, the company is pursuing both growth investment and shareholder returns. The FY2027/2 company guidance targets a dividend of JPY 4.00 per share with a payout ratio of 31.8%, allocating generated cash to business growth investment while also channeling returns to shareholders.

Timely Disclosure & Industry Trends

2026/07/07
June 2026 Monthly Sales Update – Group revenue at 80% YoY. New products at 52% as demand reversal materializes, while used products held firm at 122%. Critical data point for gauging the impact of new game hardware demand normalization. June 2026 Monthly Sales Update
2026/06/05
May 2026 Monthly Sales Update – Group revenue at 166% YoY, new products at 217% reflecting pronounced new game hardware effects. Used products also strong at 135%, suggesting robust business momentum in the first half of 1Q. May 2026 Monthly Sales Update
2026/05/19
Dissolution of Capital and Business Alliance with Surugaya, Transition to Business Alliance – Capital ties restructured while operational alliances in stores, EC, and logistics continue. P&L impact from investment securities changes (JPY 98M gain on sale already booked in the prior year) appears limited, but changes in the nature of the partnership warrant monitoring. Notice Regarding Dissolution of Capital and Business Alliance with Surugaya and Transition to Business Alliance
2026/04/23
Simultaneous Opening of Furuichi AEON Mall Ibaraki and Chikushino Stores – Advancing mall openings in the Kansai and Kyushu regions. As a tangible step in the growth strategy, a contribution to 1Q revenue is expected. Furuichi AEON Mall Ibaraki and Chikushino Stores Grand Opening on April 23, 2026

Previous Quarter Results (FY2026/2 Full-Year Actuals)

Teitsuu operates a multi-format reuse store network centered on "Furuhon Ichiba," "Furuichi," and "Toreca Park," alongside an EC business through its wholly-owned subsidiary Yamtoku, forming a Multi-Package Sales business encompassing the sale and purchase of books, games, trading cards, hobby items, and more. Under the group vision of "Connecting Communities and the World through Reuse," the company has set mid-term targets of JPY 50B in revenue and JPY 2.5B in operating income for FY2029/2. FY2026/2 was driven by new game hardware sales growth and accelerated shopping mall openings, delivering over +47% YoY profit growth across all profit line items. Financial health also improved, with an equity ratio of 48.8% and a debt repayment period of 1.5 years, achieving both growth investment and shareholder returns.

Item	Amount	YoY	vs. Guidance	Remarks
Revenue	JPY 42.2B	+15.8%	-	New games +49.0% and used trading cards +19.5% drove growth
Operating Income	JPY 1.4B	+51.1%	-	SG&A ratio improved to 29.9% (from 31.2%)
Recurring Profit	JPY 1.355B	+47.3%	-	Equity-method investment loss of negative JPY 21M recorded
Net Income	JPY 867M	+73.0%	-	Extraordinary gains of JPY 167M booked (incl. JPY 98M gain on sale of investment securities)
EPS	JPY 13.65	+71.9%	-	-

FY2027/2 Full-Year Company Guidance: Revenue JPY 42.5B (+0.6%), operating income JPY 1.6B (+16.1%), recurring profit JPY 1.6B (+18.1%), net income JPY 800M (▲7.8%), dividend JPY 4.00/share (payout ratio 31.8%)