SUGI HOLDINGS CO.,LTD.

Business Details

The SUGI HOLDINGS group consists of a single segment, the Drugstore and Dispensing Pharmacy Business. The core subsidiary, Sugi Yakkyoku Co., Ltd., operates Drugstores with In-Store Dispensing Pharmacy (Sugi Yakkyoku) that integrate the sale of pharmaceuticals, health foods, cosmetics, and daily necessities with prescription dispensing, based on a total healthcare strategy. Sugi Medical Co., Ltd. handles peripheral healthcare businesses such as home-visit nursing care and support for opening medical institutions, while S Trading Co., Ltd. conducts the overseas export and domestic wholesale business. At the end of the first quarter of FY2027 (ending February 2027), the number of stores was 2,343 (a net increase of 22 stores from 2,321 at the end of the prior fiscal year).

Recent Overview

Net sales and operating profit posted double-digit growth, but net income declined sharply due to the absence of a prior-period special factor

In the first quarter of FY2027 (ending February 2027) (March to May 2026), net sales were ¥270,175 million (up 10.1% year on year) and operating profit was ¥12,209 million (up 10.9% year on year), reflecting solid core business performance. On the other hand, quarterly net income attributable to owners of parent fell sharply to ¥6,901 million (down 67.5% year on year), due to the absence of a special factor from the same quarter of the prior year, when additional deferred tax assets were recognized in connection with the absorption-type merger of former I&H Co., Ltd. (income tax adjustment of ¥-12,554 million). Ordinary profit increased only 1.9%, held back by an increase in investment losses under the equity method of ¥1,170 million (versus ¥24 million in the prior period) and an increase in interest expenses of ¥390 million (versus ¥104 million in the prior period). As a subsequent event, the company resolved at a board of directors meeting on July 9, 2026 to conduct a third-party allotment of new shares to GIC Private Limited (5,082,000 shares, issue price of ¥3,195 per share, proceeds of ¥16,008 million). The proceeds are to be used for store openings and renovation investment, DX/AI-related investment, and M&A, among other purposes. The company also plans a 1-for-2 stock split effective September 1, 2026, and on the same date plans to make Seki Yakuhin a consolidated subsidiary. The full-year earnings forecast remains unchanged (net sales of ¥1,092,000 million, operating profit of ¥54,000 million).

Key Products

Growth Drivers

• Continued dominant-area store openings in the Kanto, Chubu, and Kansai regions (34 new stores opened in the first quarter of FY2027 (ending February 2027); 2,343 stores at quarter-end)
• Growth in the number of prescriptions filled and expansion of dispensing sales as the population ages
• Improvement in gross margin through purchase-data-driven promotions and manufacturer-distributor-retailer collaboration utilizing the Sugi Yakkyoku App
• Expansion of business scale and early synergy creation through the planned consolidation of Seki Yakuhin as a subsidiary in September 2026
• Acceleration of investment in store openings, DX, and M&A using proceeds from the third-party allotment of new shares to GIC Private Limited (fundraising amount of ¥16,008 million)
• Improvement in labor productivity through dispensing DX (spread of prescription transmission apps and automation of physical operations)
• Improvement in gross margin ratio through expanded sales of private brand products
• Cost reduction through the sequential expansion of stores with solar panels installed under a third-party ownership model

Risks

• Pressure on earnings in the dispensing segment due to drug price revisions and dispensing fee revisions (evaluation shift from physical operations to personal services)
• Continued increase in labor costs, construction costs, and logistics costs due to price increases and wage hikes
• Acceleration of industry restructuring and intensifying competition due to M&A and alliances, including with companies in other industries
• Pressure on ordinary profit due to expanding investment losses under the equity method (¥1,170 million in the first quarter, versus ¥24 million in the same period of the prior year)
• Changes in financial structure and interest rate risk associated with bond issuance (¥22,500 million) and long-term borrowings (¥64,538 million), in addition to the third-party allotment of new shares
• Risk of goodwill recognition and integration costs arising from the consolidation of Seki Yakuhin as a subsidiary (planned for September 2026); the impact on earnings is currently under review
• Dilution of existing shareholders due to the third-party allotment of new shares (5,082,000 shares)
• Risk of continued recognition of impairment losses (¥14 million in the first quarter, with an additional ¥424 million in valuation losses on investment securities also recognized)