TOKYU CORPORATION

Business Details

Tokyu Corporation Railways operates 9 rail lines totaling 110.7km in the southwestern part of Tokyo and Kanagawa Prefecture, and this segment also includes the regional railway of Izukyu Corporation, the bus business of Tokyu Bus Co., Ltd., and the airport operations business of Sendai International Airport Co., Ltd. It is a core segment that supports the daily mobility of residents along the rail lines while contributing to the enhancement of value along the lines across the entire group through synergies with the Real Estate and Lifestyle Services businesses.

Recent Overview

Revenue increased, but profit declined due to higher repair and personnel costs. Capital expenditures expanded 14.8% year on year.

In the Transportation segment for FY2026 (ending March 2026), the total number of passengers transported by Tokyu Corporation Railways increased 3.1% overall, and passenger fare revenue increased 1.8%, resulting in operating revenue of ¥226,946 million (up 2.9% year on year). On the other hand, due to increases in repair costs, personnel costs, and other expenses, operating income declined to ¥27,341 million (down 5.7% year on year). Capital expenditures increased 14.8% year on year to ¥68,805 million, as infrastructure renewal and capacity-enhancing investments continued. The number of passengers transported by Izukyu Corporation increased 3.0%, while Tokyu Bus decreased 0.4%.

Key Products

Growth Drivers

• Expansion of fare revenue (up 1.8% overall) driven by the increase in passengers transported by Tokyu Corporation Railways (up 3.1% overall in FY2026, ending March 2026)
• Increased use of tourism routes such as Izukyu Corporation due to the recovery and expansion of inbound demand (Izukyu Corporation up 3.0%)
• Enhancement of value along the rail lines through expansion of the wide-area railway network, following the certification of the business concept for the new airport line (between Kamata Station and Keikyu Kamata Station)
• Improved passenger convenience and strengthened brand value along the lines through station renewals in the underground section of the Den-en-toshi Line and other projects
• Appeal of environmental advantages through energy-saving and decarbonization measures (installation of large-scale storage batteries and auxiliary power supply devices at stations)

Risks

• Pressure on profit due to increases in upfront costs such as repair expenses and personnel costs (operating income declined 5.7% in FY2026, ending March 2026)
• Continued high level of capital expenditure burden associated with maintenance and renewal of aging facilities and natural disaster countermeasures (¥68,805 million in FY2026, ending March 2026)
• Cost increase pressure from rising personnel expenses (wage increases and base pay hikes)
• Increased cost of interest-bearing debt due to interest rate rise risk
• Long-term uncertainty in transportation demand due to declining birthrate and demographic changes
• Structural challenges in the route bus business, as seen in the decline in passengers transported by Tokyu Bus (down 0.4%)

Business Details

This segment comprises the Department Store Business (Tokyu Department Store Co., Ltd., Nagano Tokyu Department Store Co., Ltd.), Chain Store Business (Tokyu Store Chain Co., Ltd.), Shopping Center Business (Tokyu Mall's Development Co., Ltd., SHIBUYA109 Entertainment Co., Ltd.), Cable TV business (Itscom Co., Ltd.), Advertising Business (Tokyu Agency Inc.), Video Business (Tokyu Recreation Co., Ltd.), and others. It is positioned to provide a wide range of services closely tied to daily life, primarily along the Tokyu rail lines, and to contribute to enhancing value along the lines.

Recent Overview

Each business performed steadily, achieving both higher revenue and higher profit

In the Lifestyle Services segment for FY2026 (ending March 2026), steady performance from businesses such as Tokyu Recreation Co., Ltd. and Tokyu Power Supply Co., Ltd. resulted in operating revenue of ¥533,271 million (up 1.1% year on year) and segment profit of ¥21,868 million (up 13.0% year on year). Although the revenue increase was modest, profitability improved significantly, with the profit margin rising from 3.7% in the prior period to 4.1%.

Key Products

Growth Drivers

• Revenue contribution from the steady performance of businesses such as Tokyu Recreation Co., Ltd. and Tokyu Power Supply Co., Ltd.
• New revenue contribution from the opening of the Shibuya Sakura Stage store (Tokyu Store Chain)
• Promotion of quad operations (own sales floors, consignment sales, leasing, and franchising) and strengthened competitiveness through the establishment of Tokyu Retail Management Co., Ltd.
• Deepening of synergies through cross-group collaboration (Transportation, Real Estate, and Lifestyle Services)
• Cost improvement from lower power procurement costs at Tokyu Power Supply Co., Ltd.

Risks

• Impact on department store and chain store sales from changes in the consumption environment and weak personal consumption
• Risk of profit pressure from rising raw material prices and energy costs
• Risk of impairment losses
• Increased costs due to rising personnel expenses (wage increases and base pay hikes)
• Intensifying competition with rivals and changes in consumer purchasing behavior (such as the shift to e-commerce)

Business Details

This segment comprises the Real Estate Sales business (residential land development and condominium sales), Real Estate Leasing business (office buildings and commercial facilities), Real Estate Management business (property management and condominium management), Real Estate Brokerage business, and the Construction Business. It operates primarily in the Shibuya area along the Tokyu rail lines, as well as in the greater Tokyo metropolitan area, the Kinki region, and major regional cities, with Tokyu Land Corporation, Tokyu Livable, Inc., and Tokyu Construction Co., Ltd. among the companies responsible for these businesses. In FY2026 (ending March 2026), increased rental income drove results, although profit declined due to the absence of large-scale property sales that had occurred in the prior period.

Recent Overview

Revenue increased due to higher rental income, but operating income declined 9.9% due to the absence of large-scale property sales from the prior period

In the Real Estate segment for FY2026 (ending March 2026), increased rental income in the company's Real Estate Leasing business, among other factors, resulted in operating revenue of ¥262,995 million (up 3.6% year on year). On the other hand, the company's Real Estate Sales business experienced a decline due to the absence of large-scale property sales that had occurred in the prior period, resulting in operating income of ¥43,595 million (down 9.9% year on year). Capital expenditures increased significantly to ¥65,910 million from ¥37,038 million in the prior period, reflecting accelerated development investment. Segment assets also increased 9.4% year on year to ¥1,301,003 million.

Key Products

Growth Drivers

• Continued increase in rental income from large-scale redevelopment in the Shibuya area (the opening of Shibuya Axsh, and the steady progress of the Shibuya Upper West Project, the Miyamasuzaka District redevelopment, and Phase II of Shibuya Scramble Square)
• Stable expansion of revenue in the Real Estate Leasing business through the maintenance of high office rents and increased percentage-based rents from commercial and hotel properties
• Expansion of the overseas condominium sales business in Binh Duong New City, Vietnam
• Planned execution of growth investments centered on real estate development investment under the medium-term three-year management plan (capital expenditures for the period under review increased substantially to ¥65,910 million year on year)
• A market environment in which the competitive advantage of newly opened properties is enhanced due to supply-demand tightness resulting from delays or cancellations of large-scale redevelopment projects by other companies

Risks

• Risk of fluctuations in real estate sales revenue due to the absence of large-scale condominium sales or changes in sales timing (operating income declined 9.9% year on year in FY2026, ending March 2026)
• Risk of rising development costs due to soaring raw material prices and construction costs
• Increased cost of interest-bearing debt due to rising interest rates and impact on the real estate market
• Risk of construction delays or cost overruns in large-scale projects such as the Shibuya redevelopment
• Risk of impairment losses associated with holding large amounts of fixed assets

Business Details

This segment comprises the hotel business operated by Tokyu Hotels & Resorts Co., Ltd. and the golf business operated by Three Hundred Club Co., Ltd. and others. The segment actively captured inbound demand centered on hotels in urban areas, achieving an average room rate of ¥26,681 (up ¥2,761 year on year). During the period under review, both operating revenue and operating income increased significantly, with segment profit rising 46.0% year on year, the highest profit growth rate among all segments.

Recent Overview

Capturing inbound demand at urban hotels drove operating income up 46.0% year on year, the sharpest expansion of any segment

In FY2026 (ending March 2026), the company actively captured inbound demand centered on hotels in urban areas, raising the average room rate to ¥26,681 (up ¥2,761 year on year). Operating revenue was ¥139,346 million (up 9.8% year on year), and operating income was ¥9,710 million (up 46.0% year on year), achieving the highest profit growth rate among all segments. Segment assets also increased by approximately ¥12,853 million year on year to ¥139,365 million, with investment continuing.

Key Products

Growth Drivers

• Rising occupancy rates and room rates driven by the continued strong growth in inbound demand (average room rate of ¥26,681, up ¥2,761 year on year)
• Improved GOP through the recovery of domestic travel demand and enhancement of facility and service quality
• Concentrated capture of inbound demand due to the locational advantage of hotels centered in urban areas
• Expansion of the international customer base through dual-brand operations with Pan Pacific Hotels Group
• Strengthened competitiveness through value-enhancement investments in existing facilities, such as the renovation of Cerulean Tower Tokyu Hotel

Risks

• Cost increase pressure from rising raw material prices and personnel expenses (wage increases)
• Increased funding costs due to interest rate rise risk
• Risk of fluctuations in inbound demand (due to foreign exchange and geopolitical factors)
• Risk of impairment due to holding large amounts of fixed assets
• Intensifying price and service competition with rival hotel chains

Business Details

Tokyu Corporation's reportable segments are divided into four categories: "Transportation," "Real Estate," "Lifestyle Services," and "Hotel & Resort Business." The "Adjustments" column includes corporate assets not allocated to each reportable segment and intersegment transaction eliminations. Investments in equity-method affiliates are also recorded as corporate assets and used for reconciliation with the consolidated financial statements. In FY2026 (ending March 2026), the company changed the amortization period for retirement benefit expenses (from 15 years to 13 years).

Recent Overview

Corporate adjustment items expanded due to the change in the amortization period for retirement benefit expenses and the additional acquisition of Tokyu REIT investment units

In FY2026 (ending March 2026), the company changed the amortization period for actuarial differences and other items related to retirement benefits from 15 years to 13 years, increasing operating income, ordinary income, and income before income taxes and non-controlling interests by ¥1,687 million each. In addition, following the additional acquisition of investment units in Tokyu Real Estate Investment Corporation, the company recorded a negative goodwill equivalent of ¥6,653 million as equity in earnings of affiliates. Equity in earnings of affiliates roughly doubled from ¥11,760 million in the prior period to ¥23,920 million. Separately, an error in the disclosure related to retirement benefits was discovered as of May 27, 2026, resulting in a partial correction to the earnings report (total assets: ¥2,920,289 million → ¥2,922,828 million; net assets: ¥957,767 million → ¥959,506 million).

Key Products

Growth Drivers

• Increase in equity in earnings of affiliates (from ¥11,760 million in the prior period to ¥23,920 million in the period under review) and expansion of the equity-method investment balance (from ¥182,920 million to ¥235,160 million) due to the expanded application of the equity method to Tokyu Real Estate Investment Corporation
• A ¥1,687 million boost to operating income and ordinary income for the period under review from the change in the amortization period for retirement benefit expenses (from 15 years to 13 years)
• Expansion of the medium- to long-term investment income base through the growing balance of investments in equity-method affiliates

Risks

• Since corporate assets and elimination items are not allocated to individual business segments, their impact on consolidated results tends to be less transparent
• Equity in earnings of affiliates is non-operating income and is not reflected in segment profit (on an operating income basis), requiring caution when assessing actual business conditions
• The profit-boosting effect (¥1,687 million) from the change in the amortization period for retirement benefit expenses is a one-time factor based on a change in accounting estimates, requiring attention to its lack of continuity
• The increased cost of interest-bearing debt amid rising interest rates may affect company-wide financial expenses (interest expense increased from ¥9,054 million in the prior period to ¥11,828 million in the period under review)
• A correction to the earnings report (dated May 27, 2026) due to a disclosure error related to retirement benefits has occurred, indicating a challenge in ensuring the accuracy of financial information management