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spk00: Good day, ladies and gentlemen. Thank you for standing by and welcome to Yoshitsu's first half of fiscal year 2022 earnings conference call. During today's presentation, all parties will be in a listen-only mode. This conference is being recorded today, Tuesday, March 29, 2022. If you have any objections, you may disconnect at this time. Joining us today from Yoshitsu are the company's principal executive officer, Mr. May Kanayama, the company's principal accounting and financial officer, Mr. Yoichiro Haga. Before we continue, I would like to remind you that some information discussed on this call will contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties. The company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances or changes in its expectations except as may be required by law. Although the company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the company cautions investors that actual results may differ materially from anticipated results and encourages investors to review other factors that may affect its future results in the company's registration statements and in its other filings with the SEC. With that, I will now turn the call over to Mr. May Kanayama, the company's principal executive officer. His opening remarks will be delivered in English by the company's IR representative. Mr. Kanayama, please go ahead.
spk09: Konoyama-san, please go ahead.
spk05: Thank you very much for participating in the financial report meeting in September 2021 at Yoshitsubo Station while everyone was busy. First of all, I will tell you the full outline of today's report meeting. Next, I will tell you the details of the financial contents of CFO Kagayori. Finally, I will give you the time to respond.
spk01: Thank you, operator, and everyone for joining Yoshizu's first half of fiscal year 2022 earnings conference call today. On our call today, I will give an overview of our performance for the first half of fiscal year 2022. Then, our principal accounting and financial officer, Mr. Yoichiro Haga, will share the details of the company's financial review. Lastly, we'll conduct a Q&A session to take your questions.
spk09: Thank you.
spk05: In the first half of 2021, we were able to achieve the current performance. With a total sales of $1.23 billion, we have increased by 34.8% compared to the previous year due to the expansion of the global market and the expansion of the customer base. compared to the previous year, increased by $1,111.6 million and achieved a sales of $6,230 million. The franchise and retail areas achieved proper growth and increased sales by 34.2%. Considering the current market situation, the domestic direct sales have increased, We focused on the online store strategy and gave the country's overall sales performance a minimum of sales. We can't achieve these results without professional cooperation from our employees. We are grateful for your support in this new coronavirus pandemic. We gave significant effort to deliver solid financial results of the first half of fiscal year 2022, with a total revenue of $112.3 million, up 34.8% year-over-year, along with our increased global market coverage and customer base.
spk01: Although our business was negatively impacted by the ongoing COVID-19 pandemic, challenges to global supply chain and the travel restrictions, our online stores posted an impressive revenue of $62.3 million, up 111.6% from the same period of last year, which helped steady growth in franchise stores and wholesale customers, marking an increase of 34.2% in revenue. Given the current market condition, our physical store sales suffered, but we had upgraded the strategic focus on overseas online markets, minimizing the impact of store sales to the overall financial performances. We cannot achieve these results without our dedicated team. I'm so proud of them and appreciate for their support and execution during the COVID-19 pandemic. Their hard work allows us to grow our business and to execute strategic plans to propel our future growth.
spk05: On February 28, 2022, there are 10 stores in Japan, 24 online stores, 9 stores in the US, 4 stores in Canada, 4 stores in Hong Kong, 1 store in the UK, and 10 stores in Japan and other countries.
spk01: As of February 28, 2022, we had 10 directly operated physical stores in Japan, 24 online stores, 9 franchise stores in the U.S., 4 franchise stores in Canada, 4 franchise stores in Hong Kong, 1 franchise store in the U.S., and around 148 wholesale customers in Japan and other countries.
spk05: I have a lot of confidence in the future of Yoshizubo. The market is We hope to gradually recover from the new coronavirus pandemic and manage the cost of disbanding of the financial statements. We are focusing on global development, especially in Europe, North America, and Southeast Asia. Finally, we will expand the region from North America and large companies to expand the region.
spk01: I am very confident about the future of Yoshizu and expect to see improvements in our financial matrix and effective control in our costs as the market gradually reverts from the COVID-19 pandemic. Moreover, we are focusing on global expansion, especially in some key regions like Europe, North America, and Southeast Asia. Following our recent cooperation with a well-known company in North America, we are on the right track to make a push to expand in this area. Beyond this aspect, we are planning to manufacture and sell our private label products in five years to further expand our product offerings.
spk05: Please support us in the future. Hakka-san, onegaishimasu.
spk01: Thank you for your continued support to the company. Next, I will turn the call over to our principal accounting and the financial officer, Mr. Yuichiro Haga, for a closer review of our financials of the first half of fiscal year 2022 on behalf of the management team. Mr. Haga, please go ahead.
spk02: And thank you, Mr. Kanayama. Good morning, everyone. On behalf of the Manning team, I will provide a brief financial overview of the first half of fiscal year 2022. As the COVID-19 pandemic continued spreading, we encountered a surge in various costs and shortages of staff. However, we tacked these challenges and achieved recorded revenue with our strong effort. Total revenue up 34.8% to $112.3 million for the six months ended September 30, 2021, from $83.3 million for the same period of last year. The increase was due to the increased revenue from online stores, franchise stores, and wholesale customers, which was partially offset by the decrease in revenue from directly operated fiscal stores. Revenue from directly operated fiscal stores down by 74.5% to $5.2 million for the six months ended September 30th, 2021. The decrease was mainly due to the state of emergency declared by the Japanese government in April 2021 in response to the COVID-19 pandemic. Almost all of the company's fiscal stores were temporarily closed from late April 2021 to the end of May 2021. After the company's fiscal stores reopened in June 2021, most of the company's fiscal stores remained closed on Saturdays or Sundays, and opening hours were reduced every weekday. After July 2021, Most of the company's fiscal stores resumed their business with working hours reduced by one to two hours every day. The company's business was still negatively affected during the first half of the fiscal year 2022. Revenue from online stores up by 111.6% to $62.4 million for the six months ended September 30, 2021. The increase was due to the growing popularity of the online shopping, given that the e-commerce industry has been rapidly expanding in recent years. In order to seize the opportunities, The company expanded its online store network by opening new stores on multiple popular and reputable third-party e-commerce marketplaces in overseas regions, while improving the efficiency of its supply chain and short-storage and inventory management. Revenue from franchise stores and wholesale customers up by 34.2% to $44.7 million for six months in the September 30, 2021. The increase was mainly due to the increased sales to overseas franchise stores and wholesale customers offset by a slight decrease in the company's Japanese domestic wholesale. With improvement of the company's supply chain and storage and logistic capacity, the company added two new franchise stores and increased sales to overseas wholesale customers on a per-customer basis during the first half of the fiscal year 2022. Gross profit increased by 24.1% to $18.3 million for the six months ended September 30, 2021. Overall gross margins were 16.3% for the same period. Operating expenses increased by 23.4% to $13.7 million for the six months ended September 30, 2021. The increase was due to the increase in shipping expenses, transaction commissions, consulting and professional service fee, promotion and advertising expenses, and payroll employee benefit expenses and bonus expenses. Net income up by 40.5% to $2.4 million for the first half of the fiscal year 2022. Basic and diluted earnings per share was $0.09 for the same period. As of September 30th, 2021, the company had cash of several million dollars. As of September 30, 2021, the company had accounts receivable balance due from third parties and related parties of $47.8 million and $5.2 million, respectively. The balance as of September 30th, 2021 had been fully collected as of March 21st, 2022. The corrected balances of such receivables provide cash available for use in the company's operations as working capital if necessary. As of September 30th, 2021, The company has merchandise inventories of $35.3 million, which the company believes can be sold quickly based on its analysis of the current trend in demand for its products. For the fifth month and its September 30, 2021, net cash used in operating activities was $19.7 million. Net cash used in investing activities was $1.6 million. Net cash provided by financing activities was $11.9 million. We feel very positive about our overseas e-commerce business. and eyeing on achieving 120% increase in our revenue in fiscal year 2022. We remain confident in our business and the potential to grow, but we might expect to see high transportation costs and operating expense given to the current market conditions. Now, I would like to turn the discussion over to the operator for any questions. Thank you.
spk00: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. Our first question comes from Connor Lee from Street Trader. Please go ahead.
spk03: Hi, Molly. Thanks for taking my question. According to the company's IPO prospectus, you mentioned to open new directly operated stores and add the franchise stores. So what is the current development and the progress on these two aspects? Thanks.
spk10: Thank you for your question. Please allow me to translate your question.
spk09: We are currently working on the introduction of a branch and franchise store. Are you working on it now?
spk05: Yes, we are actively looking for a place to open a new store in Japan. Currently, we are negotiating with several stores, and we are planning to open a new store in Shuto Prefecture within a few months.
spk10: The company is actually looking for suitable new store locations and is currently negotiating with several reputable real estate developers. In the next few months, our new store will be open in the Tokyo metropolitan area.
spk05: Actually, we'll open a new franchise store in December this year in Canada. In addition, we're proceeding with plans to open franchise stores in Australia, North America, and Southeast Asia. In the past, we have had more local customers than ever since COVID-19 began. The cabinet is preparing for tourists to return to Japan and is working on attracting more local citizens by actively developing new stores and
spk10: renovating old ones. We strive to satisfy our customers' shopping needs and ensure they feel the joy of the shopping.
spk09: That's all.
spk08: Thank you.
spk03: Thank you.
spk00: The next question comes from Liscon Lau, a private investor. Please go ahead.
spk06: Good morning, everyone. As a private investor, I have a question for the management team. Consider the current worldwide supply chain issues. What is the potential impact to our business? That's it. Thank you.
spk10: Thank you for your question, sir. Please wait a moment.
spk09: Well, do you think that the stock market is affected by the global supply chain issue?
spk05: I don't think there is any significant negative effect on our business. I will let our CFO to clarify it in detail.
spk02: Due to the impact of the pandemic, the speed of business growth has declined, but our overseas sales have reached its highest. This December, the overall sales of overseas franchises, including overseas franchises, have exceeded 8.4 billion yen. We have closed about 40% of the same period. Our sales have increased by about 25%. Although the impact of the pandemic has slowed down the globalization of the business,
spk10: the company still achieved a new high in overseas turnover. As of December of this fiscal year, the cumulative sales of our overseas wholesales, including our franchise stores, exceeded 8.4 billion yen, accounting for about 40% of the total sales of the same period. Compared with the same period of the previous year, sales increased by about 25%. And during the same period, the cumulative sales of overseas online stores exceeded 10 billion yen, accounting for about 49% of the total sales in the same period, an increase of about 17% compared with the sales ratio of the same period of the previous year. This shows that supply chain issues have not had any worrisome negative impact on the company. Thank you. Thank you for your answer.
spk05: You're welcome.
spk00: The next question comes from Penny Wong from Sense Gain Capital. Please go ahead.
spk07: Hi, company. I just reviewed the company's balance sheet and would like to know what causes an increase of the company's long-term borrowing. Thank you.
spk09: Thank you for your question, ma'am. What is the reason for the increase in long-term borrowing?
spk02: Yes.
spk10: The company's long-term borrowing increased by 840 million yen at the end of August 2021. Actually, it is the warehouse construction cost. We have concentrated several warehouses in one place to save rent, management fees, personnel costs, and other expenses. We believe this move can help the company reduce costs and increase gross profit in the long run. That's all.
spk08: Thank you. Okay. Thank you.
spk00: The next question comes from Emma Smith, a private investor. Please go ahead.
spk04: Good morning, UCC team. Congratulations for achieving such encouraging financial performance. However, compared to the same period last year, the growth margin decreased by 1.4% to 16.3%. So what's the plan for you to improve your growth margin? Thank you.
spk10: Excuse me, may I beg your pardon?
spk04: Can you hear me now? Yes, yes, please. Oh, okay. So congratulations for achieving such encouraging financial performance. However, compared to the same period last year, the growth margin decreased by 1.4% to 16.3%. So my question is, what's the plan for Yushu to improve your growth margin? Thank you.
spk10: Thank you so much.
spk09: Compared to the same period last year, the share price decreased by 1.4% to 16.3%. Do you have any plans to improve the share price? The main reason for the decrease in the share price is the impact of patiming. Rather than the impact of patiming, we are focusing on
spk05: The COVID-19 pandemic caused a decline in the gross profit margin.
spk10: The decline in our gross profit margin was mainly due to the increased promotion activities, price discounts, and increased operating expenses of online stores.
spk05: We consider this as an investment for our company to secure products from suppliers
spk10: increase our brand awareness, improve our customer services, and attract more customers.
spk05: We are still trying to build more partnerships with manufacturers and expand our business to reach
spk10: more customers. At the same time, we're opening sales channels offline and online.
spk05: With the COVID-19 pandemic stabilization, I believe that we will see the improvements in our gross profit margin and
spk10: I am very confident about the future of yours. That's all. Thank you very much.
spk04: Okay. Thank you.
spk00: Seeing no further questions, let me turn the call over to the company's IR representative from Ascent Investor Relations for closing remarks.
spk01: Thank you very much for joining this conference call. If you have any questions, please contact us through emails at ir at ystbek.co.jp or reach our IR Council, Ascend Investor Relations at tina.xiao at ascent-ir.com. Management will respond to your questions as soon as possible. We appreciate your interest and support in Yoshizu and look forward to speaking with you again next time.
spk00: Thank you again for attending Yoshizu's first half of fiscal year 2022 earnings conference call. This concludes our call today and we thank you all for listening in. Goodbye.
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