Tokyo Lifestyle Co., Ltd.

Good day, ladies and gentlemen. Thank you for standing by, and welcome to Tokyo Lifestyle's fiscal year 2026 earnings conference call. During today's presentation, all parties will be in a listen-only mode. This conference is being recorded today, Friday, July 10, 2026. If you have any objections, you may disconnect at this time. Joining us today from Tokyo Lifestyle is is the company's representative, Sissy Wong. Before we continue, I would like to remind you that some information discussed on this call will contain forward-looking statements within the meeting 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 the anticipated results and encourages investors to review other factors that may affect its future results in the company's annual report on Form 20F and in its other filings with the SEC. With that, I will now turn the call over to Ms. Sisi Wong, the company's representative. Please go ahead.

Thank you, operator, and thank you all for joining Tokyo Lifestyle's fiscal year 2026 earnings conference call today. On today's call, I will provide an overall of our performance for the fiscal year ended March 31st, 2026, followed by a detailed review of our financial results. Fiscal year 2026 was a year of strong execution across our business, Delivering robust revenue growth in all of our core operating channels. Our directly operated stores, franchise network, and wholesale operations each achieve the double-digit growth, demonstrating the effectiveness of our strategy to diversify our portfolio, broaden our customer base, and accelerate global market expansion. This result further validates our transformation from a traditional retailer into a diversified consumer lifestyle platform, integrating retail, franchise, wholesale, and luxury goods businesses to create sustainable long-term value. During the year, we continued advancing our afterlife growth strategy by expanding our franchise and wholesale operations. with a particular focus on the high-end merchandise segment, while these channels generally generate lower gross margin than our directly operated store. They require significantly less capital investment and operating expense, allowing us to scale more efficiently and generate attractive long-term returns. As a result, the change in our revenue makes reflects that deliberate optimization of our business model rather than the deterioration in operating performance. Another standout achievement of the year was the outstanding performance of our luxury goods business. In particular, our luxury goods segment quickly emerged as a meaningful contributor to growth, reflecting strong customer demand and the successful execution of our product expansion strategy. At the same time, the continued expansion of our wholesale customer base and distribution network further strengthened our market reach. diversify our revenue stream and enhance the resilience of our business. Supporting this growth, our total assets increased by 48% during fiscal year 2026. While we remain profitable for the third consecutive year, this achievement reflects both the continued expansion of our business and increasing strength of our market position. We continued strengthening our international platform by opening four new physical stores and adding 68 new wholesale customers. At the same time, we expanded strategic partnerships and continued investing in local talent and performance-based insensitive programs. Further enhance our organizational capabilities to support efficient and sustainable global growth. In addition, we continue optimizing our omni-channel retail network by converting selected underperforming directly operated stores into franchise locations managed by experienced local partners. This initiative has improved overall efficiency of our store network while supporting our athlete operating model. Looking ahead, we remain committed to executing our long-term growth strategy through continued customer acquisition, stronger global brand recognition, further diversification of our product portfolio, and deeper customer engagement across all sales channels. We plan to establish a new distribution center in Australia in 2026 to support inventory, for our Australia retail operations, while additional distribution centers are being planned in other strategic markets. Over the next three years, we intend to open 20 additional directly operated stores across the United States, Canada, Hong Kong, Australia, Thailand, and Taiwan, while adding 23 new franchise stores in Japan, Southeast Asia, Macau, and Europe. As we continue executing our strategy, we remain confident in our ability to generate sustainable long-term growth and create greater value for our shareholders through disciplined execution and continued operational excellency. Now I would like to highlight our financial results for fiscal year 2026. Total revenue increased by 77.6% Rising from $210.1 million to $373.2 million Revenue from our directly operated store increased by 15.7% year-over-year to $19.8 million Revenue from our franchise stores and wholesale operations grew by 86.9% to $346.7 million This growth was primarily driven by the significant increase in luxury product sales. In addition, the expansion of our wholesale customer base further strengthened our wholesale platform, deepened supplier relationships, and contributed to continued revenue growth. Gross profit increased by 17.5% to $28.1 million. compared with $23.9 million in fiscal year 2025. Growth margin declined by 3.9 percentage points to 7.5%, primarily due to a shift in our revenue mix. As of our rapid growth, franchise and wholesale businesses, which generally carry lower growth margin than directly operated stores, accounted for a large proportion of Total Revenue. Operating expenses increased by 29.6% to $24.9 million, primarily reflecting higher shipping and logistic costs associated with business growth. Increased credit loss, provisions, higher payroll, employee benefits, and performance bonuses resulting from our expanding operations. increased professional service fees and higher promotion, advertising, and lease expenses related to our directly operated store. As a result, income from operations was $3.2 million, compared with $4.7 million in fiscal year 2025. Net income was $0.7 million, compared with $6.6 million in fiscal year 2025. The decrease was primarily attributed to tax-related factors rather than the change in our underlying operating performance. Executing these tax impacts, our core business continued to deliver solid operating results supported by strong revenue growth, healthy customer demand, and disciplined execution. Basic earnings per share were $0.02 for fiscal year 2026, compared with $0.16 for fiscal year 2025. Deluded earnings per share were $0.02, compared with $0.16 for fiscal year 2025. As of March 31, 2026, the company had cash and cash Equalities of $2.1 million and Accounts Receivable of $186.8 million Due from third parties, approximately 22.3% of this receivable has been collected subsequent to this two-year end, providing additional liquidity to support our working capital needs. As of March 31, 2026, Merchandise inventory total approximately $14.4 million. Based on current demand trends, we believe this inverted risk are well positioned to be sold within a relevant short period. For fiscal year 2026, NAS cash used in operating activities was $10.3 million. while net cash provided by investing activities and financing activities was $6.1 million and $4.2 million, respectively. Overall, our fiscal year 2026 results demonstrate the resilience, scalability, and efficiency of our business model. Although our reported profitability was affected by tax-related items during the year, Our underlying business continues to generate strong revenue growth and healthy operation performance. As the microeconomic conditions continue to improve and the consumer demand generally recovers across our key markets, we remain confident in our ability to deliver sustainable, profitable growth through disciplined execution, Student Capital Allocation and Continued Operational Excellence Looking ahead, we remain focused on further strengthening our financial performance through disciplined execution, effective cost management, and strategic investment. At the same time, we will continue identifying new growth opportunities and expanding our revenue streams as we work to create sustainable long-term value for our shareholders. Thank you so much for joining this conference call. If you have any questions, please contact us through email at ir at ystbek.co.jp or reach our IR Council Ascent Investor Relation at investors at ascent-ir.com. Management will respond to your question as soon as possible. Thank you again for attending Tokyo Lifestyle's Fiscal Year 2026 Earnings Conference Call.

This concludes our call today, and we thank you all for listening in. Goodbye.