Zozo Inc Ord

It is time to start the financial results announcement of the first quarter of 2025 ending in March 2026 or so. We will only be offering live streaming this time. And we plan to have the session until 5.20 p.m. After that, we will have a Q&A session with institutional investors on a separate Zoom channel from 5.30 p.m. Now, I'd like to introduce the presenter, director, executive VP, and CFO Koji Yanagisawa. Hello. Now, CFO Yanagisawa will take us through the business results. Hello. I'd like to walk you through the first quarter financial results for the fiscal year ending in March, 2026. And the presentation document we will be using today has been uploaded already to our website's Investor Relations page, so please take a look. The concept for this year's financial statement is design that makes the people who work at the company the heroes and heroines. Believing that a company's true uniqueness comes from its people, we focused on each employee's individuality, portraying them life-size in expressive, croquis-style line drawings. The cover and opening illustration will change each quarter, reflecting our desire to make the report not just about the numbers, but also about the people behind them. We hope you'll enjoy noticing these little changes and feeling more connected to the people behind the report as the year goes on. But first, I'd like to explain the details of the revision of the earnings forecast announced today. This is page 33 of the handout. Regarding LIST, which has been consolidated since May 2025, we have disclosed revised performance forecasts that incorporate the effects of the consolidation of the business plans and the allocation of the acquisition costs following the progress of these procedures. Revised forecast includes the following. GNV plus 9.7% year-on-year at 673.9 billion yen. GNV excluding other GNV plus 13.8% year-on-year at 653.7 billion yen. Net sales plus 8.6% year-on-year at 231.5 billion yen. Operating profit plus 6.9% year-on-year at 69.2 billion yen. And operating margin 10.6%. EBITDA plus 9.9% year-on-year at 76.7 billion yen. And EBITDA margin 11.7%. And compared to the performance forecast announced on April 30, GMV and GMV excluding other GMV increased while Opie and EBITDA decreased. Next, this is page 34 of the handout. The targets for each business segment are as follows. Starting this fiscal year, we have added a new business segment list. And the GMV target for the current fiscal year is 50.3 billion yen for that. And there are no changes to the forecast of other business segments from those announced on April 30. Next is the trends of dividends per share and payout ratio. There are no changes to the annual dividend announced on April 30th, and we continue to plan to pay a dividend of 39 yen per share. And as a result of this, the payout ratio is expected to be 72.7%. Let's go to page 11 of the handout. This illustrates the trend in capital expenditures with further progress made in the consolidation of list business plan and in the allocation of acquisition costs. We have revised the projected figures for depreciation and goodwill amortization previously disclosed on April 30th, incorporating additional information obtained following list consolidation as a subsidiary. We recalculated these figures, and as a result, depreciation increased from $4.72 billion to $5.16 billion, while goodwill amortization decreased slightly from $2.1 billion to $2.05 billion. Next are the highlights of the first quarter of the fiscal year ending in March 2026. For the first quarter, GMV increased by 12.2% year-on-year to 159.2 billion yen. GMV excluding other GMV increased by 12.4% year-on-year to 149.1 billion yen. EBITDA increased by 8.9% year-on-year to 18.5 billion yen. EBITDA margin was 12.5%, which is a decrease of 0.4 point compared to the same period last year. And progress against the revised company plan that I just explained is as follows. GMV excluding other GMV, 22.8%. EBITDA, 24.2%. Current fashion demand remains robust, and GMB is progressing largely in line with plans. When looking at it by business segment, Zozotown Business is slightly below the plan, while Line Yahoo Commerce is above the plan. And additionally, EBITDA surpassed the plan, driven by factors including unrecognized promotional expenses, logistics-related costs, and shipping charges. And both GMV and EBITDA reached record highs in the first quarter. Next, I will present an overview of the key performance details. Let's go to page 9. This is the analysis of the increase and decrease of EBITDA compared to the previous year's results at the end of the first quarter. EBITDA increased by approximately 1.51 billion yen from 17.06 billion yen in the previous quarter to 18.57 billion yen in the current quarter. And factors attributable to the increase of EBITDA are the following. First, gross profit increase of 3.13 billion yen due to higher GMV in Zozotown Business and Line Yahoo Commerce. Second, sales increase of 240 million yen due to growth in the advertising business and gross profit increase due to the consolidation of list and others plus 1.36 billion yen and decrease in variable costs due to improvements in the efficiency of the logistics centers and the decrease in the ratio of packing and shipping costs due to an increase in average order value, 50 million yen. On the other hand, factors that reduced EBITDA are as follows, and there are three of them. First, increase in fixed costs due to an increase in the number of consolidated employees and the occurrence of one-time expenses related to M&A minus 0.6%. 77 billion yen. Second, increase in actual PR expenses to attract customers, promote sales, and cover list standalone expenses, minus 1.95 billion yen. An increase in other expenses due to success fee paid to FA related to the M&A and others, minus 0.55 billion yen. Let's go to page 10. This is the balance sheet. First, with respect to cash and cash deposits under current assets, payments related to the acquisition of list shares, payment of the year-end dividends, and disbursements of the acquisition of treasury shares have impacted the balance, resulting in a decrease of approximately 55.2 billion yen year-on-year. Next, under non-current assets, intangible assets have increased by approximately 24.9 billion yen compared to the previous fiscal year and primarily due to the recognition of goodwill related to the acquisition of list shares. Additionally, within shareholders' equity of assets, treasury stock decreased by approximately 3.8 billion yen, primarily due to the cancellation of the treasury stock in May and the ongoing acquisition of treasury stock. And by the way, the acquisition of treasury stock is currently progressing smoothly. Moving on to page 21 of the handout, this is the breakdown of SG&A expenses. The SG&A to GMV ratio was 22.7%, a decrease of 0.7 point from the same period of last year. While GMV increased due to the consolidation of list, incremental SG&A expenses were zero or minimal for some items for list alone. This contributed to a decrease in the SG&A expense ratio. Factors that drove up the SG&A ratio are the following. There are two mainly. First, in addition to expenses recorded for list alone, advertising expenses increased by 0.5 points. due to an increase in web advertising spending for Zozotown. Secondly, as I mentioned, amortization of goodwill related to the acquisition list led to 0.3 point increase. On the other hand, factors contributing to the decrease in the SG&A ratio include two elements. First, the expansion of the consolidated scope along with the improvements in operational efficiency such as optimizing inventory levels at logistics centers and labor savings through automation resulted in a 0.6 point decrease in logistics related labor costs. Second, the expansion of the consolidated scope and higher AOV compared to the previous period led to a 0.6 point decrease in shipping costs. Next, let's go to page 24. This is the actual promotion expenses and its trend. In the first quarter, we used 4.2% of GMV as the actual promotion expenses, which is a sum of advertising and point-related expenses that are deducted from net sales. Compared to the same period of the previous year, the actual promotion-related expenses ratio increased by 0.9 point due to the following factors. There are three of them. One, increased spending on web advertising for Zozotown. Second, increased promotional expenses such as free shipping campaigns and point promotions. Third, list reported expenses separately with advertising and promotion expenses accounting for a large portion of SG&A expenses. Additionally, due to the consolidation of LIST, we have revised the full-year budget and increased the actual promotion-related expenses to GMB ratio to 4.7%. And furthermore, compared to the Zozotown business, List tends to have a higher ratio of advertising and promotional expenses to GMV. With respect to the actual promotion expenses for Zozotown business, excluding List, As explained at the beginning of the fiscal year, the ratio of GND remains unchanged at 4.4%. As noted on the opening slide of the financial results summary, certain promotional activities were delayed in the first quarter, resulting in lower promotional spending than planned. We expect to deploy the deferred portion in the second quarter and beyond, ensuring the full year budget is fully utilized. Next, let's go to page 25 of the handout. The following are the Zozotown's KPIs. And please note that the following indicators do not include results from line Yahoo commerce list or B2B businesses. Let's look at the number of total buyers. The number of total buyers increased by 150,000 from the previous quarter to 12.36 million. And among them, the number of active members increased by 180,000 from the previous quarter to 11.58 million. The number of guest buyers decreased by 40,000 from the previous quarter of 770,000. In the first quarter, we acquired new members through a range of initiatives leveraging web advertising and Zozotown's platform. We increased our web advertising budget year over year to enhance customer acquisition, And improved targeting drove a higher return on investment compared to last year. Next, let's go to page 28 of the handout. This is the number of shops on Zozotown. At the end of the first quarter, the number of shops stood at 1,681, representing a net increase of 32 shops from the end of the previous quarter. The number of new stores opened in the first quarter was 43, including stores like Korea-based e-commerce fashion brands like AEAE and Sculptor, a Japanese home appliance brand, Kado, New York-based makeup brand, Maybelline New York, and more. Next, let's go to page 30 of the handout, average retail price. With respect to average retail price, it turned out to be 3,744 yen, an increase of 1.2% compared to the same period last year. The main factors contributing to this increase were an increase in the sales mix of spring outerwear and other items with higher unit prices compared to the same period last year and a decrease in the average discount rate for sales items. Additionally, price increases on new spring and summer items across various brands have leveled off and are now in line with last year. Next, page 31. This is the average order value. The average order value turned out to be 8,543 yen, up by 2.4% compared to the same period last year. The increase in the average number of items purchased per order drove the AOV growth rate to exceed the ARP growth rate. This was primarily due to greater use of free shipping policy for orders of 1,200 yen or more compared to the same period of last year, which led to a higher proportion of combined purchases around the policy's implementation dates. So that is all for the numerics. And lastly, I'd like to briefly share Zozo's first matching service release on June 30, 2025. This is a new service that we launched. Dozo match is a service that's been in the works for about three years. And it was brought to fruition through the dedicated efforts of our staff. The concept stemmed from a hypothesis formed during the COVID period. Reduced opportunities for going out and social interaction led to a contraction in the apparel market. underscoring a close link between meeting people and fashion demand. So that's when we started to consider this new service. With Zozo Match, we aim to foster new connections, broaden motivations and opportunities for people to enjoy fashion, and ultimately help revitalize the entire fashion industry. What it means is that meeting people will lead to more fashion. And in fact, the results of our survey on Gen Z's views on romance and dating apps also confirmed a correlation between romance and fashion. When asked, do you ever intuitively judge whether someone is a potential romantic interest based on their overall appearance, including their fashion style? 97.5% answered yes. And when asked, do you feel like buying more clothes when you're in a romantic relationship, 89.9% answered yes. These results suggest a tendency to intuitively perceive a person's personality and charm through their overall style, including fashion, when meeting someone. It also indicates that many people place importance on fashion in romantic relationships and that their awareness of fashion increases when they're in a relationship. And finally, here's an overview of the Zozo Match service. Zozo Match is a matching app powered by Zozo's proprietary AI, which introduces users to people who share their preferred style, drawing on data such as fashion genre diagnostics. Profiles are designed to be easily understood at a glance using full body photos that highlight each user's personality and style. And this approach enables more intuitive connections compared to competitor services that rely more on filtering their users by specifications. When we say specs, we're talking about their academic background. So rather than to focus on the specs, we focus on the style that they exude. And Zozo's proprietary AI analyzes users preferred styles and recommends compatible matches. While of course, robust safety measures and support systems ensure a secure user experience. As a unique service connecting people through fashion, we aim to deliver a fun, safe and high quality matching experience. That is all. That concludes Dozo's first quarter financial results announcement for FY25, ending in March 2026. Thank you for your time and attention.