ZOZO, Inc.

It is time. So we would like to begin Zozo's FY2026 first quarter Q&A session for institutional investors. As was the case for the earnings briefing, we have Yanagisawa and also Director and COO, Fuminori Hirose, as well as the General Manager of Corporate Planning Office, Yusaku Kobayashi, here with us. So these three will be answering your questions. We plan to wrap up this session at 6 p.m. Should you have any questions, please use the icon to raise your hand. And when called upon, please unmute yourself and state the company as well as your name before asking your question. Teresan, please go ahead. Thank you very much for this opportunity. My name is Terai from JP Morgan Securities. I have two questions. First question. Zozotan and Lanyaku Commerce, GMV. So you mentioned that it was lower than expected because of the lower temperatures, but how do you plan to achieve the fiscal year targets and what's the forecast going forward? Hirose, please go ahead. Thank you very much for your question. Zozotan and Lanyaku Shopping, GMV. Thank you for joining us today. And as I mentioned before, the number of buyers have been increasing as well. Promotions, mainly web advertising, we will be investing proactively. So we will continue to increase the number of new users. And with respect to at least the Zosan business, we aim to achieve the fiscal year target. Online Yahoo Shopping, we will use a ZOZO Festival to try to achieve the fiscal year target. That's it. Thank you. Thank you. The second question is about lists. First quarter, the top line grew by 30%, but Let's see currency impact and as well as the organic growth, taking into account the different timings for the fiscal year wrap-up. So we are seeing some impact from the currency, but organically, it is, JNV is growing a little bit more positively, but we don't disclose specific numbers, but we are seeing better performance than last fiscal year. Thank you very much. I have one more follow-up question. So the checkout function is on track. And if you proceed on track, do you believe that the trends should improve in the second half of the year? This fiscal year, this business plan, the numbers include increasing the number of merchants using the checkout feature. And if we can progress on track, we should be achieving our fiscal year target. But we don't know if we go overachieve those targets, but we should be able to achieve our targets. That's it from my end. Thank you. Thank you very much for your question. Moving on to Yoneshima-san. Please go ahead. Thank you. City Group Security, Shioneshima. I also have two questions. First question. The number of buyers are growing quite steadily, but the average retail price and average order value, Yanagisawa-san, you did explain that earlier, and we understand that it's factors impacting those KPIs, but... But even if you're doing promotions, AOV, ARP continues to decline. And this trend hasn't really changed, but I don't know if it's AOV or ARP or maybe both. How do you try, what kind of initiatives are you thinking of to try to reverse the downward trend? Hiro-san, maybe this is your question as well. The average retail price, honestly, it's out of our control. Actually, it's hard for us to control because the brands set their retail prices and also set the discounts as well. So we cannot control the ARP at least. In terms of AOV, though, we have set a 12,000 yen or above discount. Thank you for watching! We don't have a clear initiative to further enhance or improve the AOV. This is a follow-up question, but consumers as well, do you feel like they're spending less or is there any impact from the consumer trends or is it just mainly based on the free shipping campaigns or the prices set by the brands? We don't know if they're unwilling to spend clearly. The data doesn't show that clear trends, but the inflation does continue. So there are many places where they're spending money and they have to spend more as well. So maybe the users are thinking about their total spend. It would be great if the inflation would work in your favor, but the purchasing power and OZO If the brand's ARP increases as well, of course, then if that, you know, matches up very well, then we'll see a positive impact. Second question is not about the earnings result. You said that you're going to buy a maximum of $30 billion. It's quite a sizable repurchase amount. And you bought Liz and you bought HiLink as well. And of course, Even with that in mind, you have announced a very sizable share repurchase. And of course, you'll be spending money on M&A going forward. But I know that you're trying to improve your ROE. But I thought that it was a little bit early to conduct the share repurchase. But can you share background as to why this was the right time for you? There are multiple reasons. Cash flow wise, it's not a problem to do so. And M&A, we will do more M&As in the future. But even with that in mind, we still have sufficient funds. So we wanted to efficiently use the cash on hand. And also share prices are relatively reasonable right now. Therefore, we thought that it would be a good time to conduct share buyback. And the third reason is ROE. We wanted to improve the ROE, stop it from falling any further as quickly as possible. So 80% is a five-year average of total shareholders' return. But in order to achieve that, That's why we decided to undertake the share repurchase at this point in time. So cash flow-wise, there's no issues. That's great to hear. I'm reassured. Understood. Thank you very much for your question, Yoneshima-san. Moving on to Kazahara-san, please go ahead. So this is Kazahara from Nikko Securities. I have two questions. The payroll, logistic-related payroll, and packing and shipping expenses has dropped. In the presentation material, you explained this to a certain extent. However, could you give more color? Why is this happening in second quarter onwards? Will this continue? That's the first question. Thank you. Gwaisam, please go ahead. In terms of the logistic related expenses, we have made many improvements, small improvements in improving operational efficiency, especially in terms of we have spent a lot, invested in improving education when receiving inventory, and that has produced great results as well. And in terms of costs, of course, The inventory levels, it will be key to see if we can maintain the optimal inventory levels. And if we can actually continue to have a well-balanced inventory level, we should be able to achieve better efficiencies, cost savings in comparison to the previous fiscal year. So that's the first question. And in terms of shipping, So generally speaking 2025 November Nekoposu is a very compact shipping option and the size has become bigger actually so as a result we've seen We can ship more items using the very compact shipping fee. Therefore, we're seeing great cost savings from the bigger compact size shipping option available. And this 2025 October, since then, we have been enjoying lower shipping fees due to better terms. And so from the third quarter Thank you for watching! benefits from that as well and you're actually using nekoposu even more heavily is that right in terms of the fourth quarter compared to the fourth quarter the first quarter we can send summer spring summer products and that fits more more of those products fit within the nekoposu so of course we are enjoying benefits from the nekoposu this quarter than the previous quarter and Yamato's contract hasn't changed since, right? No. Thank you very much. And the second question. ZOZO Cosmetics update. Achievement rate against the budget. Can you talk about the cosmetics business? Thank you. We are doing well against the budget. So we are welcoming more and more brands and more brands are taking part proactively in different promotions. And then there's, we also had a NARS Fest as well. So our recognition is increasing. First quarter, we've done quite well in cosmetics. So it's on track with the budget or are we overachieving, underachieving? We're on track. That's it from me. Thank you very much. Thank you very much for your question. Next, Yamaoka-san from Numerous Securities. My name is Yamaoka. Basically, one question, GMV. I just wanted to double check. This is double checking, but the first quarter, the total GMV was on track with the plan, the total GMB, yes. So June, it was a little bit weak, but April, May, we did well. So if you look at the whole entire quarter, we're on track, yes. And it's related to that a little bit, but the number of members are increasing. And on the other hand, The average retail price has come down. Therefore, even though the number of members are increasing, but GMV hasn't changed all that much. But how do you connect the increase in membership to higher GMV? I don't know if the connect is the right word, but is it more advertising or? How do you plan to expand GMV? What kind of initiatives are you thinking of to increase the GMV? So new acquisitions, it's been growing since last year, last fiscal year. But in the first year, people won't buy as, you know, even if we try hard, they won't really buy as much the first year. So second, third year will be more key. So they're not going to convert right after they become a member. So that's a given. But we want to make sure that they stay with us and buy more. And in order to encourage them to buy more, we need to add categories, brands. And we want to offer them an AI agent in-house service and fully utilizing those services so that users can discover and we can provide products that the users want. So that is first and foremost important. Understood. Thank you. Mr. Yamaoka, thank you very much for your question. Next, moving on to Nagao-san. My name is Nakao from B of A. I have three questions. One, GMV. I don't think it's a direct competitor with you, but Mercari is doing quite relatively well, and they're selling more men's and women's categories as well. I think those categories are growing for Mercari. But your users... The purchase amount, frequency, do you think in addition to that, are you seeing any impact from competitors? Do you feel that there is a threat? Thank you very much. We don't really think about competitors, but Brands, physical stores, of course. We keep track of how their monthly performance are doing. And I talked about June not being that great for us, but other brands are, well, are, you know, underperformed in June. So we don't really, we're not too concerned about Mercari, for example. Thank you. And second question is about advertising. you said that you have the plans for advertising that are quite similar to the previous year and I think that you're on track with your internal plans but second quarter onwards from last fiscal year the hurdles is not that high and the advertising is doing okay so what's What's the forecast for the advertising business going forward and is there any changes in the initiatives for the advertising business? I can answer that. I can take that as well. Advertising. OZO ad is actually listing ad and also banner ads as well as advertising to include flyers within the packaging. but the packaging advertising isn't actually increasing but but the other types of advertising sorry so the banner and also search ads are not growing as much but the packaging ads are actually growing well and I don't think that it will be quite tough to grow ZOZO ads with the current products that we have. So we are considering other types of products, but we don't think that we'll see explosive growth for the advertising business. Thank you. Lastly, about cost, you mentioned... The economic terms being more favorable from October of 2025 with a delivery partner, but going forward, for example, do you foresee any additional impairments in the economic terms? Any changes you foresee in terms of shipping or any kind of other efficiencies gains, any In terms of shipping costs, for now, we don't expect any changes in the economic terms, so it will stay at the current level. But in terms of the operational efficiency, as Kobayashi mentioned, costs should be coming down. To a certain extent. But over the midterm, as I mentioned before, next fiscal year onwards, 2028, we have a new logistics center that will be made available and we will automate that to improve our shipping efficiency. So that is, we want to make sure that we can make that happen. So that's some of the key big things for us logistically. And it's related to that, I have a follow-up question. Material handling equipment, you invested in that and you have more, you have to pay, there's more depreciation because of that. And you said that increased by 0.2 points this quarter, but when you look holistically, of course, can we expect that the investment has actually worked in your favor? Improving efficiency? Yes, we already calculated that, simulated that when we implemented those equipment. We won't see a benefit right away, but over the long term, we believe that it will contribute to cost savings. That's why we decided to invest in these kind of equipment. Understood. Thank you. Thank you very much for your question. Kanamori-san, please go ahead. This is Kanamori from Nikko Securities. I just have one big question. The midterm KPI is more fashion, near fashion, and global domain. But of course, I understand that we shouldn't be keeping track of your progress yet. But your progress is still unclear. And with respect to this, you have disclosed Your top line sales by Hi-Link. I didn't know where it was included in the sales. And qualitatively, can you talk about the contribution? And I think operating profit and EPA would be better, but What's the uplift that it's contributing to, for example? So if you can give us more details about Hi-Link as well. In terms of disclosures, as you just mentioned, More Fashion, yes, we have some numbers, but near Fashion Global, we don't have anything too disclosed yet. So we have... included qualitative updates for near and fashion and global. So that's the status in terms of midterm plans and KPIs. At the moment, we probably may be able to offer some progress updates at the end of this fiscal year. And Kobayashi-san, can you talk about the detailed numbers for high link? So with Recepta Highlink, in terms of cells, other cells, it's included in other cells. And high cells target for Highlink, it's about two to three billion. We've announced that already. So from the total, If you consider the total, it's not going to have a huge impact. Contribution will be quite minimal. And in terms of contribution to profits, compared to the total, sales contribution is going to be limited. And as you can calculate from that, it's not going to significantly impact the consolidated profit. That's the current status. Company-wide profit is after or before goodwill, either way. And you talked about lists, and organic growth was positive, you mentioned that, but high-link growth, what's the status of the growth for high-link? Sorry, I'll respond to that question as well. So, No change from the previous year is the current situation. But going forward, second quarter onwards, we will enhance our synergy or integration with ZOZO, and we believe that that will help the high-link sales grow. You mentioned including advertising within the ZOZO packages, and you started to do that at the end of the first quarter, so we'll see results in the second quarter. The first quarter, We tested the ROI and tested which users would respond more positively to the advertising. So yes, the results will come further down the line. Thank you. Thank you very much, Kanamori-san, for your question. Any other questions? If not, it's a little bit early but we would like to wrap up the Q&A session. Thank you very much for joining this session.