ABC-Mart Q2 FY2027: Earnings Beat Forecasts Amid Strong Domestic Demand, Raises Full-Year Outlook Despite Yen Risks

ABC-Mart (ABC-MART Co.) released consolidated results for the second quarter ending August 31, 2026. Sales rose 6.4 percent year-on-year to JPY202.298 billion. Operating profit increased 7.4 percent to JPY36.131 billion, ordinary profit climbed 5.7 percent to JPY37.971 billion, and net income attributable to parent shareholders grew 6.6 percent to JPY25.931 billion. These gains reflect improvements in personal income, employment stability, and rising inbound tourism.

Growth was further driven by demand for running and walking footwear, alongside expanding popularity of hands-free shoe models. Consequently, the company revised its full-year outlook upward. Full-year consolidated sales are now projected to rise 6.4 percent year-on-year to JPY403 billion, while operating profit is expected to grow 6.2 percent to JPY67.2 billion. As a result, full-year net income forecast increases by JPY1.3 billion to JPY47.7 billion, exceeding prior year results and making full-year targets virtually assured.

Shareholder return policies were also strengthened. The annual dividend total is set at JPY80, up from JPY75 in the prior year, representing a 6.7 percent increase. The interim dividend for the second quarter was raised to JPY40, compared to JPY35 previously. This reinforces the company’s commitment to stable growth and enhanced capital policy.

The domestic segment sales rose 4.8 percent year-on-year to JPY146.342 billion. Comparable store sales increased by 4.5 percent, supported by a weaker yen boosting inbound shopper spending and an expanded inventory of sports apparel. The company opened 16 new stores, primarily in suburban shopping centers, while closing 9 locations. Major multi-format outlets like "ABC-MART GRAND STAGE" and "ABC-MART SPORTS" are being prioritized.

Notably, the new running-focused format "OSHMAN'S RUN & FITNESS" launched in Kyoto aims to build community-centric engagement. In the overseas segment, sales surged 10.8 percent year-on-year to JPY58.692 billion, with segment profit jumping 31.5 percent to JPY4.299 billion. This growth follows the acquisition of "FOLDER," a shoe retailer in South Korea, adding 16 stores to bring the total overseas count to 408. Inbound demand remained strong in South Korea (+11.3 percent sales growth) and Taiwan (+14.9 percent).

Product-wise, sports shoes grew 5.2 percent, while apparel and other items saw significant gains of 29.5 percent. Kids' footwear rose 10.5 percent. Conversely, sandals declined 1.5 percent and women's shoes fell 4.7 percent, likely due to product mix shifts or seasonal factors. The data indicates successful expansion into sports apparel, signaling a business model evolution from pure footwear to lifestyle casual wear.

Segment comparison data follows:

The financial position remains extremely sound. Total assets grew by JPY20.437 billion year-on-year to JPY475.639 billion. Equity increased by JPY15.481 billion to JPY416.481 billion, maintaining a robust equity ratio of 86.9 percent. This strong balance sheet provides ample preparation for potential risks.

Operating cash flow generated a surplus of JPY21.997 billion, an improvement of JPY0.795 billion from the prior year. While increases in inventory and accounts receivable offset some gains, these were funded by rising accounts payable. Investing activities saw outflows of JPY8.369 billion, covering store renovations and the acquisition costs for "FOLDER" in Korea.

With full-year dividend guidance raised to JPY80, the interim payout was increased to JPY40. The upward revision in earnings forecasts signals strong commitment to shareholder returns. Cash and cash equivalents stand at JPY212.144 billion, indicating ample liquidity.

Key challenges for the second half include potential declines in consumer sentiment due to inflation. Rising energy and raw material costs may tighten household budgets. Additionally, starting in November, Japan's tax-free system will shift from immediate deduction at checkout to a "refund upon departure" model. This change could dampen the immediate purchasing enthusiasm of inbound tourists.

Geopolitical risks and prolonged trade friction pose supply chain threats. In overseas operations, the continued weakness of the yen increases the necessity for effective currency hedging. Investors must remain cautious of the risk that exchange rate fluctuations could suppress profits.

Domestically, the company must continuously refresh and relocate existing stores to adapt to changing commercial real estate dynamics. ABC-Mart plans to open 32 new stores and close 25 during the full year, ensuring ongoing portfolio adjustments. The competitive environment remains intense, requiring strategic responses to online sales and rivals in other sectors.

Following this Q2 report, ABC-Mart upgraded its full-year consolidated forecasts. For the second half, the company anticipates sales growth driven by rising per-customer spending, supported by improving personal income and sustained inbound demand.

The specific revised projections are as follows:

A notable highlight of this quarter is the large-scale M&A in South Korea and the launch of new store formats. ABC-Mart acquired "FOLDER," a major shoe retailer in Korea, integrating 16 stores into its group. This move significantly enhances its local market presence in Korea.

Domestically, the company launched flagship stores like "OSHMAN'S RUN & FITNESS," which combines running and fitness themes. These initiatives aim to create sports communities by establishing touchpoints with health-conscious customers. This strategy marks a transition from traditional shoe sales to a lifestyle proposal business model, potentially serving as long-term growth drivers.