Kusuri no Aoki Q1 FY2027: Revenue Surges 36.4% to Record High Amid Tight Competition

Kusuri no Aoki (Kusuri no Aoki Holdings) posted consolidated results for the first quarter ending August 2026 with sales of 159.04 billion yen, operating profit of 8.42 billion yen, ordinary income of 8.57 billion yen, and net income attributable to parent shareholders of 6.87 billion yen. All metrics showed year-over-year growth, with net profit rising sharply by 36.4%.

The primary driver of strong sales was the expansion of food categories in large-format stores and improved expertise in handling fresh produce. By enhancing the appeal of one-stop shopping through its "Food & Drug" model, the company successfully addressed consumers' heightened focus on household budgeting.

Operating profit margins also improved as efficient store operations and economies of scale began to take effect. In the Shikoku region, new store openings fueled significant sales growth, confirming the success of its dominant strategy to increase regional density.

As the company reports as a single segment (neighborhood retail business), performance is analyzed by product category and region.

In terms of products, sales of fresh food surged 142.3% year-over-year due to enhanced offerings of fruits, vegetables, and prepared meals in new large stores. Overall food sales, including processed items, grew by 114.4%, strengthening the revenue mix beyond pharmaceuticals and groceries. Beauty products also saw steady growth of 104.3%.

Regionally, the core Hokuriku area performed strongly with a 117.1% increase. The Kanto region remained stable at 103.0%, though its growth rate lagged behind Hokuriku due to differences in new store pacing. Notably, the Shikoku region posted an exceptional 252.9% sales increase from just five stores, highlighting the significant impact of new openings.

Total assets stood at 406.45 billion yen, a decrease from the end of the previous fiscal year, influenced by increases in buildings and structures alongside reductions in receivables and accrued income. The equity-to-assets ratio remained stable at 35.7%, ensuring financial health.

The company set its annual dividend forecast at 64 yen (32 yen interim, 32 yen final). This follows a previous year's total of 56 yen, which included a special dividend for the company's 40th anniversary, indicating a continued commitment to shareholder returns.

The balance sheet shows adjustments in asset composition, with investment securities' valuation gains and losses included in other comprehensive income. The company is also clearly focused on reducing interest-bearing debt by lowering non-interest-bearing liabilities.

Given that first-quarter results aligned closely with plans, the company decided to maintain its full-year forecast for the fiscal year ending May 2027.

The full-year sales forecast is 640 billion yen (up 12.9% year-over-year), and operating profit is projected at 32 billion yen (up 18.1%). These figures represent robust growth, driven by the dual engines of new store openings and same-store sales expansion.

The decision to keep forecasts unchanged signals no major deviations in store opening plans or pricing strategies, providing reassurance to investors.

The business environment remains challenging due to persistent high oil and energy prices driving up raw material costs, alongside volatile exchange rates.

The drugstore industry is experiencing intense competition through M&A consolidation and shrinking catchment areas. While Kusuri no Aoki is differentiating itself via its "Food & Drug" strategy, competitors are adopting similar approaches, making continuous customer acquisition critical.

Labor shortages leading to rising personnel costs are expected to continue long-term, requiring a delicate balance between operational efficiency and service quality.