Tsuruha Q2 FY2027: Revenue surges 129% to Y12.75 trillion amid Welch merger synergy realization

Tsuruha recorded its strongest-ever interim performance in the first post-merger report, with sales reaching Y12.755 trillion. Although direct comparable percentage growth is unavailable due to different base periods, revenue expansion clearly outpaced market trends driven by expanded retail networks and product strength.

Operating profit jumped 92.6 percent year-over-year from the prior interim period's Y28.4 billion to reach Y5.477 billion. Adjusted for goodwill amortization, EBITDA rose 126.3 percent to Y8.553 billion, signaling robust cash generation capabilities.

Net income attributable to Tsuruha shareholders grew 48.5 percent to Y3.025 billion, translating to earnings per share of Y66.75. The company maintained a sturdy balance sheet with an equity-to-assets ratio of 56.4 percent.

While the broader drugstore sector faces intensifying competition from non-industry rivals, overall market size is expanding due to healthcare demands from aging demographics and food category growth. Tsuruha leveraged its December 2025 merger with Welch as a core advantage, accelerating initiatives to build a value-creation platform.

On the product front, the company has begun integrating existing private brands between the two entities and launching a new PB line titled 'Karada to Kurashi ni, +1' (Body and Life, Plus One). System integration efforts are also advancing toward a unified database for shared loyalty programs and applications.

Store expansion strategies focused on strengthening dominant regional presence across six blocks while reviewing unprofitable locations. By the end of the second quarter, domestic direct-operated stores numbered 5,652, including 3,338 dispensing outlets, with an additional 36 stores located overseas.

As of the reporting period, total assets stood at Y1.588 trillion, while total liabilities were recorded at Y670.4 billion. Total equity reached Y917.7 billion, boosting the equity-to-assets ratio by 3.3 percentage points compared to the previous fiscal year-end.

Cash flow from operating activities reflected a usage of Y17 billion, a reversal from the Y47.1 billion collected in the prior interim period, primarily due to reductions in accounts payable and corporate tax payments. Investing activities saw cash outflows of Y19.9 billion for new store development and renovations. Financing activities consumed Y23.869 billion through long-term borrowings, repayments, and dividends.

Annual dividend guidance was set at Y48.00 per share, distributed as Y24.00 each for the interim and year-end. This reflects amounts post-share split, highlighting strong intent for shareholder returns.

Tsuruha announced full-year consolidated forecasts expecting significant growth as integration synergies fully materialize:

While operating and ordinary profits show strong double-digit growth, net income declines slightly by 2.7 percent. This reduction is likely driven by goodwill amortization costs, one-time integration expenses, or effective tax rate shifts. However, projected EBITDA growth of 74.0 percent to Y1.623 trillion confirms the robust underlying cash flow of the core business.

Primary risks include intense competition in the drugstore industry, potential margin pressures, cost wars, and changes in prescription reimbursement systems following the merger. Integration challenges may also arise from delays in system unification or difficulties in harmonizing store management protocols.

Additional factors to monitor include reserves for store closure losses, potential impairment charges, and foreign exchange fluctuations impacting overseas subsidiaries. Nevertheless, Tsuruha possesses significant leverage through its expanded retail network and procurement power to overcome these hurdles via cost reductions and product differentiation.