Food-Focused Drugstores Q1 FY2027: Aoki surges, Kawachi falters

The key differentiator was how well companies controlled costs while using food to attract customers buying everyday essentials. Sales growth at Kusuri no Aoki outpaced the industry average of 6.1%, while Kawachi’s revenue fell from a year earlier.

• Food as a traffic driver: Food accounts for about 70% of Genky’s sales, while general food is Cosmos’s largest sales category. Kusuri no Aoki generated ¥74.2 billion in food and fresh-food sales.
• Balancing low prices and profit: Cosmos secured revenue growth through low-price sales, but inflation and rising labor costs restrained profit growth. At Genky, higher selling, general and administrative expenses more than offset the increase in gross profit.
• Weather and seasonal goods: Poor summer weather held back seasonal product sales at Kawachi, which reported lower revenue and profit for the half-year.

The companies do not report for the same period. Genky, Kusuri no Aoki and Cosmos reported first-quarter results, while Kawachi reported half-year results, so revenue comparisons by scale need to account for the different periods. Food is a key draw for shoppers, but low-price competition, labor costs and weather all affect profitability.

Kusuri no Aoki stood out, with revenue up 13.8% year on year, operating profit up 16.0% and net profit up 36.4%. By contrast, Kawachi’s half-year revenue fell 0.8%, operating profit declined 6.2% and net profit dropped 8.6%. It was the only one of the four to report lower revenue.

• Kusuri no Aoki: Its 5.3% operating margin topped the 4.0% industry average. Expanded food offerings at large stores, stronger fresh-food sales and greater store concentration in areas including Shikoku supported results.
• Genky: Its 4.6% operating margin was above the average, but operating profit fell 5.3%. Gross profit increased by ¥757 million, while selling, general and administrative expenses rose by ¥910 million.
• Cosmos: Its 4.19% operating margin was marginally above average. Revenue grew, but operating profit increased only 3.1%, weighed down by inflation and higher labor costs, among other factors.
• Kawachi: Its 2.1% operating margin was the lowest of the four and below the industry average. Poor seasonal product sales due to bad weather, along with stronger consumer thrift, affected its selling environment.

The gap in profits cannot be explained by sales scale alone. Kusuri no Aoki translated expanded food and fresh-food offerings and regional store concentration into growth, while Genky’s rising costs exceeded its gross profit increase. Weather-related weakness emerged at Kawachi, where low prices and promotions were not enough to make up the difference. The companies differed in their ability to turn revenue growth into profit.

The companies are using food to draw shoppers while testing different combinations of store expansion, pricing and operations. Even among those continuing to open stores, results varied in how expansion translated into profit, putting the focus on sales at existing stores and cost control.

• Genky: Opened nine R stores, bringing its store count to 541 at quarter-end. Food sales were ¥42.043 billion, about 70% of total revenue. It maintained its full-year forecasts of ¥244 billion in revenue and ¥12 billion in operating profit.
• Cosmos: Continued its low-cost operating model and low-price sales, aiming to grow revenue, including ¥180.5 billion in general food sales. Its full-year forecasts are ¥1.19 trillion in revenue and ¥43 billion in operating profit.
• Kusuri no Aoki: Broadened food categories at large stores and expanded its fresh-food offering. It is building regional store concentration in Hokushinetsu and Shikoku, and maintained its full-year forecasts of ¥640 billion in revenue and ¥32 billion in operating profit.
• Kawachi: Opened one store in Tochigi Prefecture and closed three in Miyagi, Ibaraki and Chiba prefectures. It cut its full-year operating profit forecast to ¥5.1 billion and is also reviewing its store network.

Progress against full-year operating profit forecasts was 23% for Genky, 28% for Cosmos, 26% for Kusuri no Aoki and 59% for Kawachi. Kawachi’s figure covers a half-year, however, unlike the first-quarter figures of the other companies. The differing reporting periods need to be taken into account when comparing full-year forecasts and progress rates. Growth quality depends not only on store openings but also on food sales and operating efficiency.

A shared challenge is absorbing higher labor and operating costs while maintaining low prices. A stronger food offering can bring shoppers into stores, but does not guarantee profits; weather and changes in the competitive environment can also affect performance.

• Higher labor and selling, general and administrative expenses: Inflation and rising labor costs restrained profit growth at Cosmos, while higher selling, general and administrative expenses at Genky outpaced its gross profit growth. Genky warrants particular attention in this period because the impact of rising costs is visible in its results.
• Low-price competition and profitability: Discounts and promotions can attract customers seeking to save, but make it harder to protect profits. Cosmos, which continues its low-price strategy, and Kawachi, which is promoting sales, both need to balance sales growth with profitability.
• Weather-driven swings in seasonal products: Poor summer weather weighed on seasonal product sales at Kawachi. The impact of seasonal goods was especially visible in its results, making weather risk particularly apparent at the company among the four.
• Costs after store expansion: Genky opened nine stores, while Kusuri no Aoki is also opening stores and building greater regional density. The focus is on converting expansion into sales and profit. Cost control is especially important at Genky, where store growth and rising selling, general and administrative expenses have coincided.

Looking only at industry-wide sales growth could obscure the effects of store expansion and stronger food offerings. Investors should also track operating margins, selling, general and administrative expenses, and whether companies maintain or revise their full-year forecasts. For students considering a career in the sector, store merchandising is only part of the picture: price competition and more efficient store operations are also important business issues.

Cosmos had the largest revenue base, but Kusuri no Aoki was stronger in growth and operating margin. Net profit growth also varied, showing that scale and growth momentum did not necessarily go hand in hand.

• Kusuri no Aoki: Net profit rose 36.4% year on year. Revenue and operating profit also grew at double-digit rates, reflecting its stronger food and fresh-food offering and greater regional store density.
• Cosmos: Net profit increased 1.0%. Revenue grew 5.2%, but operating profit rose just 3.1%, so profit growth lagged sales growth.
• Genky: Net profit fell 7.8%. New store openings and other factors supported revenue growth, but higher selling, general and administrative expenses and interest payments weighed on profit.
• Kawachi: Half-year net profit declined 8.6%. Weak sales of seasonal products and other factors contributed to lower revenue and profit.

All four companies are expanding their food offerings, but they are taking different paths to turn sales into profit. Kusuri no Aoki is focused on food, fresh food and regional store concentration; Genky on low-cost operations and managing expenses after store openings; and Cosmos on low prices and cost control. Kawachi faces the task of recovering sales, including from weather-related setbacks, and reviewing its store network. Net profit growth reflects not only sales momentum but also expenses and non-operating factors, so it should be considered alongside operating profit.

Work at food-focused drugstores goes beyond pharmaceutical knowledge to include food sales and store operations that support everyday shopping. These results show that companies’ performance depends not only on how products sell, but also on pricing, costs and where stores are located.

• For those interested in merchandising: Food accounts for about 70% of Genky’s sales, and Kusuri no Aoki is expanding food and fresh-food sales. Product selection and food-floor operations are important parts of the business.
• For those seeking store operations roles: Genky’s store expansion and Kusuri no Aoki’s regional concentration show that success depends on local operating capabilities, not just the number of stores. Employees need to think about managing costs while growing sales.
• For those who value adapting to change: Bad weather affected seasonal product sales in Kawachi’s half-year results. Retail teams need to respond to consumers’ focus on saving and shifts in demand for products.

Investors should look beyond food’s share of sales and revenue growth to operating margins and trends in selling, general and administrative expenses. Job seekers and career changers can better understand each company by considering whether their desired role relates to product sales, store operations or expansion strategy. The sector’s growth depends on both products that attract shoppers and operations that turn sales into sustainable profit.