Tay Two (7610) Q1 FY2027 Earnings Deep Dive Report: Record Performance and Progress in Re-Growth Strategy

Tay Two Co., LTD. (Securities Code: 7610) achieved consolidated net sales of 11.72 billion yen and operating profit of 790 million yen in the first quarter of the fiscal year ending February 2027, marking record-high net sales for a first quarter . Since the transition to consolidated financial reporting, both net sales and operating profit have reached new highs. Net profit attributable to owners of the parent company also reached a significantly high level, second only to the February 2021 period, which was influenced by special demand during the COVID-19 pandemic. This strong performance is primarily attributed to a significant increase in sales of new game hardware and related products.

Earnings Highlights and Profitability Improvement Factors

In the first quarter, consolidated net sales increased by 36.9% year-on-year to 11.72 billion yen , and operating profit surged by 257.7% to 790 million yen . Ordinary profit rose by 309.5% to 810 million yen , and net profit attributable to owners of the parent company increased by 421.8% to 470 million yen . Despite increased selling, general, and administrative (SG&A) expenses due to store opening investments and various costs, aggressive sales promotions and sales expansion absorbed the cost increases, leading to substantial profit growth.

Notably, the company maintained profitability through economies of scale and improved cost efficiency . Despite rising costs such as inflation, sales growth outpaced the increase in SG&A expenses, leading to a reduction in the SG&A ratio to 28% . Strong performance in games, trading cards, and hobby products supported profit levels.

Company Growth Phases and Long-Term Performance Trends

Tay Two is currently positioned in a " re-growth phase ," actively pursuing investments to create future business models. Looking back at the company's performance since its listing, it has transitioned through various business phases: "Growth Phase (store registration, store expansion)," "Growth Phase (Furuichi Game)," "Decline Phase (revenue and profit decrease, subsidiary restructuring)," and "Reform Phase (back to basics, withdrawal from loss-making businesses, organizational review, management reconstruction)," leading to the current "Re-Growth Phase (growth strategy formulation, EC strengthening, long-term target setting, B2B strengthening)."

The historical performance trends are shown below:

This graph visually illustrates the various business phases Tay Two has experienced in the past and the corresponding fluctuations in net sales and operating profit. Particularly, the recovery in net sales since the 2020s and the accompanying improvement in operating profit suggest that the current "re-growth phase" strategy is proving successful. Recent performance has reached levels comparable to past peaks, raising expectations for future growth.

Product-Specific Sales Trends and Composition Changes

Sales of key products, particularly new games and new trading cards, performed exceptionally well , with new hobby products also showing solid performance. New games, in particular, saw a significant increase of 226.5% year-on-year , driven by the stabilization of new game hardware supply and pre-price revision demand. Trading cards recorded a 139.1% increase due to market stabilization and agile sales strategies, while hobby products grew by 119.7% . In the used goods segment, games increased by 123.3% , trading cards by 139.1% , and hobby products by 119.7% , maintaining strong performance. In contrast, books saw a slight decrease of 98.3% year-on-year.

Regarding the product sales composition, the share of new products increased by 5 percentage points year-on-year to 47.3% . This was primarily due to a 9-percentage-point increase in new games, with the stabilization of new game hardware supply, increased demand, and pre-price revision demand being the main drivers of sales growth.

Significant Improvement in Operating Profit Margin

In the first quarter, strong sales of new games (driven by new hardware demand) and trading cards/hobby products led to increased gross profit. As a result, both operating profit and operating profit margin significantly improved. Specifically, the operating profit margin substantially increased from 2.6% in the prior year's first quarter to 6.8% .

The trend of operating profit and profit margin by quarter is as follows:

This graph clearly demonstrates that Tay Two's operating profit and its margin have significantly improved compared to previous quarters. The sharp increase in operating profit in Q1 FY2027, along with the notable rise in the profit margin, underscores the strengthening of the company's profit structure. This indicates that not only sales growth but also efficient operations and the sale of high-margin products are contributing factors, serving as a crucial indicator for sustainable future growth.

Competitive Advantages and Diversified Business Strategies

Tay Two has established competitive advantages based on management resources cultivated over 30 years of business operations. Specifically, these include: a nationwide network of 185 stores fostering community engagement; a prefectural network including B2B operations providing corporate transactions and know-how to partners; the patented in-house developed appraisal system "TAYS" for efficient product assessment; group synergy with Yamade for enhanced EC and home-delivery purchases; overseas expansion starting from Taiwan; and affinity with initiatives supporting children's future. These diverse strengths serve as management resources supporting growth.

Restructuring of Re-use EC Business and Logistics System Enhancement

In its EC business, anticipating the closure of its proprietary EC site "Furuichi Online," Tay Two is consolidating sales functions to external marketplaces such as Amazon and Yahoo! Auctions to improve EC business efficiency and profitability. Specifically, the company is reviewing its Warehouse Management System (WMS), optimizing warehouse layouts, streamlining listing and shipping processes, and optimizing product supply. Yahoo! Auctions, in particular, has seen strong performance in the game category, with operational improvements contributing to profit expansion.

Furthermore, through collaboration with its group company Yamade, Tay Two is strengthening its logistics system . By outsourcing logistics, the company aims to shorten lead times and improve delivery quality, establishing a growth foundation for its EC business. Leveraging Yamade's expertise in purchasing, appraisal, and valuation, combined with Japan Post's delivery network, Tay Two achieves shorter lead times, improved delivery quality, and enhanced customer convenience, thereby boosting its EC business competitiveness.

Expansion of B2B Business and DX Promotion

In the re-use B2B sector, Tay Two is expanding its franchise consignment business. It is providing integrated know-how in products, store operations, systems, and logistics to partner companies, promoting the establishment of a stock-type revenue base . Additionally, the deployment of its in-house developed automated trading card appraisal machine "TAYS" has exceeded 550 locations as of June 2026 . The accompanying service "POP×THREE" has also been released, supporting everything from purchasing to store display and promotion through DX. The company is also challenging itself with in-house development of IoT-enabled vending machines , aiming to develop original IoT-equipped vending machines that achieve "sales expansion," "management efficiency improvement," and "cost reduction," thereby strengthening sales channels in areas without directly managed stores.

Global Expansion and IP Business Development

In the global domain, Tay Two is preparing to open its second store in Taipei this autumn , aiming to capture inbound demand and expand revenue opportunities both domestically and internationally through IP business development. The company continues to build its overseas business foundation starting from its Taiwan stores and aims to strengthen its global business foundation by acquiring inbound demand, primarily for used games and trading cards, at domestic stores, thereby expanding customer touchpoints both domestically and internationally.

For IP business development, the strategy is to continue expanding the handling of popular IP-related lottery and character products, and to promote the development of IP products tailored to customer demographics and store locations. By leveraging synergies with its existing store network, the company aims to expand revenue opportunities in the IP business.

Consolidated Earnings Forecast and Mid-to-Long-Term Targets

For the fiscal year ending February 2027, Tay Two forecasts consolidated net sales of 42.5 billion yen and operating profit of 1.6 billion yen . Furthermore, the company has set mid-to-long-term targets for the fiscal year ending February 2029: net sales of 50 billion yen and operating profit of 2.5 billion yen , indicating an expectation for aggressive growth strategy implementation.

The consolidated earnings forecast and mid-to-long-term targets are as follows:

This graph clearly illustrates Tay Two's past performance and future targets, which are crucial for understanding the company's mid-to-long-term growth path . In particular, the sales and operating profit targets set for FY2027 and FY2029 reflect a strong commitment to further accelerate current strong performance and significantly expand business scale and profitability. The progress of specific strategies aimed at achieving these targets will be a key factor influencing future performance.

Dividend Policy and Shareholder Returns

Tay Two's policy is to continuously pay dividends in accordance with its performance, based on a comprehensive assessment of shareholder returns and the strengthening of its financial foundation. In the first quarter, the company repurchased 248 million yen worth of its own shares . This initiative aims to improve capital efficiency and enhance shareholder returns. For the fiscal year ending February 2027, the company forecasts a regular dividend of 4 yen, with an expected dividend payout ratio of 31.8% .

Summary

In the first quarter of the fiscal year ending February 2027, Tay Two achieved record-high net sales and significant profit growth driven by demand for new game hardware and efficient business operations. Positioned in a re-growth phase, the company is pursuing diversified strategies including strengthening its store network, restructuring its EC business, expanding its B2B segment, promoting DX, and developing global and IP businesses. These initiatives are expected to solidify the foundation for achieving mid-to-long-term performance targets and contribute to sustainable growth.