Earnings Deep Dive: UpGarage Group Q1 FY2027 Results Analysis – Record-High Performance Driven by Expanding Reuse Demand and Strategic Initiatives

The Q1 FY2027 financial results for UpGarage Group (announced August 3, 2026) reflect a highly robust performance. Driven by expanding demand in the reuse market, contributions from new stores opened in the previous fiscal year, and the successful implementation of profitability improvement measures, the group achieved record-high sales and operating profit for a first quarter.

This report provides a comprehensive analysis of the group's Q1 performance highlights, profit structure, segment-specific details, full-year forecasts, and future growth strategies.

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1. Q1 FY2027 Performance Summary

Consolidated results for the first quarter showed significant growth, with both sales and profit at all levels substantially exceeding the same period last year.

• Net Sales : 3,969 million JPY (+17.5% YoY)
• Gross Profit : 1,653 million JPY (+20.2% YoY, Gross Margin: 41.6%)
• Operating Profit : 263 million JPY (+55.1% YoY, Operating Margin: 6.6%)
• Ordinary Profit : 274 million JPY (+71.7% YoY)
• Net Income Attributable to Owners of Parent : 181 million JPY (+91.2% YoY)

In the core Reuse Business , the group benefited from sustained demand for used automotive and motorcycle parts, alongside strong contributions from new directly-operated and franchise (FC) stores opened in the previous term. Additionally, the increase in FC royalty rates implemented in the second half of the previous fiscal year significantly bolstered profitability.

The following graph illustrates the quarterly trends in net sales and operating profit over the past several years.

[Slide Commentary: Quarterly Trends in Net Sales and Operating Profit (PAGE_4)]

This slide clearly demonstrates that the group's performance is following a mid-term upward growth curve , despite seasonal fluctuations. The automotive parts industry typically experiences higher sales and profits in the third and fourth quarters (second half) due to seasonal demand for items like winter tires. However, the Q1 FY2027 net sales of 3,969 million JPY and operating profit of 263 million JPY reached record-high levels for a first quarter. With operating profit surging +55.1% compared to the same period last year (170 million JPY), it is evident that the underlying earning capacity has been steadily strengthened.

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2. Profit Structure and Analysis of SG&A Expenses and Operating Profit

This section analyzes the improvement in profit margins and the cost structure during the first quarter.

Improvement in Gross and Operating Profit Margins

The gross profit margin improved by +0.9 percentage points to 41.6% , up from 40.7% in the same period last year. This was driven by strengthened purchasing and sales capabilities, the expansion of installation services, and higher unit prices for used reuse products following price increases in new tires and parts. Consequently, the operating profit margin rose by +1.6 percentage points to 6.6% , compared to 5.0% in the previous year.

Control of SG&A Expenses

Total SG&A expenses increased by +15.3% (+183 million JPY) to 1,389 million JPY from 1,205 million JPY in the same period last year. The primary factors for this increase include:

• Personnel Expenses : 663 million JPY (+105 million JPY / +18.8% YoY) due to the hiring of 41 new graduates in April 2026 and staff increases for store expansion.
• Rent Expenses : 154 million JPY (+25 million JPY / +20.0% YoY) due to the increase in locations from new store openings.

Although the absolute amount of SG&A expenses rose due to personnel and expansion costs, the significant revenue growth resulted in the SG&A ratio improving from 35.7% to 35.0% , indicating that effective cost control is functioning well.

Analysis of Operating Profit Variance

The +93 million JPY increase in operating profit (from 170 million JPY to 263 million JPY) is broken down as follows:

• Directly-Operated Stores : +200 million JPY (contribution from new stores and strong existing store performance)
• Franchise (FC) : +54 million JPY (reuse demand expansion and royalty rate increases)
• Wholesale Distribution : -9 million JPY
• Other : +31 million JPY
• Increase in SG&A : -183 million JPY (higher personnel and property costs due to new hires and store openings)

The profit margin expansion in directly-operated and FC stores successfully absorbed the increase in SG&A expenses, resulting in a substantial overall profit increase.

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3. Segment Trends ①: Robust Growth in the Reuse Business

The Reuse Business (including "UpGarage," "Riders," "Cycles," and "Tools"), which accounts for approximately 60% of the group's sales, maintains very strong momentum.

Reuse Business Sales Breakdown (Million JPY)

• Store Sales (Direct) : 1,803 million JPY (+23.6% YoY)
• Franchise-Related : 366 million JPY (+19.1% YoY)
• EC Commissions/Web Ads : 64 million JPY (+10.0% YoY)
• Overseas EC : 36 million JPY (+11.2% YoY)
• USA Business : 74 million JPY (+84.7% YoY)
• Reuse Business Total : 2,491 million JPY (+20.4% YoY)

Store KPI Trends

Directly-operated same-store sales were 108.5% of the previous year, marking the 16th consecutive month of year-on-year growth . The average customer spend at direct stores also rose steadily to 13,510 JPY (from 12,450 JPY). FC-related performance was also strong, with same-store sales at 107.5% and total store sales at 110.7% , further boosting the profitability of the entire FC business alongside the royalty revisions.

The following slide shows the quarterly sales and purchasing trends for the entire UpGarage chain.

[Slide Commentary: Reuse Business Chain-wide Quarterly Trends (PAGE_11)]

This slide illustrates the expansion of the "UpGarage Chain" ecosystem, combining direct and FC stores. Total chain sales for Q1 reached 6,896 million JPY (+13.7% YoY) , and total chain purchasing reached 1,689 million JPY (+7.6% YoY) . In the reuse business, "purchasing" represents future inventory; thus, the upward trend in purchasing serves as a leading indicator for future sales scale expansion . Driven by consumer trends toward frugality and environmental awareness, both demand and supply for reuse products are growing sustainably.

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4. Segment Trends ②: Stable Growth in Wholesale Distribution

The Wholesale Distribution Business , accounting for approximately 40% of sales, continues to expand steadily.

Wholesale Distribution Sales Breakdown (Million JPY)

• Tire Distribution Center : 501 million JPY (+8.1% YoY)
• Nexlink (Ordering Platform) : 976 million JPY (+16.3% YoY)
• Wholesale Distribution Total : 1,478 million JPY (+13.4% YoY)

The "Tire Distribution Center" added four new members, leading to steady wholesale growth. "Nexlink," the ordering platform for automotive businesses, saw double-digit growth as sales rose from 839 million JPY to 976 million JPY, driven by increased transaction volumes with existing partners and the acquisition of new members.

Note that the gross profit margin for the wholesale segment declined from 10.9% to 9.0% due to changes in product mix resulting from the expansion of transaction volume.

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5. Full-Year Forecast, Growth Strategy, and Shareholder Returns

FY2027 Full-Year Forecast and Progress

The group has maintained its consolidated full-year earnings forecast.

• Net Sales : 17,000 million JPY (+10.5% YoY)
• Operating Profit : 1,400 million JPY (+26.8% YoY)
• Ordinary Profit : 1,420 million JPY (+25.7% YoY)
• Net Income Attributable to Owners of Parent : 910 million JPY (+16.5% YoY)

While performance is seasonally weighted toward the second half, the Q1 progress rate against the full-year sales forecast is 23.3%, and 51.3% against the first-half forecast (7,741 million JPY) . Regarding operating profit, due in part to the timing of new store openings, the progress rate against the first-half forecast (407 million JPY) has reached 64.6% , indicating an extremely strong start.

The following slide summarizes the full-year forecast and key performance indicators.

[Slide Commentary: FY2027 Earnings Forecast (PAGE_22)]

This slide outlines the group's full-year growth story and capital efficiency targets. The group projects net sales of 17,000 million JPY (+10.5%) and operating profit of 1,400 million JPY (+26.8%), maintaining a plan for continuous double-digit profit growth. Crucially, high-level capital efficiency targets have been set: ROE of 16.7% and ROIC of 15.0% . By executing plans for 7 new direct stores and 10 new FC stores, and driving full-year contributions and profitability from the USA business, the group aims to generate returns that clearly exceed the cost of capital.

Store Opening Plan and Key Initiatives

The annual network expansion plan is as follows:

• Direct Stores : 7 new openings (Q1 actual: 0)
• FC Stores : 10 new openings (Q1 actual: 2)
• Tire Distribution Center : 30 new members (Q1 actual: 4)
• Cycles : 3 new openings
• USA Locations : 1 new opening (aiming for a 3-location structure for the full year)

Additionally, the group is enhancing the efficiency of its circular business model and strengthening human capital, such as through the reinforcement of corporate purchasing (up 147.8% YoY in Q1) and the rapid integration of 41 new graduates.

Shareholder Return Policy (Dividend Forecast)

As part of its management focused on the cost of capital and stock price (PBR/PER improvement measures), the group is actively strengthening shareholder returns.

• FY2027 Forecast Annual Dividend : 42.5 JPY per share (a 6.0 JPY increase from the previous year's 36.5 JPY)
• Dividend Payout Ratio Target : Aiming for a gradual increase to 40.0% based on the mid-term management plan (current forecast payout ratio: 37.0%)
• Policy to continue consecutive dividend increases since listing

Through the enhancement of shareholder benefits, the operation of a sustainability committee, and strengthened IR activities, the group demonstrates a commitment to deepening market dialogue, improving PER, and maximizing corporate value.