cotta Co., Ltd. Q3 FY2026 Earnings Deep Dive Report

In the third quarter of the fiscal year ending September 2026, cotta Co., Ltd. achieved significant growth in both revenue and profit . This performance was driven by the steady expansion of its core confectionery and bakery business, alongside substantial contributions from new business segments, such as the beauty and hair care sector, acquired through M&A. The company’s diversification strategy (multi-platform approach) is progressing smoothly, signaling a steady strengthening of its foundation for sustainable growth.

This report extracts 10 key topics from the disclosed financial materials to provide an in-depth analysis of the overall performance, cost structure, segment-specific details, progress in PMI (Post-Merger Integration), and future growth strategies.

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1. Q3 FY2026 Consolidated Financial Summary

For the cumulative third quarter, the company reported net sales of 12,181 million yen (+17.5% YoY) , operating profit of 855 million yen (+18.9% YoY) , and EBITDA of 1,107 million yen (+21.8% YoY) , marking double-digit growth in both top-line and bottom-line figures.

The performance summary above (Slide 3) is critical for grasping the overall picture of these earnings. Key takeaways from this data include:

• High Progress Rate Against Upwardly Revised Forecasts : Even after the upward revision of the full-year forecast, the progress rate for net sales stands at 77.7% , and operating profit at 86.0% , indicating an extremely steady pace.
• Diversification of Business Portfolio : The company has moved beyond its reliance on the traditional confectionery and bakery business, with the beauty and hair care business (Works) and the IT/SES business (TERAZ) beginning to contribute significantly to profits.
• Contribution from M&A : Newly consolidated companies are generating solid profits, providing a powerful boost to the group's overall profit growth.

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2. Operating Profit Variance Analysis (Waterfall Analysis)

The increase in operating profit of +136 million yen (from 719 million yen in the previous year to 855 million yen this year) is backed by a very healthy shift in the profit structure.

• Increase in Gross Profit : +539 million yen (driven by business scale expansion and strong sales of high-margin private brand (PB) products).
• Increase in SG&A Expenses (excluding goodwill amortization) : △323 million yen (due to increased personnel and advertising costs associated with the expansion of the consolidated scope).
• Increase in Goodwill Amortization : △80 million yen (accounting expenses associated with aggressive M&A).

By successfully absorbing the increase in goodwill amortization and integration costs, the company has expanded operating profit through core gross profit growth. This confirms that M&A is leading not just to an increase in sales scale, but to genuine profit generation.

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3. Efficiency in Selling, General and Administrative (SG&A) Expenses

With the expansion of net sales and the scope of consolidation via M&A, the absolute amount of SG&A expenses increased from 2,407 million yen to 2,810 million yen (+16.7%). However, the SG&A-to-sales ratio improved by 0.1 percentage points, from 23.2% in the same period last year to 23.1%.

Key cost factors and drivers of efficiency include:

• Personnel Expenses (1,166 million yen, 9.6% of sales) : Increased due to the consolidation of the beauty business, but the ratio to sales improved by 0.1pt.
• Advertising and Sales Expenses (282 million yen, 2.3% of sales) : cotta has implemented efficiency measures by strictly selecting target areas.
• Freight Costs (76 million yen, 0.6% of sales) : Since most e-commerce delivery costs are recorded in the cost of sales, freight costs within SG&A remained flat or showed a downward trend (△9.5%).

The realization of economies of scale and the optimization of cost-effectiveness across the group have contributed to the improvement in the SG&A ratio.

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4. Trends and Structural Transformation of the Confectionery and Bakery Business

The core confectionery and bakery business maintained solid growth, with net sales of 7,404 million yen (+3.8% YoY) and segment profit of 733 million yen (+9.2% YoY) .

Trends by channel are clearly divided:

• Corporate Channel (cotta business) : Growth remains steady, driven by an increase in average unit price resulting from enhanced proposals that capture customer needs.
• Individual Channel (BtoC) : The growth slowdown has continued following the reaction to the "stay-at-home demand" during the COVID-19 pandemic. In response, the company is pursuing a strategic shift beyond its traditional web-only model, such as creating synergies with physical stores.

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5. Key KPIs for the Confectionery and Bakery Business (PB Ratio & Order Unit Price)

The stability of profitability in the confectionery and bakery business is supported by Private Brand (PB) products and increased customer unit prices .

• BtoB PB Ratio : Remains stable at an extremely high level of around 45% (46% in Q3). The penetration of high-margin, in-house developed products is contributing significantly to the stabilization of the profit structure.
• PB Product Sales Performance : Up +9% YoY in Q3 alone. In particular, "confectionery and bakery materials" surged by 21% YoY . This was partly due to special demand , as customers flocked to the company for its stable supply capabilities amid concerns over supply shortages and high costs of naphtha-based materials.
• Customer Unit Price : While the number of active customers remains stable at 26,000 to 28,000, the BtoB order unit price has risen to 14,485 yen through enhanced approaches to high-value customers.

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6. Performance Summary and Profitability Improvement of the Beauty Business (Works)

The performance of Works Co., Ltd., which operates the beauty business, has expanded rapidly with net sales of 3,629 million yen (+60.6% YoY) and operating profit of 96 million yen (+209.7% YoY) . (Note: This includes the impact of full-year contributions and the new consolidation of MedMarge, compared to the previous year when it was consolidated from Q2.)

Driven by successful customer acquisition measures and direct mail campaigns for dormant customers, the number of orders increased. Furthermore, the expansion of PB products and the capture of high-value-added segments led to an improvement in the overall gross margin . After absorbing goodwill amortization (60 million yen), the operating profit margin rose to 2.6%, indicating substantial cost efficiency gains.

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7. Key KPIs for the Beauty Business (Dramatic Rise in PB Ratio)

The most notable point in the beauty business is the increase in the PB ratio achieved by transplanting the know-how cultivated by cotta.

Slide 17 above is a symbolic graph that underscores the speed of transformation in the beauty business. The implications of this data are as follows:

• Upward Trend in PB Ratio : It has steadily risen from 15.1% in the same period last year to 17.5% in Q3 (+2.4pt YoY) .
• Expansion of High-Margin Product Sales : PB sales in Q3 alone reached 218 million yen (+21.4% YoY). High-margin categories such as "hair care and styling" (+54.7% YoY) and "beauty equipment and salon supplies" (+25.5% YoY) performed particularly well.
• Simultaneous Growth in Unit Price and Customer Count : The order unit price is on a recovery trend at 18,454 yen , and the number of active customers is also expanding to 32,000 .

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8. PMI (Post-Merger Integration) Achievements and Results

A strength of cotta's M&A strategy is its ability to fundamentally improve the profit structure of acquired companies by transplanting its own logistics, e-commerce, and marketing know-how (PMI) .

PMI results are quantitatively evident in the following three areas:

1. Logistics Improvement : Despite an increase in shipment volume, logistics personnel costs per order were kept at a low level of 398 yen (+2.6% YoY) , comparable to the previous year, thanks to efficiency investments.
2. Increase in E-commerce Conversion Rate : The company promoted the shift of orders—previously centered on phone and fax—to the web (strengthening newsletters and LINE distribution), raising the web ratio from 58.0% in the same period last year to 61.6% (+3.6pt) .
3. Marketing Enhancement : Through increased campaign exposure and the reactivation of dormant customers, the number of orders expanded from 62,538 in the same period last year to 66,286 (+6.0%) .

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9. New Entry into the Aesthetic Medicine Field (Acquisition of MedMarge)

On May 11, 2026, the company brought MedMarge Co., Ltd. , which operates an online medical platform, into the group. This has launched a new growth strategy that transcends the framework of the beauty business.

Slide 24 illustrates one of the most important strategies for the company's future business portfolio expansion.

• New Concept: "Beauty Salons as Gateways to Aesthetic Medicine" : The company will integrate Works' nationwide network of beauty salons with MedMarge's online medical technology (e.g., AGA treatment).
• Win-Win-Win Business Model : For beauty salons, it provides new revenue sources beyond treatments and improves customer satisfaction; for users, it offers access to medical approaches at familiar salons; and for the cotta group, it enables rapid entry into the high-growth aesthetic medicine market.
• High Transaction Value Target : Against the current transaction value of approximately 970 million yen, the company aims to double this to approximately 1.9 billion yen after synergies are realized (in the first year after consolidation).

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10. Mid-to-Long-Term Growth Strategy: Platformization and Solution Expansion

cotta's mid-to-long-term growth vision goes beyond being a mere e-commerce company.

• Horizontal Expansion of Product Sales : Just as the e-commerce model cultivated for confectionery shops (since 1998) was transplanted to beauty salons (since 2024), the company will expand horizontally into "other industries facing similar procurement challenges."
• Vertical Expansion (Solution Extension) : For its existing customer base (over 150,000 accounts nationwide), the company will provide vertically integrated solutions that solve challenges across the entire value chain, including "manufacturing support," "human resources services," "sales support," "financial services," and "advertising," rather than just "procurement (product sales)."
• DX Resource Backup : With the PMI of TERAZ (SES/system development business) now complete, a system is in place to strongly support the group's entire IT/DX infrastructure in-house.

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Conclusion

cotta's Q3 FY2026 earnings demonstrate that its growth story is progressing logically and steadily. This is built on the stable cash-generating power of the confectionery and bakery business, the profitability improvements through successful PMI in the beauty business acquired via M&A, and the entry into the high-growth market of aesthetic medicine .

Improvements in KPIs, such as the rising ratio of high-margin PB products and increased customer unit prices, are permeating the entire group. The company's future moves in platform expansion and solution deployment remain a key focus for investors.