HALMEK HOLDINGS (Securities Code: 7119) reported strong results for the first quarter (Q1) of the fiscal year ending March 2027. Thanks to the optimization of advertising investments through structural reforms and a strategic focus on profitability, the company achieved a significant increase in operating profit despite a slight decline in revenue.

This report extracts 10 key topics from the earnings materials, providing a comprehensive and detailed analysis of the company's performance, progress in structural reforms, future growth strategies, and shareholder return policies.

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1. Overview of Earnings and 10 Key Topics

1. Significant Profit Growth : While revenue decreased by 3.5% year-on-year to 9.045 billion yen, operating profit surged by 25.0% year-on-year to 790 million yen.
2. Record-High Q1 Profit : Operating profit for the first quarter reached an all-time high for any Q1 period.
3. Profitability Improvement via Structural Reform : Reductions in loss-making sales, improved advertising efficiency, and lower cost-of-sales ratios contributed to profit growth.
4. Customer Base Trends : Due to advertising optimization, the number of active customers decreased by 9.0% year-on-year to 1.24 million, reflecting a shift toward building a higher-quality customer base.
5. Shift to Specialized Merchandising : The company transitioned its retail business model from a general mail-order approach to a "specialized merchandising" model (e.g., cosmetics).
6. Business Model Pivot for Web Media : The pre-senior media platform "HALMEK up" shifted from a subscription model to a product sales and advertising-based model.
7. Fundamental Reform of the "Kotose" Business : Advertising investments were tightened in response to past declines in sell-through rates, focusing on restructuring the profit model.
8. Community Business Growth and M&A : High-ticket events like the "Hajimete Series" and the acquisition of Vogue Gakuen contributed to earnings.
9. Exceeding H1 Profit Targets : Q1 operating profit (790 million yen) already surpassed the H1 forecast (750 million yen), representing an impressive progress rate of 105.5%.
10. Enhanced Shareholder Returns : The company plans an annual dividend of 40.0 yen (an increase from the previous year), with a combined dividend and shareholder benefit yield reaching up to 5.9%.

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2. Executive Summary: The Composition of Revenue Decline and Profit Growth

The slide above (Page 4) is a critical document that succinctly outlines the earnings policy and overall performance for this period. While the top line (revenue) decreased by 3.5% year-on-year from 9.37 billion yen to 9.04 billion yen, operating profit grew by 25.0% from 630 million yen to 790 million yen.

The primary reasons for the revenue decline include the optimization of advertising investments for new customer acquisition—which had been aggressive until the previous fiscal year—and the suppression of low-margin, loss-making sales. By segment, the HALMEK retail business saw a decline of 310 million yen and the Kotose business saw a decline of 180 million yen, while the community business, bolstered by M&A, saw an increase of 140 million yen.

On the profit side, "structural reforms" in HALMEK’s information content and retail businesses boosted profits by 150 million yen . Although the number of active customers decreased from 1.36 million to 1.24 million, this is the result of a strategic shift from quantitative expansion to quality-focused profitability.

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3. Quarterly Operating Profit Trends: Seasonality and the Significance of "Record-High Profit"

The trend chart in the slide above (Page 8) illustrates the seasonal characteristics of the company's business model and the high level of profit achieved in Q1. Due to customer purchasing behavior and the timing of publication and catalog releases, the company's performance exhibits strong seasonality, with profits peaking in the first (Q1) and third (Q3) quarters .

Notably, the Q1 operating profit of 790 million yen for FY2027/3 clearly outperformed previous Q1 results (FY2024/3 Q1: 660 million yen; FY2025/3 Q1: 600 million yen; FY2026/3 Q1: 630 million yen), marking a significant record high for the first quarter. According to the year-on-year profit analysis (Page 9), the primary drivers were the structural reform of the HALMEK retail business (+100 million yen) and the increased efficiency of information content (+40 million yen), demonstrating that management measures are steadily translating into profit.

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4. Progress in Structural Reforms and Growth Strategies by Segment

Active structural reforms are underway in each segment to drive top-line regrowth and improve profit margins.

(1) HALMEK Retail Business (Transition to Specialized Merchandising and Store Expansion)

Previously operating as a "general mail-order" business centered on catalogs, the company has transitioned to a divisional structure based on product categories (fashion, cosmetics, innerwear, food, etc.) starting this term. As a first step, it is promoting the specialization of "cosmetics," renewing its dedicated e-commerce site to deliver a unique brand world, refreshing packaging, and strengthening CRM measures for recurring purchases. Physical store expansion is also progressing well, with 22 stores across 14 prefectures. Q1 store sales are growing at a CAGR of +24% , with physical locations serving as powerful hubs for acquiring new customers and building brand loyalty.

(2) Information Content Business (Opening Web Content and Monetization Pivot)

In the publishing business, the "HALMEK" magazine maintains the No. 1 circulation among all domestic magazines (431,000 copies). Furthermore, for the web media "HALMEK up," the company shifted its business model in May 2026 from a subscription model to a "free access to paid content + product sales/advertising model." By significantly increasing traffic, the company aims to monetize through apparel sales on the pre-senior retail site "Up select."

(3) Kotose Retail, Community, and Corporate Businesses

• Kotose Retail : Responding to the decline in inventory sell-through rates from the previous year, the company is implementing fundamental reforms, prioritizing profit improvement by narrowing down catalog distribution targets.
• Community Business : High-ticket, new-customer-acquisition events like "Hajimete no Keibajo (First Time at the Racecourse)" (13,000 yen) and large-scale real events like "HALMEK Festa" are thriving. Additionally, in May 2026, the company acquired Vogue Gakuen , a handicraft culture school, to expand its "koto-shohi" (experience-based consumption) offerings.
• Corporate Business : Capturing the demand for digital marketing targeting seniors, the company achieved 360 million yen in Q1 sales (year-on-year increase) through cross-marketing that combines analog and digital channels.

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5. Earnings Forecasts and Progress: Q1 Results Exceed H1 Profit Targets

The slide above (Page 24) shows the progress that investors should focus on most. Compared to the consolidated earnings forecast for the first half of the fiscal year ending March 2027, Q1 results show exceptionally high progress:

• Revenue : Q1 Actual 9.045 billion yen / H1 Forecast 168.00 billion yen ( Progress: 53.8% )
• Operating Profit : Q1 Actual 790 million yen / H1 Forecast 750 million yen ( Progress: 105.5% )
• Profit Before Tax : Q1 Actual 777 million yen / H1 Forecast 725 million yen ( Progress: 107.2% )
• Net Profit : Q1 Actual 500 million yen / H1 Forecast 450 million yen ( Progress: 111.2% )

In just one quarter (3 months), the company has cleared all profit targets for the first half (6 months) (progress rate over 100%). However, given the slightly soft revenue and planned growth investments for the second half, the company has maintained its H1 and full-year earnings forecasts (Full-year: 35 billion yen revenue, 2 billion yen operating profit) for the time being.

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6. Shareholder Return Policy (Dividends and Shareholder Benefits)

The company demonstrates a proactive stance on shareholder returns:

• Dividend Forecast : The annual dividend forecast for FY2027/3 is 40.0 yen per share (20 yen interim, 20 yen year-end). This is a 4 yen increase from the previous year's 34 yen, with a projected payout ratio of 36.8%.
• Shareholder Benefit Program : For shareholders holding 100 shares or more, the company offers gifts (guaranteed benefits) such as magazine subscriptions or selected products. Additionally, as a 10th-anniversary benefit, it has expanded a lottery-based program featuring "Ring Bell Smart Gifts" (worth 100,000 yen) and Hoshino Resorts accommodation vouchers. The maximum yield, combining dividends and benefits, reaches 5.9% .

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7. Conclusion and Summary

HALMEK HOLDINGS' Q1 earnings for the fiscal year ending March 2027 represent a strong performance, where the company did not chase unsustainable top-line expansion but instead dramatically improved profitability through advertising optimization and structural reforms.

Preparations for revenue regrowth in the second half, such as the shift to specialized merchandising, the web media model change, and the M&A of Vogue Gakuen, are steadily progressing. The fact that profit targets for the first half were exceeded in Q1 provides a significant financial advantage. Attention will now turn to the process of transitioning toward revenue growth in the latter half of the structural reform phase.