TSURUHA HOLDINGS INC.
Q2 Financial Results Briefing for the Fiscal Year Ending February 2027
October 7, 2026
Event Summary
[Company Name]
TSURUHA HOLDINGS INC.
[Company ID]
3391-QCODE
[Event Language]
JPN
[Event Type]
Earnings Announcement
[Event Name]
Q2 Financial Results Briefing for the Fiscal Year Ending February 2027
[Fiscal Period]
FY2027 Q2
[Date]
October 7, 2026
[Number of Pages]
30
[Time]
16:00 16:58
(Total: 58 minutes, Presentation: 23 minutes, Q&A: 35 minutes)
[Venue]
Webcast
[Venue Size]
[Participants]
[Number of Speakers]
4
Jun Tsuruha
Hideaki Kirisawa
Ryutaro Miyake
Takamune Shibazaki
[Analyst Names]*
Hisahiro Yamaoka
Sho Kawano
Dairo Murata
President and Representative Director
Director and Executive Officer, In charge of
Group Sales and Product Management, and
Supervisor of Welcia Holdings Co., Ltd.
Executive Officer and Chief Financial Officer
Executive Officer and Deputy Chief Financial
Officer
Nomura Securities
Goldman Sachs
JPMorgan Securities
*Analysts that SCRIPTS Asia was able to identify from the audio who spoke during Q&A or
whose questions were read by moderator/company representatives.
1
Presentation
Moderator: Thank you for waiting. It is now time to begin the financial results briefing for Q2 of the fiscal year
ending February 2027 for TSURUHA HOLDINGS INC.
We are joined today by: Jun Tsuruha, President and Representative Director; Hideaki Kirisawa, Director and
Executive Officer; Ryutaro Miyake, Executive Officer and Chief Financial Officer; and Mr. Takamune Shibazaki,
Executive Officer and Deputy Chief Financial Officer.
discuss our initiatives for this fiscal year. Mr. Miyake will then explain the details of our financial results,
followed by the Q&A session. We expect to conclude at 5:00 PM. For those joining us online, an exit survey
will appear when you leave the session. We would appreciate your cooperation.
With that, I'll turn it over to Mr. Tsuruha. Mr. Tsuruha, you may begin.
Tsuruha: This is Tsuruha. Thank you all for joining us today.
Please turn to page three. This page shows the consolidated financial highlights for TSURUHA HOLDINGS INC.
Net sales were JPY1.2755 trillion. Operating income was JPY54.7 billion. Net income attributable to owners of
the parent was JPY30.2 billion. EBITDA was JPY85.5 billion.
2
Gross profit progressed steadily in Q1, driven by strong sales of seasonal goods as temperatures rose.
However, in Q2, temperatures did not rise as expected, and we also experienced prolonged rainfall across the
country. These factors weighed on customer traffic, and results came in slightly below our plan.
On the other hand, SG&A expenses remained under tight control, continuing the discipline we maintained in
Q1. As a result, operating income exceeded our plan by about JPY2 billion.
Please turn to the next page. This page shows the YoY comparison.
The overall trends are consistent with what I mentioned earlier. Operating income increased YoY, driven by
steady integration synergies and tight cost control, despite JPY11 billion in goodwill amortization associated
with the integration.
Excluding goodwill amortization, both the TSURUHA Group and the WELCIA Group recorded operating income
growth of more than 20%. Integration synergies enabled us to improve profit at a pace that exceeded net
sales growth.
Net income declined. This was due to the absence of the JPY6.6 billion gain on the sale of investment securities
recorded by the TSURUHA Group in the previous year, as well as the fact that goodwill does not generate tax
benefits.
3
Please turn to the next page. This section covers the status of integration synergies and our initiatives for H2
and the next fiscal year.
At the end of H1, synergies totaled JPY8.5 billion. During H1, we focused our negotiations mainly on non-food
categories. Because some internal preparations progressed ahead of schedule, we were able to begin
negotiations for food-related categories earlier than planned. We expect a portion of these synergies to
materialize in H2. In our PB category, we have begun launching products under the new brand called Karada
to Kurashi ni, +1. We plan to introduce more than 100 SKUs in H2.
Looking ahead to H2 and the next fiscal year, we plan to unify our MD operations. We expect synergies to
continue to build. As we have explained before, most of the synergies are related to the supply chain. Our
plan assumes that synergies will accumulate through H2 and gradually expand. Although results have
exceeded our H1 plan, the level of future synergies may fluctuate depending on net sales trends. There are
also uncertainties, including recent price increases and the situation in the Middle East. Some negotiations
and initiatives have not yet been finalized, so we are not revising our synergy plan at this stage.
The current outperformance reflects synergies that emerged earlier than expected, as well as synergies that
exceeded our initial assumptions. Given that market conditions remain difficult to forecast, we are not revising
the three-year synergy target of JPY40 billion at this time. We plan to update the figures once synergies are
confirmed through negotiations or once the impact of changes in net sales becomes clear.
4
Please turn to the next page. This page shows the performance of our PB products.
On a consolidated basis, PB products accounted for 12.3% of net sales. PB net sales were 113% of the previous
year's level, showing steady momentum. TOPVALU performed particularly well, at 129% of the previous year's
level.
For Karada to Kurashi ni, +1, we are focusing this fiscal year on rebranding existing PB items. We have begun
launching products like those shown in the image.
The PB sales mix remained flat at 12.3%, the same as in Q1. We believe this reflects temporary
discontinuations associated with the transition to the new PB brand. PB net sales themselves remain very
strong, and we see no particular issues.
5
Please turn to the next page. This section covers our store strategy, the drug & food format.
We now have 37 drug & food stores, most of which are remodeled stores. At the remodeled stores, net sales
reached 111.3% and customer traffic reached 107.5% of the levels before the remodel. These are significantly
stronger results than we typically see from a remodel.
As we have explained before, we are currently rolling out this format mainly at WELCIA Group stores, where
the necessary preparations were already in place. Once preparations are complete, we will also consider
introducing the format at TSURUHA Group stores.
Our collaboration with AEON allows us to quickly establish procurement routes and identify outsourcing
partners. This gives us greater speed and efficiency than traditional drugstore food operations. We will
continue expanding the format and strengthening operational support so that drug & food becomes a key
growth driver.
6
Please turn to the next page. This section covers our DX strategy.
We are building an environment that enables cross-company analysis of customer data from both TSURUHA
and WELCIA. The foundation is now in place, and we are entering the phase of analysis and promotional
execution. Although the apps are still separate, we can already conduct unified promotional activities based
on shared analysis.
We had planned to integrate the two apps in March next year. However, because we must also respond to
the reduced consumption tax rate on food products, we will shift the integration schedule from March to April.
With the unified app, we will further strengthen one-to-one marketing and work to make our stores the
preferred choice for customers.
In our dispensing pharmacies, we are centralizing prescription data entry. By supporting administrative tasks
remotely, we can reduce the workload at individual stores. This improves operational efficiency and
consolidates routine tasks, allowing staff to focus more on face-to-face care for patients. Along with these
efficiency gains, we are building a structure that will enable us to pursue future opportunities related to
reimbursement.
7
The next page contains information on our sustainability initiatives, so please take a look at that page as well.
That concludes my presentation. Thank you very much.
Moderator: We will now move on to the detailed explanation of our financial results by Mr. Miyake.
Miyake: I will now walk you through the details of our financial results.
8
Please turn to page 10, This section shows the results of the TSURUHA Group.
Net sales were JPY573.7 billion. Operating income was JPY34.5 billion. Net income attributable to owners of
the parent was JPY21.7 billion. EBITDA increased by JPY6 billion YoY, reaching 116% of the previous year's
level. Operating income margin was 6%, above both the previous year and our plan.
In Q2, net sales fell slightly short of plan. Customer traffic was affected by prolonged rainfall and other
weather-related factors. On the other hand, gross profit met our plan, supported by synergy creation. SG&A
expenses were kept under tight control, continuing the discipline we maintained in Q1, and we achieved our
profit plan.
9
Please turn to the next page. This page shows the performance of the WELCIA Group.
Net sales were JPY701.7 billion. Operating income was JPY31.3 billion.Net income attributable to owners of
the parent was JPY19.5 billion. EBITDA increased by JPY4 billion YoY, reaching 110.7% of the previous year's
level.
As with the TSURUHA Group, weather-related factors affected performance, and net sales came in slightly
below plan. From Q1 onward, we reviewed our pricing policies and promotional activities, which helped
narrow the gap between gross profit margin and plan. SG&A expenses remained within plan through
continued cost control.
As a result, operating income fell short of plan. However, compared with plan, we still delivered solid profit
growth, and we recognize that the overall effects of the integration are contributing meaningfully.
10
Please turn to the next page. This page shows the quarterly trends for TSURUHA HOLDINGS.
In Q2, the SG&A expense ratio increased by 1.1 percentage points. This was mainly due to slower net sales,
which resulted in a higher ratio. In addition, Q2 of the previous year did not include many integration-related
costs, whereas this year includes new goodwill amortization associated with the integration. Even with these
factors, the SG&A amount itself remained within our internal plan.
11
Please turn to the next page. This page shows the quarterly trend for the TSURUHA Group.
As mentioned earlier, Q2 saw a notable decline in customer traffic due to weather conditions, and net sales
were soft. Gross profit benefited from synergy creation. Although the gross profit amount grew only modestly
in line with net sales, the gross profit margin increased by 0.7 percentage points YoY. The SG&A expense ratio
increased because net sales did not grow, but the SG&A amount remained within plan.
12
Please turn to the next page. This page shows the quarterly trend for the WELCIA Group.
Net sales followed a similar pattern to the TSURUHA Group. For gross profit, we reviewed our pricing and
promotional activities from late in Q1. As a result, gross profit margin increased significantly in Q2, rising 0.9
percentage points YoY, with synergies also contributing to the improvement. The SG&A expense ratio
increased, as it did for TSURUHA, because net sales were soft. However, the SG&A amount remained within
plan, and we continue to maintain tight cost control.
13
Please turn to the next page. This page shows the trends in existing store sales, the number of customers, and
average customer spending.
In Q2, performance fell below plan, mainly due to weather-related factors, as mentioned earlier. However,
Q1 exceeded plan, and as a result, cumulative H1 performance met plan.
In Q1, the TSURUHA Group and the WELCIA Group showed different trends. From late in Q1, WELCIA revised
its promotional activities, and the gap between the two groups has since narrowed.
14
Please turn to the next page. This page shows the product-category performance for the TSURUHA Group.
OTC pharmaceuticals were soft. There was no COVID-related demand this year, unlike last year, and changes
to the sales methods for drugs prone to misuse also had an impact. Food products were flat at 100% of the
previous year's level, reflecting the special demand for rice last year. In dispensing pharmacies, the number
of prescriptions dispensed continued to increase as we opened new pharmacies, resulting in strong growth
to 111.6% of the previous year's level.
15
Please turn to the next page. This page shows the product-category performance for WELCIA.
As noted, from this fiscal year, we reorganized WELCIA's product categories to align them with those of the
TSURUHA Group. Please refer to the notes for details on the major category changes.
Sales trends were similar to those of the TSURUHA Group. In food products, promotional measures aimed at
increasing the number of customers were effective, and despite the special demand for rice last year, sales
reached 101.9% of the previous year's level. In dispensing pharmacies, the number of prescriptions dispensed
continued to increase. We also strengthened our efforts to capture additional fees. Although the NHI drug
price revision reduced gross profit margin, the decline was limited to 0.6 percentage points.
Overall gross profit margin has been rising since late in Q1, supported by the review of promotional activities.
Gross profit margin increased by 0.4 percentage points YoY.
16
Please turn to the next page. This page shows the breakdown of SG&A expenses for the TSURUHA Group.
Overall, SG&A expenses remained within plan. Personnel expenses, SG&A expenses, and promotional
expenses all increased YoY, but each remained within plan. Utility expenses decreased YoY, supported by
continued synergy effects from Q1.
17
Please turn to the next page. This page shows the breakdown of SG&A expenses for the WELCIA Group.
As with the TSURUHA Group, SG&A expenses remained under tight control and within plan. Goodwill
amortization was included in the prior fiscal year, but there are no other notable items to report.
18
Please turn to the next page. This section covers the performance of our dispensing pharmacies.
Both the TSURUHA Group and the WELCIA Group continued to perform solidly, reaching 109.5% of the
previous year's level. The share of dispensing pharmacy sales in net sales continued to increase. Combined,
dispensing pharmacy sales accounted for 19.5% of net sales, with a gross profit margin of 36.4%, and
dispensing pharmacies represented 59.1% of all stores.
Gross profit margin declined due to the NHI drug price revision. Even so, we continue working to limit the
impact through efforts to capture additional reimbursement.
19
Please turn to the next page. This page shows our store openings and closures.
On a consolidated basis, we opened 53 stores and closed 77. As of the end of August, the total number of
stores was 5,652. Although this represents a net decrease, store openings are weighted toward H2, and we
are broadly on track with our plan.
We completed 196 remodels. We are focusing our remodeling efforts on stores where we expect to see
meaningful improvements.
Please refer to the table for additional details.
20
Please turn to the next page. This page provides an overview of our balance sheet and cash flow.
After adjusting for the timing of holidays, cash flow generation was about JPY43 billion. There are no other
notable items to report.
That concludes my explanation of the detailed results.
From page 24 onward, the appendix includes performance data for each operating company. Please refer to
those pages as needed.
Thank you for your attention.
21
Question & Answer
Moderator [M]: We will now move on to the Q&A session. We will first take questions from institutional
investors and analysts here in the room. If you have a question, please raise your hand. Before asking your
and the content of the presentation. Each person may ask up to two questions. If you have two questions,
please ask them consecutively.
I see a hand raised. Let me bring the microphone to you.
Matsuo [Q]: Thank you for the explanation. This is Matsuo from SMBC Nikko Securities.
I have two questions. My first question is about integration synergies. Many investors are focused on this area.
You mentioned JPY8.5 billion for H1. If I remember correctly, Q1 was just under JPY3 billion, so it seems that
you generated around JPY5 billion in Q2.
Mr. Tsuruha mentioned that some synergies materialized earlier than expected. That raises the question of
whether we are effectively bringing forward synergies from the next fiscal year. In other words, how should
we think about the JPY15 billion synergy plan for next fiscal year? If there was additional upside this time,
could you elaborate on the components? Put simply, if the plan is JPY15 billion for this fiscal year, should we
expect JPY17 billion or JPY18 billion next fiscal year?
in Q1. You mentioned food products, but other categories also showed meaningful improvement. If this
improvement is sustainable, WELCIA could catch up in H2. Could you share your view on the outlook for
Kirisawa [A]: Thank you for your questions. I will address both.
On synergies, as we explained earlier, they are progressing smoothly. We are accelerating areas where we
can bring synergies forward. TGMD, our purchasing subsidiary, is leading negotiations with suppliers.
billion over three years, for a total of JPY40 billion. If synergies materialize earlier, they will continue to
accumulate in the following year as well. They do not disappear simply because they emerged ahead of
schedule. They add to the cumulative total.
So
would be JPY1 billion lower. Our view is that cumulative synergies will continue to build. That is my answer to
your first question.
For your second question, WELCIA reviewed several areas after the Q1 results.
Each operating company had its own promotional activities. Some of these overlapped with company-wide
promotions, resulting in excessive promotional activity. We reviewed the ROI of these activities and
determined which should be discontinued and which should continue. In short, we reduced unnecessary
discounting in Q2.
We also reviewed our pricing policies. We reassessed product content, competitive pricing, and SKU counts.
Prices naturally fluctuate depending on competitive conditions, but we made targeted adjustments. These
22
reviews of promotional activities, combined with synergies that began to emerge more strongly in Q2,
ncludes my response.
Matsuo [Q]: Thank you. Just to clarify my first question, regarding your comments that some synergies are
materializing earlier than expected and that some are exceeding your initial assumptions, is it fair to
understand that, simply put, you are on track to exceed the JPY15 billion target this fiscal year, but you are
being cautious in your comments at this stage because some of the synergies are linked to factors such as net
sales trends? In other words, should we understand that there are no particular concerns emerging with
regard to synergies from next fiscal year onward?
Kirisawa [A]: That understanding is correct.
Matsuo [M]: Thank you very much. That is all from me.
Moderator [M]: Thank you. Next question, please.
Yamaoka [Q]: Thank you for the presentation. This is Yamaoka from Nomura Securities. I also have two
questions.
My first question is similar to the previous one. Regarding integration synergies, you mentioned that some
synergies are materializing earlier than expected and that some are exceeding your initial assumptions. Could
you explain which components are materializing earlier, which are exceeding your initial assumptions, and
how these relate to the synergy components you have already disclosed? I would appreciate more detail on
My second question relates to pricing. You mentioned that the environment continues to include price
increases and that you are monitoring conditions carefully. In this ongoing inflationary environment, how are
you thinking about your pricing strategy for H2? And additionally, with the potential reduction in the
consumption tax on food products next year, how do you view the environment after April?
I imagine the dynamics may change, so could you share your perspective on price increases in H2 and how
you see conditions evolving after April next year?
Kirisawa [A]: I will answer both questions.
On why synergies are materializing earlier than expected and exceeding our initial assumptions, we originally
had a schedule for supplier negotiations. Our TGMD purchasing organization was able to establish its structure
earlier than planned. With strong cooperation from suppliers, negotiations progressed smoothly, and
synergies began to eme
able to achieve. In practice, negotiations went better than expected. Importantly, the combined buying power
of the TSURUHA Group and the WELCIA Group proved more effective than anticipated. This allowed us to
secure better terms from suppliers, resulting in synergies that exceeded our initial assumptions. These factors
together explain why synergies are both materializing earlier and exceeding our initial assumptions.
Regarding pricing and the upcoming food tax reduction, inflation has not subsided, and geopolitical risks, such
as the situation in the Middle East, remain. We expect continued upward pressure on product costs.
Pricing must always take competition into account. Even if we want to sell a product at a certain price, the
competitive environment may not allow it. One key strategy is PB. As mentioned earlier, TOPVALU, especially
the Best Price line, is receiving strong customer support and continues to grow at double-digit rates.
23
These products offer low prices and good quality, and in a cost-increase environment, they are central to our
pricing strategy.
WELCIA has already been actively expanding TOPVALU, and we plan to broaden the assortment further.
TSURUHA has been slower to introduce TOPVALU, but starting with the autumn-winter shelf resets, the
number of SKUs will increase. We intend to strengthen our use of TOPVALU to reinforce our low-price value
proposition.
Regarding the tax reduction in April, we expect some degree of purchase deferral. Customers may wait,
Looking back, from March through May last year, we saw strong demand for items such as plastic wrap and
garbage bags due to the naphtha issue. If similar dynamics overlap with purchase deferral, it could create a
double impact. We will prepare promotional strategies accordingly.
The degree of purchase deferral will differ by product type, depending on whether items are consumed
immediately or, like seasonings, can be stored for longer. We will differentiate promotional intensity within
the food category.
Health foods, which we sell as a drugstore, will also be subject to the tax reduction. We see significant
opportunity there after April. Strengthening our health food business will be a key initiative for next fiscal
year. That concludes my response.
Moderator [M]: Thank you very much. We will continue taking questions from investors and analysts here in
the room. I see a hand raised. Let me bring the microphone to you.
Kaminaka [Q]
the TSURUHA Group.
Customer traffic has declined for six consecutive months, and compared with the WELCIA Group, TSURUHA
appears to be underperforming. Could you explain the reasons behind this? Is it due to slower progress in
remodels compared with WELCIA, changes in the competitive environment, or something else?
Tsuruha [A]: Thank you for the question. Let me address it.
As you pointed out, the number of customers at existing TSURUHA Group stores has been a challenge. There
are several factors, but if you look at the category data, you will see that food sales have been soft, with some
months falling below the previous year's level.
Before the integration with WELCIA, food operations within the TSURUHA Group, such as supplier alignments,
shelf allocation, and promotions, were inconsistent across operating companies. Therefore, before
integrating with WELCIA, we first focused on unifying food operations within the TSURUHA Group.
This required coordination across our operating companies. We successfully built the foundation, but during
that period, we were not able to strengthen our promotional activities as much as we would have liked.
Now that food operations within TSURUHA have been unified, we will begin generating synergies with the
WELCIA Group. With this foundation in place, our focus for H2 will be to increase visit frequency, particularly
through food.
24
That said, reacting to lower customer traffic by immediately increasing promotions can hurt gross profit. While
the coming period includes major promotional events such as Black Friday and the year-end season, we intend
to manage promotions carefully. We will prepare food categories that drive visit frequency and work to
restore customer traffic. That is my answer.
Kaminaka [M]: Thank you very much.
Moderator [M]: Thank you. We will now take questions from institutional investors and analysts joining us
online. Our first question, please.
Nishizawa [Q]: This is Nishizawa from BofA Securities. Thank you. I have two questions.
First, regarding synergies, you have indicated a full-year synergy target of JPY15 billion for this fiscal year.
Could you share how much you had originally expected to achieve in H1 at the beginning of the fiscal year? I
would appreciate some clarification on the numerical assumptions.
Second, also regarding the numbers, in terms of progress against plan, net income appears to be doing even
better than ordinary income in H1. Including H1 as well as your full-year outlook, given that synergies are
materializing, I believe the likelihood of lower impairment losses is also increasing. Could you once again share
your outlook for net income for the full year?
Kirisawa [A]: On your first question regarding synergy planning, we manage synergies on a full-year basis.
While we have internal assumptions for H1, we do not disclose those figures publicly, so I would like to refrain
from providing specific numbers. That said, as we have explained, synergies are materializing earlier than
expected and exceeding our initial assumptions. We will continue working toward achieving the full-year
target of JPY15 billion. That is my answer to your first question.
Miyake [A]: I will address your second question regarding net income and impairment.
As synergies are progressing smoothly and earlier than expected, we will assess impairment at year-end based
on updated future cash flow projections.
Given the current situation, if synergies continue to materialize strongly, cash flow projections for individual
stores should improve meaningfully. As a result, we expect impairment losses and other special losses to be
smaller than initially anticipated. Once we reach a point where we can assess this with greater certainty, we
will provide an update. That concludes my response.
Nishizawa [Q]: Thank you. As a follow-up on synergies, ordinarily, synergy contributions tend to be larger in
H2. So, based on the JPY8.5 billion achieved in H1, one might simply extrapolate that to JPY17 billion for the
full year. Would that be a reasonable interpretation?
Kirisawa [A]: When we talk about synergies, they consist mainly of cost-of-goods reductions and increased
rebates. However, both of these depend on products selling as planned. As we have mentioned repeatedly
today, the current environment is uncertain, and it is still difficult to forecast sales with confidence.
If sales progress exactly as assumed, your interpretation may be directionally correct. However, since we have
set a full-year target of JPY15 billion, our focus is on achieving that target with certainty. So, while your
interpretation could be valid if sales follow our assumptions, at this stage we are keeping the official plan
unchanged.
Nishizawa [M]: Understood. Thank you very much.
25
Moderator [M]: Thank you. Next question, please.
Kawano [Q]: This is Kawano from Goldman Sachs. I have two questions.
My first question is about synergies, which I believe have been the focus of many questions today. Broadly
speaking, once food procurement is unified and the integration of H&BC and food has settled to some extent,
I think the next major drivers could be optimizing and standardizing promotional activities and shelf planning.
I don't think this means simply moving everything toward a single format. Have you already developed a fairly
clear view of how you want to move forward in these areas?
Or, given the size of the store network, are you still discussing what the ideal approach to shelf allocation
should look like while you see how things develop? Could you first share your thoughts on that?
My second question is numerical. In H1, personnel expenses and promotional spending were significantly
below plan. Should we expect a similar level of discipline and cost control in H2 compared with your original
plan?
Kirisawa [A]: Thank you for your questions. Let me address your first question. As you noted, procurement
for H&BC and food is progressing well toward unification. The more important next step is MD integration,
including standardizing core shelf planning, point-based promotions, flyers, and other promotional activities.
We agree that this will be a key driver.
Our combined network has around 5,600 stores, ranging from very small to very large formats. For stores of
similar size, roughly 80% to 90% of the assortment will be the same.
However, display methods and product placement can differ by operating company. And importantly, around
10% of the assortment, particularly in food, must reflect regional preferences.
As you know, products such as seasonings can vary significantly by region. A commonly cited example is soy
sauce, which tends to be sweeter in Kyushu and saltier in Tokyo. We therefore recognize that these kinds of
product substitutions will naturally be necessary by region.
So, when we talk about unifying our MD and standard shelf allocation, we do not mean that the assortment
will be 100% identical across all stores. First, the number of SKUs will naturally differ depending on store size.
Even among stores of the same size, however, we expect the assortment to differ by around 10% depending
on the region.
This overall direction is already largely established within the Group. From here, we will work on the details,
including point-based promotions and the timing of our promotional cycles. For example, some promotions
currently run on a one-month cycle while others run on a two-month cycle. There are also various details,
such as differences in the start dates of our flyers. We plan to proceed in stages, starting with the unification
of our standard shelf planning, followed by the unification of our promotional activities. That concludes my
response.
Miyake [A]: Regarding expenses, let me respond. By the end of Q2, SG&A was about JPY5.8 billion below plan.
Roughly half of this came from cost control, including synergies such as reduced electricity costs.
The remaining half relates to PB launches and remodels that will take place in H2. We plan to appropriately
utilize the portion of the budget that was not spent in H1 in H2. Remodels are being prioritized based on their
effectiveness, and some will naturally shift into H2.
26
We will continue to manage expenses carefully, and we expect the H1 trend to continue to some extent. That
concludes my response.
Kawano [M]: Thank you very much.
Moderator [M]: Thank you. We will now move on to the next question. Thank you for waiting.
Murata [Q]: This is Murata from JPMorgan Securities. Thank you for the detailed explanations. I have two
follow-up questions.
My first question is about synergies. You have explained that synergy realization is progressing smoothly and
that there are few concerns at this point. To get a clearer picture, I would like to ask about the potential risks.
Earlier, you mentioned that although terms have been negotiated as planned, the actual level of synergies
depends on whether the relevant products sell as expected in H2. Should we understand this as the main risk?
In addition, if there are any other areas that could become more challenging than initially assumed, such as
passing synergies through to pricing, developments in cost of goods, or other initiatives, I would appreciate
your comments.
My second question is more medium- to long-term in nature and looks toward next fiscal year. You are
currently seeing strong synergy effects from changes in supplier alignments and terms, beginning with nonfood and moving into food in H2.
However, these negotiations are mainly with wholesalers. You previously mentioned that negotiations and
collaboration with NB manufacturers are still ahead. As discussions with manufacturers progress, including
joint product development, coordinated promotions, and broader collaboration, what kinds of changes or
additional benefits might emerge next fiscal year and beyond?
Kirisawa [A]: Thank you. Let me address both questions.
Regarding the potential risks to synergies, as mentioned earlier, the first point is that synergies depend on
products selling as expected. If sales fall short, synergy realization will also fall short. The second point is
manufacturer price increases. If cost increases accelerate, the synergy benefit could be reduced compared
with our initial expectations.
Therefore, if price increases become more pronounced, there is a possibility that synergies may not
materialize exactly as planned. These are the main risks we currently recognize.
As for your second question regarding negotiations with NB manufacturers, as you mentioned, we are
currently negotiating with wholesalers. In H2, as shown on this page, we are changing supplier alignments for
H&BC and have also begun changing the alignments for part of the food category.
The next key step is MD integration. From the manufacturers' perspective, there are various requests, such
as having the same products available across all stores, running promotions at the same time, and having
products displayed in specific locations.
As we move forward with our collaboration with manufacturers, we will be able to implement these initiatives
in our stores through negotiations. In addition, as we collaborate with manufacturers, we expect to see
opportunities to negotiate higher rebate rates based on our increased scale. For example, if TSURUHA and
WELCIA previously negotiated separately based on only one side of the combined store base, we can now
negotiate based on twice the number of stores. So, a rebate rate that was previously 1% could potentially
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increase to 1.5% or even 2%. We expect these scale-driven negotiations with manufacturers to generate
additional synergies alongside MD integration.
That concludes my response.
Murata [Q]: I see. So, when it comes to using data to co-develop products with NB manufacturers, is that
something further down the road?
Kirisawa [A]: Not necessarily. We are already working with NB manufacturers on these kinds of initiatives,
although the number of projects is still limited. Both TSURUHA and WELCIA have pursued such initiatives in
the past.
Starting next April, our apps will be fully integrated, and customer IDs will be unified across the two companies.
With a much larger pool of customer data, we will be able to analyze purchasing behavior and customer
preferences in far greater depth. By leveraging this data, we will be able to explore opportunities such as
jointly developing exclusive products with NB manufacturers, and we expect these initiatives to accelerate
from next fiscal year onward. That is my answer.
Murata [M]: Understood. Thank you very much.
Moderator [M]: Thank you. We are currently taking questions from institutional investors and analysts joining
us online. Are there any further questions?
If not, we will conclude the Q&A session at this point.
This concludes the financial results briefing for Q2 of the fiscal year ending February 2027 for TSURUHA
HOLDINGS INC. Thank you very much for joining us today.
[END]
Document Notes
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Portions of the document where the audio is unclear are marked with [inaudible].
Portions of the document where the audio is obscured by technical difficulty are marked with [TD].
Speaker speech is classified based on whether it [Q] asks a question to the Company, [A] provides an
answer from the Company, or [M] neither asks nor answers a question.
This document has been translated by JPX Market Innovation & Research.
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