Hard Off Q1 Revenue Climbs 30% to a Record ¥11.25bn as Net Profit Nearly Triples on a ¥1.16bn Securities Gain

Hard Off Corporation Co., Ltd. (TSE: 2674), the Niigata-based operator of Japan's largest second-hand retail franchise network, reported consolidated results under Japanese GAAP on August 6 for the first quarter of the fiscal year ending March 2027 — the three months from April 1 to June 30, 2026. Revenue rose 30.0% to ¥11,251 million from ¥8,653 million, operating profit gained 34.4% to ¥1,058 million, ordinary profit rose 26.7% to ¥1,061 million, and net profit attributable to owners of the parent jumped 167.8% to ¥1,457 million. The company said all four lines set all-time quarterly highs. Earnings per share came in at ¥104.71 against ¥39.15 a year earlier. Comprehensive income more than doubled, up 109.1% to ¥849 million.

The year-earlier quarter is a low base worth naming: in the June 2025 quarter, revenue had grown only 4.5% while operating profit fell 18.7%, ordinary profit fell 17.8% and net profit fell 18.5%. What changed in twelve months is scale. Management pointed to a reuse market where consumers, squeezed by persistent price inflation and an increasingly defensive attitude to spending, keep turning to second-hand goods — a demand backdrop it described as continuing to hold firm, reinforced by broader public interest in a circular economy.

Same-store sales up 8.9%, with 69 acquired stores doing the rest

Three forces drove the 30.0% revenue increase, and the company separated them clearly. First, domestic same-store sales rose 8.9% year on year — a strong organic number in its own right, and the cleanest read on underlying demand. Second, the 30 directly-operated stores opened during the previous fiscal year contributed a full quarter of trading for the first time. Third, and largest, the 69 stores of Econos Co., Ltd., consolidated from the third quarter of the previous fiscal year after the October 2025 acquisition, were in the base for the first time in a June quarter. Strip out the acquisition and the growth rate would be materially lower — but the 8.9% same-store figure shows the core chain is expanding under its own power rather than only by purchase.

The network kept growing through the quarter. Hard Off opened 15 new directly-operated stores and three new franchised stores and closed one, a net addition of 17, taking the group to 560 directly-operated and 535 franchised reuse stores, or 1,095 in total. Directly-operated stores now outnumber franchised ones — a slow structural shift for a company built on franchising, and one accelerated by the Econos and Ecoplus subsidiaries, whose stores are counted as directly operated. Overseas, the store count rose by three to 27, split between 14 directly-operated and 13 franchised units run through Taiwan Hard Off and ECO TOWN USA INC. The overseas base remains small — under 2.5% of stores — but it is the fastest-growing line in the table in percentage terms.

Opening costs run ahead of the openings

The cost line is where this quarter's operating leverage was partly given back. Selling, general and administrative expenses rose 28.4% to ¥6,663 million from ¥5,190 million — almost exactly in line with revenue growth. Hard Off attributed the increase to opening costs for the 15 new stores launched during the quarter, against just six a year earlier, plus pre-opening costs for a further four stores that opened in July, which were incurred inside the June quarter but will generate no revenue until the second. That is a timing drag that should reverse rather than persist.

Gross margin slipped modestly, to 68.6% from 69.1%, as cost of sales rose 31.9% to ¥3,530 million — slightly faster than revenue, consistent with a heavier mix of acquired Book Off-format stores. Even so, the operating margin improved to 9.4% from 9.1%. Below the operating line, ordinary profit grew more slowly than operating profit (26.7% versus 34.4%) because non-operating income fell to ¥31 million from ¥57 million — dividend income dropped to ¥7 million from ¥36 million — while non-operating expenses rose to ¥27 million from ¥6 million, driven by interest expense of ¥24 million against ¥6 million as borrowings expanded. Depreciation rose to ¥282 million from ¥241 million, and goodwill amortisation to ¥27 million from ¥10 million, both reflecting the acquisition.

Reuse does the heavy lifting; franchising is flat

The segment split is lopsided and getting more so. The Reuse business — the directly-operated stores — generated external revenue of ¥10,786 million, up 31.6%, and segment profit of ¥1,747 million, up 33.9%. The FC business, which collects royalties and wholesale revenue from franchisees, saw external revenue slip 3.4% to ¥434 million; including intersegment sales its total revenue rose 9.0% to ¥571 million and segment profit rose 6.9% to ¥304 million. In other words, the franchise book is stable and highly profitable — a 53% segment margin on total revenue — but it is no longer the growth engine. A small "Other" segment covering system development contributed ¥128 million of total revenue and ¥4 million of profit. Unallocated corporate costs and eliminations widened to −¥996 million from −¥806 million, reflecting the larger group.

Securities sold, borrowings up, and a dividend paid out

Total assets rose ¥393 million to ¥32,032 million at June 30. Current assets grew ¥836 million to ¥17,826 million, with cash and deposits up ¥462 million to ¥3,770 million and inventory up ¥354 million to ¥11,555 million — merchandise alone is now 36% of the balance sheet, which is simply what a 1,095-store second-hand business looks like. Non-current assets fell ¥442 million to ¥14,206 million: property, plant and equipment rose ¥385 million to ¥6,288 million on the new-store programme, but investment securities fell ¥1,002 million to ¥3,216 million following the disposal that produced the ¥1,160 million extraordinary gain. Goodwill stood at ¥1,040 million.

Liabilities rose ¥727 million to ¥12,036 million, almost entirely through an ¥820 million increase in short-term borrowings to ¥5,910 million. Net assets fell ¥334 million to ¥19,995 million despite the record profit, for two reasons that both belong in the same sentence: retained earnings rose only ¥274 million because roughly ¥1,183 million was paid out as the ¥85.00 year-end dividend for the previous fiscal year, and the valuation reserve on other securities fell ¥625 million to ¥1,365 million as the sold holdings left the balance sheet. Shareholders' equity ended at ¥19,878 million and the equity ratio eased to 62.1% from 63.9% — still a conservatively financed balance sheet by retail standards. No quarterly cash flow statement was prepared, as permitted for a first quarter.

Guidance untouched, dividend raised to ¥92

Despite a quarter that ran well ahead of the implied run-rate, Hard Off left both its interim and full-year forecasts exactly as published on May 12, 2026. For the six months to September 2026 it targets revenue of ¥21,750 million (+26.0%), operating profit of ¥1,580 million (+18.9%), ordinary profit of ¥1,630 million (+13.9%) and net profit of ¥1,800 million (+94.6%). For the full year to March 2027 it guides to revenue of ¥45,700 million (+16.4%), operating profit of ¥4,050 million (+19.6%), ordinary profit of ¥4,100 million (+17.5%) and net profit of ¥3,300 million (+31.0%), for full-year EPS of ¥237.19. The first quarter therefore delivered 24.6% of guided full-year revenue, 26.1% of guided operating profit — and, because of the one-off securities gain, 44.1% of guided full-year net profit already. The annual dividend forecast is unchanged at ¥92.00 per share, all payable at year-end, up from ¥85.00 — a 38.8% payout on guided EPS.

Two technical notes accompany the statement. Hard Off changed the inventory valuation method for its Book Off business, from the retail method to the gross-average cost method, effective from the start of this quarter; the change follows the October 2025 consolidation of Econos and the resulting overhaul of the group's inventory management system, and unifies cost accounting across both companies' Book Off-format operations. Because the new system holds no historical data, the change was not applied retrospectively; the company said the impact was immaterial. Separately, there were no material changes to the scope of consolidation and no material subsequent events were disclosed. Shares issued stood at 13,954,000 with 40,990 held in treasury, and the weighted average share count for the quarter was 13,913,045.

JapanStockPulse provides informational content only and does not constitute investment advice. Figures are taken from the company's published earnings short report and may be subject to subsequent revision.