Double-digit buyer growth and FCF-linked buybacks to lift per-share value

FY7/26 sales rose 21.9% YoY to Y10.35bn and EBITDA increased 37.6% to Y1.60bn, both record highs. GPM held at 44.9%, while SG&A expenses rose only 14.6%, lifting the EBITDA margin from 13.7% to 15.5%. Kurashicom reached its previous FY7/27 sales objective of about Y10bn one year early.

Hokuoh, Kurashi no Douguten expands customer touchpoints through articles, video, and other content, directs users to its app, and broadens product categories to create more purchasing opportunities. At end-July 2026, cumulative app downloads were about 6.52mn, cumulative members were about 900,000, and annual buyers increased 14.5% to about 280,000. We believe the combination of content-led customer acquisition and broader product categories gives Kurashicom scope to grow both its customer base and sales per customer.

The direct reason for this profile was the share repurchase announced on September 14, covering up to 85,000 shares, or 1.15% of outstanding shares, for Y141mn. More important than the size of this authorization is Kurashicom's policy of continuing FCF-based buybacks while gradually reducing founder ownership. If repurchased shares continue to be cancelled, earnings growth and a declining share count could lift EPS while the free-float ratio improves.

Hokuoh, Kurashi no Douguten is the main source of sales. In FY7/26, segment sales were Y10.01bn, about 97% of consolidated sales, and EBITDA was Y1.59bn. The company sells apparel, kitchenware, interior goods, cosmetics, and other lifestyle products through its own e-commerce site; original products accounted for about 55% of product sales in FY7/25. Kurashicom also provides brand-integration services to corporate clients using its content-production capabilities and customer base.

A key feature of the business is the integrated operation of product sales and content distribution, which allows Kurashicom to accumulate customer touchpoints in its own channels before and after purchases. It continuously publishes lifestyle content through articles, YouTube, podcasts, and dramas, directing customers to its app, social media, and membership base. The app accounted for about 76% of orders in FY7/26. This model uses regular content engagement, rather than advertising alone, to support repeat purchasing.

Its growth strategy is MC², which expands product categories and customer touchpoints at the same time. More customer touchpoints support new-member acquisition, while a broader assortment across apparel, household goods, and cosmetics increases purchasing opportunities per customer. According to Kurashicom, sales from previously acquired customers returned to growth from FY7/25, while first-year sales from new customers also increased. We believe the brand's broad age appeal gives it scope to lengthen customer relationships and raise LTV.

In FY7/26, sales at the foufou fashion D2C brand increased 68.0% YoY to Y383mn, while EBITDA moved from a Y16mn loss to a Y7mn profit. Its contribution to consolidated results remains small, but merchandising reform and better demand forecasting are showing progress. Improving foufou's profitability will help determine whether Kurashicom can extend the product-planning, inventory-management, and customer-acquisition know-how built in its main business to another brand.

In FY7/26, consolidated sales rose 21.9% YoY to Y10.35bn, EBITDA increased 37.6% to Y1.60bn, OP rose 40.3% to Y1.53bn, and NP attributable to owners of parent increased 44.6% to Y1.04bn. Hokuoh, Kurashi no Douguten increased sales by 21.1% and EBITDA by 35.2%, accounting for most of the consolidated profit increase. foufou also increased sales and moved into positive EBITDA.

GPM was unchanged YoY at 44.9%, while SG&A expenses rose only 14.6% and the SG&A ratio fell 2.0ppt, from 32.1% to 30.1%. Advertising expenses increased 17.2% to Y1.22bn, below the rate of sales growth. Raising the in-house share of advertising operations to 95% in the latest month, together with scaling the business without a large increase in headcount, produced operating leverage.

Annual buyers increased 14.5% to about 280,000, while new-member acquisition reached a record high. Existing and returning buyers also increased, so sales growth is not dependent solely on acquiring new customers. However, engagement accounts aggregate followers and users across multiple channels and do not represent unique customers. Annual buyers, sales per customer, GPM, and advertising expenses as a percentage of sales should therefore be considered together when assessing customer-base growth.

For FY7/27, the company forecasts sales of Y11.70bn (+13.1% YoY), EBITDA of Y1.76bn (+9.6%), OP of Y1.68bn (+9.5%), and NP attributable to owners of parent of Y1.11bn (+7.4%). The plan incorporates organizational costs ahead of the 20th anniversary of Hokuoh, Kurashi no Douguten in FY7/28 and subsequent growth, while targeting a 15.0% EBITDA margin.

For Hokuoh, Kurashi no Douguten, the company plans sales of Y11.30bn (+12.9% YoY) and EBITDA of Y1.72bn (+8.2%). It expects continued app-centered marketing investment, growth in new buyers, and product supply aligned with demand to drive higher sales. For foufou, it plans sales of Y480mn (+25.4%) and a 6.5% EBITDA margin. Since foufou missed its company plan in the previous year, we will focus not only on sales growth but also on inventory accuracy and margin improvement.

We believe Kurashicom can maintain an EBITDA margin of about 15% as long as the main business continues to deliver double-digit sales growth and gross profit grows faster than advertising expenses. However, with cumulative app downloads already at 6.52mn, the marginal efficiency of new-customer acquisition is the next point to watch. We will use growth in both annual buyers and sales per customer as leading indicators of medium-term profit growth.

At end-July 2026, Kurashicom had cash and deposits of Y5.43bn and borrowings of Y63mn, resulting in net cash of Y5.36bn. The equity ratio was 83.7%. Operating cash flow was Y1.10bn and investing cash outflow was Y8mn, resulting in FCF of Y1.09bn. The business requires little capital expenditure, allowing OP to translate readily into FCF.

Inventory increased 47.2%, from Y548mn at the previous year-end to Y806mn, outpacing sales growth. Kurashicom says it brought forward procurement of products for sale in FY7/27 to prepare for possible supply-chain disruption due to geopolitical risk. The near-term financial burden is limited, but a demand shortfall could lead to markdowns or write-downs that reduce GPM. We will monitor whether inventory growth settles at a level consistent with sales growth.

Kurashicom's policy is to return capital when end-period net cash exceeds two years of SG&A expenses excluding advertising, with 50% of FCF as the upper limit. The FY7/26 return was Y546mn, comprising Y405mn for a Y55-per-share dividend and Y141mn for a share repurchase. The September 14 authorization covers up to 85,000 shares, or 1.15% of outstanding shares, to be purchased through ToSTNeT-3 between September 15, 2026 and July 31, 2027.

For FY7/27, the company forecasts FCF of Y1.14bn and plans to allocate the entire Y570mn return to share repurchases, equivalent to 3.7% of the September 14 market cap. The two founders own a combined 66.9%, and Kurashicom plans to reduce their ownership to just above 50% over more than 10 years by having them tender into ToSTNeT-3 repurchases. As repurchased shares will generally be cancelled, execution as planned would lower founder ownership, raise the free-float ratio, and lift EPS at the same time.

Based on the September 14, 2026 close of Y2,065 and 7.37mn shares excluding treasury stock, Kurashicom's market cap was Y15.2bn. Subtracting end-July 2026 net cash of Y5.36bn gives EV of Y9.86bn. Against the FY7/27 company forecast, EV/EBITDA is 5.6x, EV/OP is 5.9x, and P/E is 13.7x.

The company forecasts 13.1% sales growth and a 15.0% EBITDA margin for FY7/27, while the shares trade at 5.6x EV/EBITDA and 13.7x P/E on the company forecast. FY7/26 FCF yield was 7.2%, and net cash represented 35.2% of market cap. Given continued double-digit sales growth in the main business and the policy of returning 50% of FCF to shareholders, we view the current valuation as inexpensive.

The rerating case depends on recurring FCF-linked buybacks and maintaining margins after advertising investment. The current 1.15% authorization will have only a limited impact on EPS by itself. However, if repurchases around the planned FY7/27 amount of Y570mn continue, and cancellation of repurchased shares and lower founder ownership are confirmed, EPS growth and a higher free-float ratio could support a rerating. Conversely, weaker advertising efficiency would reduce FCF and shrink the return pool.

The first point to monitor is advertising efficiency. Continued double-digit growth in annual buyers, with gross profit growing faster than advertising expenses, would confirm the effectiveness of content- and app-led customer acquisition. If the advertising ratio rises without buyer growth and GPM also declines, the profitability assumptions will need to be reconsidered.

The second point is inventory. Continued growth in apparel, cosmetics, and household goods, while maintaining GPM around 44.9%, would indicate that category expansion is contributing to higher sales per customer. If inventory continues to grow faster than sales and markdowns or write-downs increase, capital efficiency will decline.

The third point is execution of share repurchases. Future disclosures of founder tenders, cancellation of repurchased shares, and improvements in free float and trading value would indicate that the long-term capital policy has moved into the execution phase. If tenders come mainly from other shareholders and free-float shares decline without lower founder ownership, liquidity could deteriorate.

The fourth point is foufou's profitability. Progress toward the FY7/27 company plan of Y480mn in sales and a 6.5% EBITDA margin would support the view that Kurashicom is extending operating know-how from its main business to foufou. If inventory requirements and losses expand again despite higher sales, foufou's position as a source of medium-term profit growth will need to be reconsidered.