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

Kurashicom delivered record sales and earnings in FY7/26 as its customer base expanded and SG&A expenses grew more slowly than sales. Sales rose 21.9% YoY to ¥10.35bn and EBITDA increased 37.6% YoY to ¥1.60bn. GPM remained at 44.9%, while SG&A expenses rose 14.6% YoY, lifting the EBITDA margin to 15.5%. The company also reached its previous target of about ¥10bn in FY7/27 sales one year early.

Hokuoh, Kurashi no Douguten uses articles and videos to stay in regular contact with customers, then converts that engagement into purchases through its app and a broader product range. At end-July 2026, cumulative app downloads were about 6.52mn, cumulative members were about 900,000, and annual buyers had risen 14.5% YoY to about 280,000. JII believes that continued content-led acquisition and category expansion can increase both the number of buyers and sales per buyer.

The immediate catalyst for this profile was the September 14 share repurchase announcement, which authorized purchases of up to 85,000 shares, or 1.15% of outstanding shares, for ¥141mn. The more important point is Kurashicom's policy of continuing FCF-linked buybacks while gradually reducing founder ownership. If the company continues to cancel the shares it repurchases, earnings growth and a falling share count will lift EPS as the free-float ratio improves.

Hokuoh, Kurashi no Douguten accounts for most of Kurashicom's earnings. In FY7/26, the business generated sales of ¥10.01bn, about 97% of the consolidated total, and EBITDA of ¥1.59bn. It sells apparel, kitchenware, interior goods, cosmetics, and other lifestyle products through Kurashicom's own e-commerce site. Original products represented about 55% of product sales in FY7/25. Kurashicom also uses its content-production capabilities and customer base to provide brand-support services to corporate clients.

The company's strength is its ability to maintain a relationship with customers through its own media before and after a purchase. Articles, YouTube videos, podcasts, and dramas offer regular lifestyle ideas and encourage users to join its app, social-media channels, and membership program. The app generated about 76% of orders in FY7/26. This structure turns routine content consumption into repeat purchases instead of relying on advertising to generate one-time visits.

MC², Kurashicom's multi-category and multi-channel strategy, broadens both its product range and the routes through which it reaches customers. More frequent contact supports new-member acquisition, while a wider assortment gives existing customers more reasons to buy. According to the company, sales from previously acquired customers returned to growth in FY7/25, and sales generated by new customers during their first year also increased. JII believes the brand's appeal across a wide age range creates room to raise LTV through longer customer relationships and continued purchasing.

At the foufou fashion brand, FY7/26 sales rose 68.0% YoY to ¥383mn, while EBITDA improved from a ¥16mn loss to a ¥7mn profit. The brand still makes only a small contribution to consolidated results, but its revised product mix and better demand forecasting produced progress. Its future profitability will show whether Kurashicom can reproduce the product-planning, inventory-management, and customer-acquisition expertise developed in its core business.

Growth in the core business translated directly into higher consolidated earnings in FY7/26. Sales rose 21.9% YoY to ¥10.35bn, EBITDA increased 37.6% YoY to ¥1.60bn, OP grew 40.3% YoY to ¥1.53bn, and NP attributable to owners of parent rose 44.6% YoY to ¥1.04bn. Hokuoh, Kurashi no Douguten accounted for most of the profit growth, with sales up 21.1% YoY and EBITDA up 35.2% YoY. foufou also moved into positive EBITDA.

Profitability improved because SG&A expenses grew more slowly than sales. GPM remained at 44.9%, while SG&A expenses rose 14.6% YoY and the SG&A ratio fell 2.0ppt, from 32.1% to 30.1%. Advertising expenses increased 17.2% YoY to ¥1.22bn, below the rate of sales growth. Kurashicom had brought 95% of advertising operations in-house in the latest month and scaled the business without a large increase in headcount, producing operating leverage.

Annual buyers rose 14.5% YoY to about 280,000, and new-member acquisition reached a record high. First-time purchases increased, as did continued and repeat purchases by existing customers, so growth did not depend solely on adding new buyers. Engagement accounts, however, aggregate followers and users across several channels and can count the same individual more than once; they are not a measure of actual customer numbers. Customer-base growth should therefore be assessed using annual buyers, sales per buyer, GPM, and advertising expenses as a percentage of sales.

Kurashicom forecasts another year of double-digit sales growth in FY7/27, but investment in its organization ahead of future growth will limit earnings growth to single digits. The company guides for sales of ¥11.70bn (+13.1% YoY), EBITDA of ¥1.76bn (+9.6% YoY), OP of ¥1.68bn (+9.5% YoY), and NP attributable to owners of parent of ¥1.11bn (+7.4% YoY). It plans to keep the EBITDA margin at 15.0% while absorbing costs related to growth from FY7/28, when Hokuoh, Kurashi no Douguten marks its 20th anniversary.

For Hokuoh, Kurashi no Douguten, the company plans sales of ¥11.30bn (+12.9% YoY) and EBITDA of ¥1.72bn (+8.2% YoY). Continued app-centered marketing investment should add new buyers, while product supply aligned with demand should support higher sales. For foufou, the plan calls for sales of ¥480mn (+25.4% YoY) and a 6.5% EBITDA margin. Because the brand missed its plan in the previous year, the focus is on whether better demand forecasting and inventory management can improve margins as sales grow.

JII believes the core business can maintain an EBITDA margin of about 15% if it continues to deliver double-digit sales growth and gross profit grows faster than advertising expenses. With cumulative app downloads already at 6.52mn, the key question is whether incremental advertising can continue to add buyers efficiently. Growth in both annual buyers and sales per buyer will be the leading indicators of medium-term earnings growth.

Kurashicom's strong balance sheet and low capital requirements give it room to fund growth and return cash to shareholders. At end-July 2026, it had cash and deposits of ¥5.43bn and borrowings of ¥60mn, resulting in net cash of ¥5.36bn. The equity ratio was 83.7%. Operating cash flow was ¥1.10bn and investing cash outflow was ¥10mn, producing FCF of ¥1.09bn. With no need for large-scale capital investment, OP converts readily into FCF.

Inventory was the main counterpoint, rising 47.2% from ¥550mn at the previous year-end to ¥810mn and outpacing sales growth. The company said it brought forward procurement of products for sale in FY7/27 to prepare for supply-chain disruption from geopolitical risk. Its financial capacity is ample, but weaker-than-expected demand would increase markdowns and write-downs, reducing GPM. Inventory growth therefore needs to settle at a rate consistent with sales growth.

Shareholder returns are linked to FCF. When end-period net cash exceeds two years of SG&A expenses excluding advertising, the company plans to return up to 50% of FCF. The FY7/26 return totaled ¥546mn, comprising ¥405mn for a ¥55-per-share dividend and ¥141mn for a share repurchase. The repurchase authorized on September 14 covers up to 85,000 shares, or 1.15% of outstanding shares, through ToSTNeT-3 between September 15, 2026 and July 31, 2027.

For FY7/27, Kurashicom forecasts FCF of ¥1.14bn and plans to allocate the entire ¥570mn return to share repurchases, equivalent to 3.7% of its September 14 market cap. The two founders own a combined 66.9%, but the company plans to buy some of their holdings through ToSTNeT-3 and reduce their combined ownership to just above 50% over more than 10 years. Because the acquired shares will generally be canceled, execution of this policy will lower founder ownership, raise the free-float ratio, and lift EPS at the same time.

The shares trade at a low valuation relative to Kurashicom's growth and financial capacity. Based on the September 14, 2026 close of ¥2,065 and 7.37mn shares excluding treasury stock, market cap was ¥15.2bn. Subtracting end-July 2026 net cash of ¥5.36bn gives enterprise value (EV) of ¥9.86bn. On 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 that forecast. FY7/26 FCF yield was 7.2%, and net cash represented 35.2% of market cap. JII views this valuation as inexpensive given double-digit sales guidance and the policy of returning 50% of FCF to shareholders.

A rerating requires Kurashicom to continue its FCF-linked buybacks and maintain margins after increasing advertising investment. The current authorization for 1.15% of outstanding shares will have only a small impact on EPS. If repurchases around the planned FY7/27 amount of ¥570mn continue, while acquired shares are canceled and founder ownership declines, EPS growth and a higher free-float ratio will support a rerating. If additional advertising fails to increase buyer numbers and FCF falls, the return pool will shrink.

The first point to monitor is whether additional advertising can continue to generate buyer growth efficiently. Double-digit growth in annual buyers, together with gross profit growing faster than advertising expenses, would show that acquisition efficiency remains intact. If the advertising ratio rises while buyer growth stalls and GPM declines, JII will reassess its profitability view.

The second point is inventory. If sales continue to grow while GPM remains near 44.9%, category expansion is increasing sales per buyer without weakening pricing. If inventory grows faster than sales and markdowns or write-downs also increase, both capital efficiency and profitability will deteriorate.

The third point is whether share repurchases deliver the intended capital-policy benefits. Purchases from the founders, cancellation of acquired shares, and improvements in free float and trading value would show that the long-term policy is being executed. If founder ownership remains unchanged while the number of freely traded shares falls, stock liquidity will worsen.

The fourth point is foufou's profitability. Progress toward the FY7/27 company plan of ¥480mn in sales and a 6.5% EBITDA margin would show that Kurashicom is applying expertise from its core business to a second brand. If losses and working-capital requirements continue to rise despite sales growth, foufou is unlikely to contribute to medium-term earnings growth.