ZOZO, Inc. (3092.T) Q2 2027 Earnings Call

0:07 as well as Fuminori Hirose, Director and COO, Yusaku Kobayashi, General Manager of Corporate Planning Office. These four will be responding to your questions today. We plan to finish the session at 6 p.m. If you have any questions, please use the icon and raise your hand. And those that are called upon, please make sure to state your name and company name before asking your questions. Ms. Terai, please go ahead. Ms. Terai, please go ahead.

1:20 Mr. Yamaoka from Nomura Securities, please go ahead. My name is Yamaoka from Nomura Securities. Can you hear me? Thank you very much. I have three questions. First, July, August, September, I would like to know about the sales environment. You mentioned that the summer demand was a little bit low, but on the other hand, when you think about last year, you mentioned that fall winter products didn't sell as well in September, but When we compare those two quarters, last fiscal year and this fiscal year, can you talk about the environment and how sales trended? Should I just ask you three questions at once?

2:29 Yes. That's the first question. And the second question, at the very end, you mentioned the AI agent strategy. Until now, you have talked about keeping the platform's values, and I think you've talked about, you've been talking about a strategy that was a little bit more defensive, but if you have any initiatives that will, of course, help you The first question Hirose will talk about.

3:38 So let me take that first question. July to September, still the environment compared to last year. Last year, as you mentioned, last year was hot. This year was more moderate. And so July, August, one why wasn't that great this fiscal year, but as you mentioned before, We did Bozo Week this year, but we didn't do it last year. And September as well was colder. So in September of last year, we sold mainly summer items. But this September, we sold more expensive products such as sweaters, heavier items. So September was great this year.

4:30 September was the best, and then July and August was. If you rank the growth rate, that would be the ranking. And in terms of the Gen Z growth and AI strategy being more offensive, Nia Love is an offline service that we offer. So when people came there, As Cyrus was there to welcome you and would propose items that look best on you and people could typically try on clothes, and those are members who came to our Nihao Labo.

5:15 Actually, their purchase amount doubled after coming to the lab, and we also have a YouTube program as well. And we see that many people who are viewing or watching that program are buying more on our site. But it's important that people actually recommend what looks great on you. And we believe that if we can make the optimal accurate recommendations, purchase amount will increase. So people have played a role until now, but we want to utilize technology and AI. We're trying to use AI and technology to make as accurate recommendations.

6:04 And we believe that if we can make that happen, then GNV will grow. And the third question, Koji Yanagisawa-san, please go ahead. I will take that. Others. and many others. The packing materials have increased from June of this year. And the second reason is AWS and cloud server usage rate has also increased as well. So those two factors contributed to the increase in others. July, August, September, the first question. Overall, external factors didn't change drastically since last year?

6:55 No. Of course, they were up and down, but if you average it, it's not very different from what we saw last year. Okay, thank you. Thank you very much. Next, Yanashima-sama. Thank you. My name is Yanashima from C Group Securities. Thank you. Can you hear me? I also have three questions. First question is similar to what was already asked. Other expenses increased, and in terms of operating margin, I felt like it wasn't that great last year, but it didn't grow as expected just this fiscal year, is my thought. So you mentioned some prices going up, and then you also consolidated lift and high link.

7:45 So there are those factors, but in terms of cost increases, do you see any increase or decrease in cost that was outside of your expectations? So that's the first question. And the second question is not really related to the earnings briefing, but GMO as well, security is an urgent matter. and yourself as well. In the first half of the year, you experienced some impact on security. But AI, what kind of efforts are you implementing to ward off such cybersecurity attacks? That's the second question. And the third question, Mushisa, you had a pop-up and pop-up with Mushisa.

8:40 and Pokemon T-shirts as well. You've mentioned that that's going very well, but in October, maybe not. Can you talk about October and tell us if you're doing better than you expected or you're broadly in line with your expectations? Please let me know. First question, Yanagisawa, can you take that? Yes, first question, in terms of margin increase, the second quarter, as Kobayashi mentioned, some factors and consolidation as well, we're seeing lower margins, but the second half, we don't foresee any factors that will drive the cost Thank you. And then the second question, security, I will respond to that question.

9:47 Globally, It's a urgent matter, and for ourselves as well, we are putting all of our efforts into warding off such attacks, preparing. But last year, or maybe two years ago, group company at school experienced some hardships. So from that point, we have implemented security efforts until In the past, but unfortunately, learning from ASCO's experience, we have put in a lot more effort into protecting ourselves, and on top of that, we've employed extra effort. So, it's I think it's impossible to say that we're completely fine, but we are doing our best to prepare.

11:09 And in the second half, there are no costs. We won't say anything in the second half that will impact the PO or impact costs due to cybersecurity initiatives. The third point, Hirose, can you take that question? Yes, I will respond to your question. First, about machines that pop off, that is a POC for cross-border efforts in the future. So we didn't really do that in expecting huge sales. It's just a test marketing effort.

11:54 And Pokemon, we're going to be delivering in the third quarter, but it's doing extremely well. And this is something that we didn't expect in the beginning. So that's an upside. And October, it was much warmer than last year. That's an external factor. So we can't really sit back and relax yet. However, November... November, we have Dozo Week and Black Fridays as well. So those are some main events that we will have. So we're preparing for those main events now. This is a follow-up question. Cross-border, can you talk about what that was like? And also... I'm sure you haven't decided on the timing, but when will you have another effort?

12:49 So, we did a pop-up in Korea, and we are selling Japanese brands in Musinsa, but the brand awareness is not as high yet, but going forward. The power of the platform in Korea is great, so we want to utilize their power as a platform to see what kind of results we will see, and we'll decide what we will do next, depending on those results, and we haven't decided on the schedule. Thank you very much. That's it for me. Thank you. Moving on to Mr. Kazahaya. Thank you. This is Katsuhaya. Sorry, I couldn't guess the company name.

13:39 I couldn't hear him, but I have three questions. Two questions about numbers. First question, finishing the first half, you talked about GNV before, but Zozo Town slightly fell short of plans, but LY did great. The first quarter, You implemented similar initiatives, but why was there such a gap in the performance of those two businesses in the second quarter? And the second question is a question about GMV as well. Purchases, purchase stock is growing.

14:26 And compared to the previous year, it seems like there's been a big change there. So is there... Please let us know if there's anything worthy of mentioning there. And also, third point, from your point of view, fall, winter, fashion, industry, how is it trending? I'm sure you're conversed with the brands, and when you look at the data, can you talk about the macro environment surrounding fashion? Thank you very much. Hirose, can you answer all three? Yes, I will do so. The first option, Zozotan sell short. Well, the gap here, Zozotan sell short, but it's not a huge gap, so we don't think that that is a big problem. And Nyahui, L.Y. Commerce, they actually had a lot more Zozo festivals The frequency increased. Therefore, this wasn't included in the plan. So, because they had more Zozo festivals, we saw greater sales. But, Kobayashi-san, can you talk about the purchase stock?

15:48 IP? Are you talking about IP? Sorry about that. It's a collaboration with Masuda-san from you. So we started shipment of those products, sorry. I had forgotten about that. That's why we see an increase. And by the way, Pokemon as well. This is also purchase stock as well. So the third quarter, we will see an increase of that. And lastly, fall, winter... As we mentioned before, October is hotter than usual, and with El Niño, we're going to probably see a warmer winter this year. So, it's not a great environment for us. There's a lot of headwinds.

16:37 But, on the other hand, Brandt's product lineup over the last four or five years, the winter has been warm. The brands have also adjusted their offering, so merchandising and inventory levels, we believe, will be quite appropriate. Thank you. One follow-up. Thank you, Mr. Hirose. The Zozo Festival, the decision to do so, the frequency... It wasn't initially planned, but can you talk about the decision-making process there?

17:36 and us, we discussed and decided whether we should have a ZOZO festival. In the beginning, we do. We have a frequency in mind, but it's quite flexible. So we might have a ZOZO festival together with ZOZO Week to further drive sales. But in terms of ZOZO Town, then, it is... Thank you very much. Thank you. Mr. Kawano, please go ahead. This is Kawano from Goldman Sachs. Thank you. I have three quick questions. First question is about Fall-winter environment grants continue to raise their prices, but when you look at the inventory that you're currently receiving, have you seen any changes in the average retail price? I'm sure the average retail price is positive, and it is impacted by the sales that you have, discounts that you offer, but Can you talk about the average retail price as well as the price of the goods that you've received so far? That's the first question.

19:10 Second question, do they use? Secondary market, there is a tailwind there. Tailwind continues, but it is getting to a certain point. Geo, so can you talk about, can you share your thoughts on the OZO use? And Mr. Sawada, you talked about AI. You talked about your plans for AI, and this is something that you need to do, but in the U.S., payments could become a barrier and could be an opportunity In Japan and the U.S., payment regulations are different.

20:05 Of course, you already have members, but in terms of payment, any impact that payment can have on AI, can you touch upon that? That's my third question. Thank you. Thank you very much. So I will answer all three questions. First, in terms of the fall-winter prices, when we look at the average, it's slightly higher, a few percentage points. So that's the state sales price. We don't think that the average retail price has gone up dramatically.

20:52 Therefore, we don't think that the demand should weaken, and the average retail price, we don't think that it will drastically increase either. So, we don't see major movement, major change this fall winter season. When you look at each and every image of brand, you know, it will vary by brand, but on average, no major change. Second, with respect to ZOZO use, It is growing faster than the Sandasa plan, and it is doing well so far. And this too, we want to strategically strengthen this. We've tried to do so over the last couple of years.

21:43 So because we sell mainly new items, we can purchase and we can resell these items in a unique original way. So usually when in the U.S. business we need to rate in cost. That's very important. But we have the data because we're selling these products as a new product and we can We understand very well how much we should be buying these products for. So we have a unique service. And going forward, we want to create a youth market around products that are not as expensive.

22:32 So that is a strategic theme that we want to continue to grow and address. And in terms of AI and payments, So that is the path right there. So from the EC, what affects the payment, who should make the payment? So EC or agent? And of course there is the payment collection impact. Who is going to pay which? Which would be better? Is it better if the Asian players do it or the Asian students? Who will benefit? This would be key.

23:19 And it's very valuable data to know what people want. Nowadays, this person who is 37, male, living somewhere, and to be able to The typical marketing initiative we don't do, bearing in mind the people's attributes. We quit data such as, you know, he bought this yesterday, so he's going to buy this tomorrow. So payment data, purchase data is very important. It will be a huge gap whether we have data about what they bought today, two days ago.

24:06 But, of course, we want to find a way where we can have our users make the purchase on our site. That's it. Thank you. Very clear. Thank you very much. Thank you. Next. Kanamori, please go ahead. My name is Kanamori Faneko. I have two simple questions. First, Pokemon T-shirt is my first question in the past. You've done very... You had a collaboration with Teishi Domoto, but that collaboration was great, but in the Y-on-Y, you didn't do as great because you didn't have another great collaboration, and I think that's a shame that you can't keep the momentum going.

24:55 And so you had that Pokemon collaboration this year, but when you keep in mind the Y-on-Y comparison... Are you implementing some plans so that the collaborations can continue to generate positive impact? And second question is, when you buy clothes, do people want to buy clothes that look great on you? Because some people... Thank you very much. So, Hirose will answer the first question.

26:02 Thank you. So, I will respond to that question. Pokemon teachers are doing very well. And while my comparison might be tough next year by Chiyoshi Domoto collaboration, but with research and collaboration, we do have a team working on collaborations and self-teams as well as management team and production team. So, we have three different teams working on We have a comprehensive team in place, addressing this. Depending on the content, the positive upwards might be big or small, but we want to strengthen IPs as well as collaborations with different IPs.

26:52 The content will impact the performance, but this is something that we want to continue to improve and enhance. The second question about what looks great on you, it might be a definition issue, but what looks good on you, maybe sometimes it's not the best word to use, but if you just think about What looks good on you? You might think about a service that a stylist provides, but what we're thinking about in the algorithm, as you mentioned before, it does include the aspirational aspect. And what's big here is that what looks good on you from your point of view as well as other people's point of view.

27:45 And, you know, the perception will differ depending on who's looking at the styling. So, it's important to know we will provide different patterns on how clothing looks great on you, and we're actually thinking about both, or referring to both with a word, what looks good on you, but we want to cover both, aspirational as well as what looks good on you right now. There are people who love clothes and who don't love fashion as much, and so the balance between whether you think something looks good on you or what others think, you're trying to strike a different balance depending on their love for fashion. It's true for men, but, you know, men will be like, you know, we want to... You know, get recommendations about clothing where people want this shoe for wearing that.

28:55 They don't know if it looks good on them, but they don't want to be this. So it's very wide-ranging. Thank you very much. Any other questions? So it is a little bit early, but since there aren't any more questions, we would like to wrap up today's Q&A session. Thank you for joining us.