ZOZO,Inc. Q1 FY2026 earnings call

• User Growth & GMV Expansion

  • The number of active buyers and new members continues to grow steadily.
  • Management notes that newly acquired users typically do not reach full purchase frequency in their first year of membership, with higher conversion and spending expected in users' second and third years. The company will focus on retention and increasing repeat spending by expanding product categories and brand offerings, and leveraging in-house AI tools to improve product discovery for customers.

• Logistics & Cost Efficiency

  • Logistic-related payroll, packing, and shipping expenses decreased quarter-over-quarter due to targeted operational improvements, including enhanced training for inventory receiving teams that has delivered measurable efficiency gains.
  • A size increase for Nekoposu compact shipping (implemented November 2025) allows more products to qualify for lower-cost compact shipping rates, generating meaningful cost savings. Additional favorable shipping rate terms from Yamato took effect in October 2025, with full benefits expected from the third quarter onward. Seasonal product mix in the first quarter (more lightweight spring/summer apparel) also increased Nekoposu utilization relative to prior quarters, boosting savings.
  • Investments in material handling equipment have increased depreciation slightly, but long-term operational efficiency and net cost savings are expected from these investments. A new automated logistics center is planned to come online in FY2028, which will drive further long-term efficiency gains.

• Share Repurchase Program

  • The company announced a sizable up to $30 billion share repurchase program. Management approved the program at this time because the company holds sufficient cash to fund the repurchase while still retaining capacity for future M&A activity. Management views current share prices as attractive, and the repurchase is intended to quickly stop further ROE declines and support progress toward the company's 5-year average total shareholder return target of 80%.

• Advertising Business

  • Current advertising growth is driven primarily by in-packaging flyer ads, while search and banner ad growth remains sluggish. No explosive growth is expected for the advertising business with the current product portfolio, and the company is evaluating new ad product offerings.

• Acquisitions & Integration

  • Hi-Link integration with Zozo's platform is progressing: in-packaging advertising for Hi-Link was tested in the first quarter, with full rollout and growth contributions expected starting in the second quarter.

No full segment-by-segment absolute financial results or revenue contribution percentages were explicitly disclosed in this Q&A transcript. The following partial updates were provided: 1) Zozotan and Lanyaku Commerce: First quarter GMV came in below internal expectations, though total company-wide GMV for the quarter was on plan overall, with strong April and May performance offsetting a weaker June. 2) ZOZO Cosmetics: First quarter performance is on track with budget, with growing brand participation, increasing customer recognition, and a successful NARS promotional event held during the quarter. 3) LIST (Global business): The segment's top line grew 30% year-over-year, with positive organic growth after adjusting for currency impacts and fiscal year timing differences, though specific granular numbers are not disclosed. 4) Hi-Link: Hi-Link revenue is included in the company's 'other revenue' line. Its annual revenue target is 2 to 3 billion yen, which represents a minimal contribution to consolidated total revenue and profit that does not materially move overall results. First quarter performance was flat year-over-year, with integration synergies expected to start delivering growth from the second quarter onward.

• The company remains confident it can achieve the full fiscal year GMV target for Zozotan and Lanyaku Commerce. The company will continue proactive web advertising investment to grow new users, and will leverage the ZOZO Festival promotional event to drive full year results for Yahoo Shopping.
  • The checkout function expansion to onboard more merchants is progressing on plan, and management expects to hit the full fiscal year target for merchant adoption, which is expected to drive trend improvement in the second half of the fiscal year.
  • If optimal inventory levels are maintained, logistics cost efficiencies will be sustained and cost will remain lower than the prior fiscal year.
  • No changes to current shipping cost terms are expected in the near term, with rates remaining at current levels.
  • The midterm strategic plan for near-fashion and global business segments will not provide formal progress updates until the end of the current fiscal year.

• Persistent inflation is putting pressure on consumer purchasing power, leading users to adjust and moderate total discretionary apparel spending.
  • Average retail price (ARP) is set entirely by partner brands rather than Zozo, so Zozo cannot directly influence ARP to reverse its current downward trend. There are also no current plans for new initiatives to lift average order value (AOV).
  • With the current product set, the advertising business is not expected to deliver strong growth, and the company will need to develop new products to drive meaningful expansion.
  • First quarter Zozotan and Lanyaku Commerce GMV missed expectations due to unseasonably cool temperatures, which weighed on spring/summer apparel demand.

Q: Zozotan and Lanyaku Commerce GMV missed expectations due to lower temperatures. What initiatives will you use to hit full year targets, and will checkout function progress drive improvement in the second half? / A: Management plans to maintain proactive web advertising investment to grow new users, and will use the ZOZO Festival promotional event to hit the full year target. Checkout function merchant onboarding is progressing on plan, and the company will meet its full year adoption target, which supports performance improvement in the second half.

Q: Why did you announce a large $30 billion share repurchase at this time, given you still plan to pursue future M&A activity? / A: The company has sufficient cash on hand to fund both the share repurchase and planned future M&A, so there is no cash flow constraint. Management views current share prices as attractive, and the repurchase will quickly stop further ROE declines and help the company meet its 5-year total shareholder return target.

Q: Why have logistics and shipping costs declined, and will these savings continue into future quarters? / A: Costs fell from operational efficiency improvements (including better inventory receiving training) and lower rates from Nekoposu size changes and revised Yamato shipping terms. If optimal inventory levels are maintained, savings will continue through the full fiscal year, with full benefits from the new shipping terms coming in the third quarter.

Q: With growing membership but falling AOV/ARP, what steps will you take to lift GMV, and is consumer spending actually weakening? / A: New users take 1-2 years to ramp up spending, so the company will focus on retention by expanding categories and using AI for better product discovery. There is no clear data showing consumers are unwilling to spend, but persistent inflation is leading users to moderate total apparel spending. ARP is set by brands so Zozo cannot control it, and there are no plans for new AOV initiatives.

Q: Could you provide an update on Hi-Link's contribution to consolidated results? / A: Hi-Link revenue is included in other revenue, with an annual target of 2-3 billion yen. Its contribution to total sales and profit is minimal and will not materially impact consolidated results. First quarter performance was flat year-over-year, but integration synergies (including in-packaging advertising) will drive growth starting in the second quarter.