Earnings call transcript: ZOZO Inc Q2 2025 reports strong GMV growth

ZOZO Inc reported robust growth in its second-quarter earnings for fiscal year 2025, with Gross Merchandise Value (GMV) increasing by 11.9% year-over-year to ¥312.4 billion. Despite this growth, the company’s EBITDA margin slightly declined by 0.7 percentage points to 11.9%. The company’s stock price showed a positive movement, rising 1.29% following the release of the earnings report. With a market capitalization of approximately ¥1.15 trillion ($7.7 billion), ZOZO maintains an impressive 93.2% gross profit margin according to InvestingPro data.

Key Takeaways

• GMV reached a record high for the second quarter, increasing by 11.9% YoY.
• EBITDA grew by 5.8% YoY, although the margin decreased slightly.
• The company launched a new K-Fashion Zone and partnered with Musinsa.
• ZOZO is investing in AI capabilities for future growth.
• Total buyers and active members saw a healthy increase.

Company Performance

ZOZO Inc demonstrated strong performance in Q2 FY2025, achieving record highs in GMV and EBITDA. The company capitalized on its strategic initiatives, such as launching the K-Fashion Zone, which contributed to its growth. The partnership with Korean fashion platform Musinsa is expected to further enhance its market presence. Despite external challenges like high summer temperatures affecting demand, ZOZO’s focus on customer acquisition and member reactivation paid off.

Financial Highlights

• GMV: ¥312.4 billion, up 11.9% YoY
• GMV excluding other GMV: ¥292.6 billion, up 12.2% YoY
• EBITDA: ¥34.7 billion, up 5.8% YoY
• EBITDA margin: 11.9%, a decrease of 0.7 percentage points YoY

Market Reaction

Following the earnings release, ZOZO’s stock price increased by 1.29%, closing at ¥1,316.5. This positive market reaction reflects investor confidence in the company’s strategic direction and growth prospects. The stock remains above its 52-week low of ¥1,284.5, indicating a stable upward trend.

Outlook & Guidance

ZOZO did not revise its current earnings forecast, maintaining a focus on expanding its AI capabilities and K-Fashion offerings. The company plans to continue developing AI styling algorithms and exploring offline AI stylist implementations. These initiatives are expected to drive future growth and enhance customer experiences.

Executive Commentary

CEO Kotaro Sawada emphasized the importance of AI in ZOZO’s future strategy, stating, "The age of AI agents is coming, and this is progressing day by day." He also highlighted the potential of AI in e-commerce, saying, "We see this as an opportunity." Sawada further elaborated on the company’s AI ambitions: "We want to create a line account with unique algorithms."

Risks and Challenges

• Supply Chain Issues: Potential disruptions could impact inventory and logistics.
• Market Saturation: Increased competition in the fashion e-commerce sector.
• Macroeconomic Pressures: Economic downturns could affect consumer spending.
• Technological Challenges: Implementing advanced AI technologies may face hurdles.
• Weather Impact: Unusual weather patterns could affect seasonal demand.

ZOZO Inc’s Q2 FY2025 earnings report highlights the company’s strong performance and strategic focus on innovation and growth. With continued investment in AI and new market initiatives, ZOZO is well-positioned to navigate future challenges and capitalize on emerging opportunities in the fashion e-commerce industry. InvestingPro data reveals the company holds more cash than debt on its balance sheet and maintains a healthy current ratio of 1.48, providing financial flexibility for its growth initiatives. For investors seeking comprehensive analysis, ZOZO is among the 1,400+ companies covered by Pro Research Reports, which transform complex financial data into actionable intelligence through intuitive visuals and expert analysis.

Full transcript - ZOZO Inc (3092) Q2 2026:

Moderator/Presenter, ZOZO: It is time to start the financial results announcement of the second quarter of FY25, ending in March 2026 for ZOZO. We will only be offering live streaming this time. We plan to have this session until 5:40 P.M. After that, we will have a Q&A session with institutional investors on a separate Zoom channel from 5:50 P.M. I’d like to introduce the presenters. Representative Director, President, and CEO, Kotaro Sawada. Hello. Director, Executive Vice President, and CFO, Koji Yanagisawa. Hello. Now, CFO Yanagisawa will take us through the business results.

Koji Yanagisawa, Director, Executive Vice President, CFO, ZOZO: Hello, I’m Koji Yanagisawa. I’d like to walk you through the second quarter financial results, FY2025 ending in March 2026. By the way, this presentation document we will be using today has already been uploaded to our website’s investor relations page, so please take a look. First, I’d like to share the financial results summary for the second quarter of FY2025. For the second quarter of FY2025, GMV increased by 11.9% year-on-year to ¥312.4 billion. GMV excluding other GMV increased by 12.2% year-on-year to ¥292.6 billion. EBITDA increased by 5.8% year-on-year to ¥34.7 billion. The EBITDA margin was 11.9%, representing a 0.7% point decrease compared to the same period last year. Progressed against the revised company plan announced on July 31 is as follows: GMV excluding other GMV, 44.8%, and EBITDA, 45.3%.

With respect to GMV, although measures to address the prolonged summer heat were in place on the inventory supply side during the second quarter, demand declined due to persistently high temperatures, resulting in a slight shortfall against plan. On the other hand, EBITDA slightly exceeded plan, benefiting from lower-than-budgeted actual promotion expenses and a reduction in the cost ratio of logistics-related expenses and shipping costs. Both GMV and EBITDA achieved record highs for the second quarter.

Moderator/Presenter, ZOZO: Next. This is page 8 of the handout. Quarterly trend in the consolidated performance. For the second quarter accounting period, GMV excluding other GMV increased by 12.0% compared to the same period last year. This overlaps with the earlier explanation of the second quarter cumulative results, but the ZOZOTOWN business fell short of its plan, impacted by lower user demand due to persistently high temperatures, particularly in September. Meanwhile, LINE Yahoo! Commerce saw limited effectiveness of its large-scale September initiative, Honkino ZOZO Matsuri, because there was an overlap in the timing with the rush event of Furusato Noze hometown tax program. However, strong performance in July and August offset this, achieving higher results than the plan. EBITDA increased 2.4% year-on-year with an EBITDA margin of 11.3%.

While GMV and gross profit fell short of plan, we made progress more quickly than anticipated for EBITDA, primarily due to lower-than-budgeted actual promotion expenses and reduced logistics-related costs. Operating profit decreased 2.9% year-on-year. This was due to the impact of factors such as goodwill amortization and depreciation expenses associated with the List consolidation, which were factored into the plan at the planning stage. Next, I will present an overview of the key performance details. Let’s turn to page 9 first. We’d like to analyze the increase and decrease in EBITDA compared to the previous year’s results at the end of the second quarter. EBITDA increased by approximately ¥1.9 billion from ¥32.85 billion in the previous quarter to ¥34.75 billion in the current quarter.

Factors attributable to the increase in EBITDA are the following: gross profit increased of ¥4.71 billion due to the increased GMV of ZOZOTOWN business in LINE Yahoo! Commerce, and sales increase of ¥210 million due to the growth in the advertising business. Thirdly, gross profit increase due to the consolidation of List and others, ¥2.98 billion. Fourthly, decrease in variable cost due to improvements in the efficiency of logistics centers and a decrease in the ratio of shipping cost due to an increase in the average order value, ¥60 million. Factors that reduced EBITDA were as follows: increase in fixed costs due to an increase in the number of consolidated employees and the occurrence of one-time expenses related to M&A in the first quarter, minus ¥1.78 billion. Secondly, increase in actual PR expenses to attract customers, promote sales, and cover List standalone expenses. Minus ¥3.73 billion.

Thirdly, increase in other expenses due to success fee paid to FA related to M&A and others, minus ¥0.55 billion. That’s for the increase and decrease analysis of EBITDA. Let’s go to page 11. The cash flow trends are as follows. Cash flows from operating activities included increased payments for corporate income taxes and other taxes, as well as increased goodwill amortization related to the List consolidation. Cash flows from investing activities included expenditures that related to the List acquisition and equipment replacement at existing logistics centers during the current period. Lastly, cash flows from financing activities included expenditures that related to the acquisition of treasury stock. The treasury stock acquisition conducted from May 1 to July 31 concluded as planned, and the total number of shares acquired was 6,541,500 shares, and the total acquisition cost was ¥9,999,854,450. Let’s go to page 22 of the handout.

This is the breakdown of our SG&A. Our SG&A to GMV ratio was 23.0%, a decrease of 0.6 point from the same period of last year. While GMV increased due to the consolidation of List, incremental SG&A expenses were either zero or minimal for certain items related to List alone, and this contributed to a decrease in the SG&A expense ratio. Factors that drove up the SG&A ratio are the following. Mainly, there are two reasons for it. First, in addition to expenses recorded for List alone, advertising expenses increased by 0.5 point due to an increase in web advertising spending on ZOZOTOWN. Secondly, amortization of goodwill related to the acquisition of List resulted in a 0.3 point increase. On the other hand, factors contributing to the decrease in the SG&A ratio include the following.

First, the expansion of the consolidated scope, along with the improvements in operational efficiency, such as optimizing inventory levels and logistics centers and achieving labor savings through automation, resulted in a 0.6 point decrease in logistics-related labor costs. Secondly, the expansion of the consolidated scope and higher AOV compared to the previous period led to a 0.6 point decrease in shipping costs. Thirdly, the expansion of the consolidated scope pushed down the payment collection fee ratio against GMV by 0.2 percentage points. Next, this is on page 25. The actual promotion expenses are as follows. In the second quarter, we allocated 4.7% of GMV to actual promotional expenses, which comprised the sum of advertising and point-related expenses deducted from net sales. Compared to the same period of the previous year, the actual promotion-related expenses ratio increased by 0.8 points due to the following factors, or three factors, mainly.

First, increased spending on web advertisement for ZOZOTOWN. Secondly, increased promotional expenses to acquire new members, deactivate the dormant members, and offer free shipping campaigns. Thirdly, List recorded expenses separately, with promotion and advertising expenses accounting for a large portion of their SG&A expenses. As mentioned in the opening summary slide, following the trend from Q1, the timing of some promotional spending has been postponed, resulting in actual promotion expenses falling short of the plan. We plan to utilize the unspent portion in Q3 and onward, and we plan to use the budget as intended on an annual basis. Let’s go to page 26 of the handout. The following are ZOZOTOWN’s KPIs, and please note that the following indicators do not include results from Line Yahoo Commerce, List, or B2B businesses. First of all, the number of total buyers increased by 160,000 from the previous quarter to 12.52 million.

The number of active members increased by 210,000 from the previous quarter to 11.8 million. The number of guest buyers decreased by 50,000 from the previous quarter to 720,000. In the second quarter, we continued to acquire new members through a range of initiatives that leveraged web advertising and ZOZOTOWN’s platform. We increased our web advertising budget year-over-year to enhance customer acquisition. In addition, measures to reactivate dormant members have proven effective, with the results of their activation now becoming apparent. Next, this is page 29 of the handout. The number of shops on ZOZOTOWN at the end of the second quarter stood at 1,686, representing a net increase of five shops from the end of the previous quarter.

The number of new stores opened in the second quarter was 35 shops, including stores like COS, a London-based fashion brand operated by the H&M Group, and Love Chrome, a cosmetics shop specializing in hair combs, and Olive Young Exclusives, the private label shop of South Korea’s multi-branded cosmetics shop, Olive Young. Next, page 31. With. Respect to the average retail price, ARP, it turned out to be ¥3,584, a decrease of 1.2% compared to the same period in the previous year. The average retail price declined as a result of an increased sales ratio due to factors such as the summer sales period being longer than the previous year. Furthermore, price increases by brands for new spring and summer merchandise have now stabilized, with prices remaining at levels comparable to the previous fiscal year. Next, let’s go to page 32. This is average order value, AOV.

AOV was ¥8,183, down by 0.2% compared to the same period last year. This was primarily due to the great use of the free shipping policy for orders of ¥12,000 or more compared to the same period last year, leading to a higher portion of combined purchases and a larger average number of items per order. In the meantime, the decline in AOV outweighed the impact of the increase in the number of items purchased per order, resulting in a slight decrease in the AOV. Let’s go to page 34 of the handout. Consolidated business forecast and dividend forecast for FY25. There are no changes to the earnings forecast. Finally, I’d like to share two topics with you. First, I’d like to present the key topics implemented and announced during the second half of the fiscal year. We held ZOZO Fest at K-Arena Yokohama on October 12th and 13th.

ZOZO Fest was a special event where fashion and music intersected, held with gratitude to connect the year 2004 when ZOZOTOWN was founded with the present. Themed around Y2K, approximately 40,000 people attended over the two days, and sales of collaboration products at the venue were strong, and we received many positive comments from attendees. Next, we are pleased to announce the launch of a new K-Fashion Zone on ZOZOTOWN. On November 6th, Musinsa, a leading Korean fashion platform, will be launched on ZOZOTOWN. This will significantly expand the lineup of Korean brands available on ZOZOTOWN, creating a shopping space where people can enjoy trendy Korean fashion more conveniently than ever before. At launch, the Musinsa ZOZOTOWN shop will carry approximately 140 brands, with a phased plan to expand the number of brands to over 1,500.

Looking ahead, while continuing to strengthen our K-Fashion offerings, we will further expand into other categories and brands to create a shopping destination that meets the diverse needs of our customers. That’s all from me. Now, our Representative Director, Sawada, will take the floor. Hello, everyone. My name is Sawada. What I’d like to do is to share a topic with you. As you can see in the title, I’d like to talk about AI agents. The age of AI agents is coming, and this is progressing day by day, as you know. What I’d like to do today is to share ZOZO’s competitive advantage as we operate our e-commerce.

Just kind of going back to what I said, the regular keyword search is going to shrink or is expected to shrink, and we believe that the era of AI agents is going to come, and I also believe that it will come. In Japan, the speed is not as high, but if you look to other countries, searches through AI agents are becoming mainstream, apparently. For sure, this age will come. Amid this environment, how should we act? Next slide, please. Of course, this is something that we take for granted now.

AI agents will start to replace searches, and when that happens, this is going to be far more superior than search as an engine because the needs and the interest could be understood and acknowledged through chat, and then it can bring the users instantly to the purchase phase, and whatever that is recommended to them, they will make a purchase of them. Also, in the e-commerce territory, not only should we offer payment services, we also offer recommendations. We let them see what they might like. Inevitably, we’re stepping into that territory, and then there’s going to be an overlap of what we do as an AC platform and what AI agents are capable of doing. I believe that this is not just for us, but for other players as well. Is this a risk for us, or is this an opportunity?

It’s a matter of how we see this. We see this as an opportunity, and then there are mainly two reasons why we see this as an opportunity. First of all, there is a superiority of the merchandise that we handle, which is fashion, and then we also have superiority in the data that we hold. When we have these two, we believe that in the world of AI agents, we have far more opportunities to capture the users. What it means is that we want to step on the gas to enter into the era of AI agents. I’d like to sort of elaborate on the advantage we have as a merchandise or a product and advantage as an AC commerce. This may sound quite normal to you, how we have a competitive edge because of the merchandise we carry.

For smartphones and detergents, for example, these are functional products and commoditized products. Yes, the price range is different between a smartphone and a detergent, but they belong to the same group because they can be compared in a simple way. It’s quite easy for AI agents to capture this data and then do a comparison. On the other hand, there’s fashion. This is a red sweater. Yes, of course, everybody can hold the data about which brand this is from and the material, for example. The question is, is this a trendy cardigan, or should this be tucked in or tucked out? Is this good for summer, or is it good for winter? All these ambiguous, intricate data is something that we need to handle in the world of fashion. These have not been verbalized yet. Even our consumers are not able to verbalize them.

What we’d like to do is to capture this data and accumulate such intricate data in our database. Recommending things like this, in order for us to be able to recommend things like this, the database is going to be key. We expect that this is a territory that normal AI agents will not be able to play in. Another one is our competitive edge as an EC platform. I believe that this has been said already. The purchase history of our customer is quite close to their purchases. Let’s say that they saw media news or they were exposed to social media articles. Compared to that, the customer information that we have is much closer to their purchases. There’s complicated, intricate fashion-related data. We have that, and we also have customer data that is quite close to purchases. We have both of them.

We have our advantage and competitive edge with our data source. We have been spending several years to develop our AI agents. How would this turn out as output? Little by little on WEAR. WEAR is a styling information app. We’re continuing to enhance that. In August, we celebrated the 10th anniversary. We upgraded this app. For those of you who use this, I think you know this already, we are embedding AI quite a lot in WEAR. Another thing we’d like to take on the challenge with is to have a conversational UI. You already know, of course, that AI agent is very good at having conversations, and that’s where we’d like to go into it as well. We want to create a line. Account with unique algorithms, so we’ll be able to enable a conversational experience that mimics their experience of speaking to human stylists.

This is one example of what we can do with WEAR. We can use LLM to produce comment about this item and send it to the customers. We don’t just simply describe this item. We tap into the consumer insight. For example, they may have some concerns or insecurities with their body, and then we can personalize our styling offering based on their concerns when we make proposals. This is the type of mechanism that is already in place. If you’re interested in trying this out, please do. Lastly, there’s LINE WEAR and ZOZOTOWN. There’s the online upstream. What we’d like to do is to connect it to the upstream of online. SB is our parent company, and they are closely working with OpenAI. There’s also adoption of offline that we’re considering as well. This summer, we set up an offline store called ZOZO Yokocho.

We can implement something like this in an offline store and consider if AI stylist is feasible. We must create the algorithm for this, and it wouldn’t be complete one day. How we envision this is to continue to develop and evolve this algorithm. I hope that you pay attention to our further development handling AI agent and AI. Thank you. How do we think of the age of AI and AI agent is what I just presented. That concludes ZOZO’s second quarter financial results announcement for FI25 ending in March 2026. Thank you for your time and attention.

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