■Summary

1. Business Overview

DD Group ＜3073＞※ is involved in the restaurant/cafe/specialty cooking business, the “food and beverage amusement business,” which develops multiple brands of stores such as darts, billiards, and karaoke in major cities nationwide, starting with the Tokyo metropolitan area, and “hotel/real estate business” such as hotels, rental containers, and real estate sales. It is characterized by a brand management system that makes use of the diversity of owned brands and dominant development. In particular, the creation of unique popular brands such as “VAMPIRE CAFE (Vampire Cafe),” “Alice's Fantasy Restaurant,” and “Versailles Pig,” business scale expansion through aggressive M&A, and high-profit brands such as “warayaki restaurants,” “Imaiya,” and “BAGUS (bagus)” have supported the company's growth until now.

* The trade name was changed from DD Holdings to DD Group on 2023/6/1.

Since 2020, a tough business environment has continued due to the effects of the spread of the novel coronavirus infection (hereinafter, COVID-19), but since recovery from the COVID-19 pandemic was in place in 2023/4, and strategy construction with an eye on the new normal became necessary, a three-year medium-term management plan (final fiscal year 2026/2) was announced. Furthermore, the management vision was changed to “a 'brand company' that creates creative and innovative brands,” and the trade name was changed to DD Group from 2023/6/1. We aim to “strengthen group management capabilities” and “maximize LTV*” through brand strengthening and business domain expansion.

* An abbreviation for Life Time Value, meaning customer lifetime value. A way of thinking that aims to maximize profits during the period (final life cycle) from the beginning to the end of transactions with customers through various brands and services.

2. Summary of financial results for the first half of the fiscal year ending February 2025

Consolidated financial results for the first half of the fiscal year ending 2025/2 were sales and operating profit higher than planned, with sales up 5.4% from the same period last year to 19202 million yen, and operating profit, up 6.9% from the same period last year, to 1787 million yen. Sales remained generally strong due to growth in existing stores and contributions from new stores in the “food and drink and amusement business.” Existing store sales increased to 108.0% (first half average) compared to the same period last year, with both the number of customers and customer unit prices. In terms of profit and loss, although preparation costs associated with the rebrand opening of “3S HOTEL ATSUGI” were incurred in the “hotel/real estate business,” operating profit increased due to boosting earnings due to the “food and drink amusement business” and continuing cost structure reforms (including the elimination of unprofitable stores). The operating profit margin also reached a high level of 9.3%, breaking a record high (on a first-half basis). In terms of activities, in addition to the smooth launch of 3 new stores, including new business categories, we were able to achieve results by contracting store operations utilizing IP content.

3. Earnings forecast for the fiscal year ending 2025/2

Regarding the consolidated earnings forecast for the fiscal year ending 2025/2, the company implemented an upward revision based on the upward trend in the first half results and current conditions, etc. Sales are expected to increase 4.6% from the previous fiscal year to 38780 million yen, and operating profit to increase 15.9% to 3760 million yen, and the trend of increasing sales and profit is expected to continue. Similar to the first half, it is expected that growth in the “food and beverage/amusement business” will contribute to an increase in sales. In terms of profit and loss, in addition to growth in existing stores, significant operating profit was achieved due to cost rise countermeasures and break-even point reduction effects that have been worked on so far, and the operating profit margin is also expected to improve to 9.7% (8.7% in the previous fiscal year).

4. Future growth strategy

The company announced a new three-year medium-term management plan in anticipation of environmental changes and medium- to long-term paradigm shifts after the COVID-19 pandemic has subsided (hereafter, after COVID-19), and is now in its second year. The management vision was changed to “a 'brand company' that creates creative and innovative brands,” and the direction is to aim for “strengthening group management capabilities” and “maximizing LTV” through brand strengthening and expansion of business areas. In particular, while strengthening our financial position through selection and concentration, we are also working on changes in profit structures such as creating business segments and expanding stock businesses that make use of customer contact points, and aim for consolidated sales of 40 billion yen, consolidated operating income of 4 billion yen (operating profit margin 10.0%), and ROE of 20% or more* as goals for the final year (2026/2 fiscal year).

* The profit target of the medium-term management plan has also been revised upward (as of 2024/4/19) based on the fact that the results for the fiscal year ended 2024/2 exceeded the plan.

■Key Points

・The first half of the fiscal year ending 2025/2 achieved an increase in sales and profit (record high profit) due to a recovery in existing stores that exceeded expectations

・Certain results such as opening new business categories and contracting store operations utilizing IP content

・The full-year consolidated earnings forecast for the fiscal year ending 2025/2 has been revised upward, and the trend of increasing sales and profit is expected to continue

・Promote a medium-term management plan with an eye on the new normal. Aim to “strengthen group management capabilities” and “maximize LTV” through brand strengthening and business domain expansion

(Written by FISCO Visiting Analyst Ikuo Shibata)