[Summary]
The conclusion is neutral. Japan's listed drugstore stocks are likely to be supported by rising unit prices for food and daily necessities, dispensing products, inbound cosmetics, and seasonal products, and the demand environment for the remainder of the year is unlikely to deteriorate significantly.
However, it is difficult to see stock prices becoming stronger across the board. This is because personnel costs, logistics costs, price competition, a decline in gross profit margin due to an increase in the proportion of food products, and restructuring costs all take effect at the same time.
Therefore, when looking at the outlook for the year, it will be more important to consider which company can most efficiently handle customer spend, gross profit margin, dispensing, and restructuring, rather than whether drugstores as a whole are strong.
Prerequisites to keep in mind first
When looking at drugstore stocks by the end of this year, there are some points to keep in mind first.
Welcia Holdings was delisted from the Tokyo Stock Exchange Prime Market on November 27, 2025 due to its business integration with Tsuruha Holdings. Therefore, when comparing currently listed drugstore stocks individually, Welcia is not included in the analysis as a single listed stock.
Based on this premise, the main targets for the year will be Tsuruha HD, Matsuki Yokokokara, Sugi HD, Sundrug, Cosmos Pharmaceuticals, and Aoki HD for drugs.
Why is the entire sector difficult to collapse?
The reason drugstore stocks are unlikely to collapse this year is because they have multiple sources of support for sales.
First, daily necessities and food are daily necessities, and demand is unlikely to decline sharply even if the economy slows down a bit.
Secondly, as the population ages and the number of prescriptions continues to increase, dispensing will contribute to stabilizing the frequency of visits to stores. In Sugi HD's financial results for the fiscal year ending February 2026, strengthening the prescription response system and utilizing DX were identified as pillars of growth in the dispensing field.
Furthermore, for companies that are strong in urban areas and downtown areas, demand from inbound tourists and a recovery in cosmetics will continue to be a factor. Matsuki Yokocokara's sales for the third quarter of the fiscal year ending March 2026 increased by 4.7% year-on-year, and operating income increased by 4.2% year-on-year, and company materials confirm that increased foot traffic and the capture of demand for cosmetics are factors behind the company's performance.
Seasonal factors cannot be ignored either. Demand for pollen, intense heat, infectious diseases, and measures to prevent dryness tend to push up the number of customers and average customer spend in the short term, and there will be multiple themes throughout the year.
Why the stock gap still tends to widen
On the other hand, even within the same drugstore, the way profits are generated is quite different.
There are four major turning points:
| Points of discussion | Conditions that work positively | Conditions that tend to be a burden |
|---|---|---|
| Gross profit margin | Cosmetics, pharmaceuticals, dispensing, and PB ratios are high | Food ratios are too high |
| SG&A expenses | Existing store efficiency, DX, and logistics optimization progress | Personnel costs, rent, and logistics costs take the lead |
| Reorganization | Purchasing, logistics, and system integration progress | Integration costs come first |
| Store openings | Dominance takes effect and turnover rate increases | Profitability slows down due to store openings |
In other words, sales growth alone does not determine evaluation.
If sales of food and daily necessities increase, sales can be made, but the higher the composition ratio of food and daily necessities, the more likely the gross profit margin will fall. Conversely, companies that are strong in cosmetics, private brand, pharmaceuticals, and dispensing tend to have higher quality profits even with the same increase in sales.
Direction of noteworthy stocks
| Stocks | Views for the rest of the year | Points to watch |
|---|---|---|
| Tsuruha HD 3391 | Strong to Neutral | The progress of Welcia integration is the biggest theme. Joint purchasing, logistics, PB, and IT integration will be key to stock price evaluation |
| Matsuki Yokokokara 3088 | Strong | Cosmetics, urban stores, and overseas expansion are relatively strong. Both inbound and high gross profit products are effective |
| Sugi HD 7649 | Neutral to Strong | Strengths include dispensing and medical collaboration. By the end of this year, the quality of dispensing and store opening efficiency will be the focus of evaluation |
| Sundrug 9989 | Neutral to Strong | Earnings are highly stable, and fluctuations in current profits are relatively small. Easy to be seen as a defensive domestic demand stock |
| Cosmos Pharmaceutical 3349 | Neutral | It is easy to expect sales growth, but since it is a low-priced model, it is important whether gross profit margin improves. |
| Medicinal Aoki HD 3549 | Neutral to Selected | There is room for growth by opening local stores and strengthening food products, but controlling profit margins and SG&A expenses will be a turning point within this year |
The ones that are relatively easy to see here are Matsuki Yokokokara, Sundrug, and Sugi HD.
Matsuki Yokokokara has a clear ability to capture high gross profit cosmetics and urban demand. As of the third quarter, the number of overseas stores has expanded to 98 stores, and 17 stores in Hong Kong, so there is room for the company to be seen in the context of Asian health and beauty consumption rather than just domestic defensive retail.
In the fiscal year ending February 2026, Sugi HD had sales of 1,010.3 billion yen, an increase of 15.1% year on year, operating income of 48.5 billion yen, an increase of 14.1%, and an equity ratio of 47.3%. The company's dispensing business continues to grow and its store network continues to expand, making it a stock that is likely to maintain its structural growth outlook through the end of the year.
Sundrug's sales increased by 5.3% year-on-year in the third quarter of the fiscal year ending March 2026, and operating income increased by 4.9% year-on-year. Although it is not an explosive growth, it is a type that steadily accumulates, and the supplementary market data as of May 7, 2026 shows that the PER is around 14 times, which is not an extremely high valuation.
On the other hand, for Cosmos Pharmaceuticals and Aoki HD, which produces drugs, it is more important to confirm not only sales growth but also profit margins. While low prices and enhanced food products will help increase store visit frequency, controlling gross profit margins and SG&A expenses will be essential to sustaining stock prices through the end of the year.
How do seasonal factors work?
Seasonal themes tend to be a factor in stock prices for drugstore stocks within the year.
Spring to early summer
This is the time when hay fever medicine, eye drops, masks, UV rays, skin care, and antiperspirants are most popular. As the number of people in urban areas recovers, it will be easier to see companies that sell cosmetics and outing-related products.
Summer
Extreme heat is the biggest theme. Cool products, drinks, oral rehydration solutions, sunscreen, insect repellent, antiperspirants, etc. can be easily rotated. Companies with a high proportion of food and daily necessities will receive a tailwind from increased store visits, but in terms of profits, it is necessary to check gross profit margins.
Autumn
Demand for cold medicine, nutritional supplements, moisturizers, and pharmaceutical preparations will be the focus. This is a time when companies that are particularly strong in dispensing are likely to be evaluated for their medical collaboration and the accumulation of demand for prescriptions.
From winter to the end of the year
Infectious diseases, cold medicine, antipyretic analgesics, moisturizers, body warmers, and cleaning supplies are easy to theme. However, if the previous year's trend was strong, a reactionary decline may occur. It is important to note that Sundrug's third quarter data showed weak sales of seasonal winter products, mainly cold medicine.
Factors that tend to move stock prices in 3 to 6 months
From the perspective of the first half of the year to early autumn, the following indicators are important.
| Points to note | How to view |
|---|---|
| Monthly sales | See whether existing store sales are driven by the number of customers or the average price per customer |
| Gross profit margin | Check whether the increase in food composition ratio is cutting into profits |
| Dispensing | View the number of prescriptions, annexation rate, and accumulation of medical cooperation |
| Cosmetics | Confirm recovery in inbound and high gross profit categories |
| Restructuring | See if Tsuruha's integration progress will reach the practical stage |
In the short term, the easiest companies to look at are Matsuki Yokokokara, which has cosmetics and urban demand, and Sundrug, which has stable profits.
On the other hand, even if the strength of sales of Cosmos Pharmaceuticals and Aoki HD, which produces drugs, is confirmed, if gross profit margins and SG&A expenses are not supported, the stock prices are likely to be in a situation where it is difficult to grow.
Winners to see in 9-12 months
From a medium-term perspective until the end of the year, there are three ways to win.
Economies of scale
The integration of Tsuruha and Welcia is the most important theme for this year. If joint purchasing, logistics, PB, and system integration progress, the evaluation axis of the entire industry may change. However, what you see at first is often costs rather than synergies, and progress confirmation is necessary.
Ratio of high gross profit area
The higher the ratio of cosmetics, pharmaceuticals, prescription drugs, and private brand businesses, the more likely it is that sales growth will lead to profit growth. In this sense, Matsuki Yokokokara, Sugi HD, and Sundrug are relatively easy to predict.
Efficiency of food customer attraction model
Models that use food products to attract customers, such as Cosmos Pharmaceuticals and drug manufacturer Aoki HD, are strong in increasing sales. However, for reassessment within this year, it is not enough to simply say that sales will increase; it will be important to see a structure that remains profitable even at low prices.
Scenario analysis
Bullish: 30% The combination of intense heat, infectious diseases, demand for cosmetics, and demand from visitors to Japan will improve not only sales but also profit margins. With the addition of expectations for restructuring, the evaluation of the sector as a whole will rise a notch higher.
Neutral: 50% Sales are strong, but profit growth varies from company to company. Matsuki Yokokokara, Sundrug, and Sugi HD have a relative advantage, and companies with a high proportion of food products are likely to be selected.
Bearish: 20% The gross profit margin will be worse than expected due to the prolonged depreciation of the yen, rising labor costs, and price competition. Even with the Tsuruha integration, there is an awareness of upfront costs, and the entire sector is being evaluated at a defensive value.
Risk
| Risk | Contents |
|---|---|
| Rising personnel costs | SG&A expenses are likely to increase due to minimum wage increases and hiring difficulties |
| Increase in food ratio | Gross profit margin will be slow to grow despite sales growth |
| Price-cutting competition | Competition with peers and different industries tends to lead to a price-driven war of attrition |
| Weak yen costs | Rising costs of imported cosmetics and raw materials put pressure on profits |
| Integration cost | Tsuruha integration may result in temporary costs and system adjustment costs |
Summary
While it will be easy for Japanese drugstore stocks to maintain their strength as a defensive player for domestic demand within this year, the stock price will be subject to considerable selection.
Strong themes include extreme heat, infectious diseases, inbound cosmetics, dispensing, and industry restructuring.
In the short term, the companies that are easy to see are Matsuki Yokokokara, which can capture demand for cosmetics and urban areas, and Sundrug, which has stable profits. In the medium term, the progress of Tsuruha's integration and structural growth centered on Sugi HD's dispensing business will become more important.
For Cosmos Pharmaceuticals and drug manufacturer Aoki HD, the key to evaluation is whether gross profit margins and SG&A expenses continue to improve, rather than the appearance of sales growth. From an investor's perspective during this year, it would be more accurate to prioritize the quality of profits than the strength of sales, which is closer to the reality of the sector.
Reference materials
- Welcia Holdings official website “Due to the business integration with Tsuruha Holdings Co., Ltd., our shares will be delisted from the Tokyo Stock Exchange Prime Market as of November 27, 2025.”
- Matsuki Yokokokara & Company Financial Results for the Third Quarter of the Fiscal Year Ending March 2026
- Sugi Holdings Financial Results for the Fiscal Year Ending February 2026
- Sundrug Financial Results for the Third Quarter of the Fiscal Year Ending March 2026
- Cosmos Pharmaceutical Company IR materials and disclosure regarding existing stores and store opening trends
- Supplementary market data: See market data from Yahoo! Finance, etc. (as of May 7, 2026)