KOZO Holdings (9973) Market Trends | Sushi and ready-made food market and profitable scenario towards 2027

[Summary]

KOZO Holdings (9973, formerly Kozo Sushi) is a low-ranking stock that handles sushi, ready-made meals, food and beverage, and distribution. The first thing to look at here is not the growth of the sushi market.

In the first quarter of the fiscal year ending December 2026, sales were 4.923 billion yen, an increase of 6.5% compared to the same period last year. At first glance, it seems to be growing. However, operating income and loss were in the red of 66 million yen, ordinary income and loss were in the red of 47 million yen, and quarterly net income attributable to shareholders of the parent company was in the red of 56 million yen. Furthermore, the operating deficit increased from 44 million yen in the same period last year.

There are sales. There is no profit left.

This is the form that investors who look at low-priced stocks hate the most. The company is forecasting sales of 20.5 billion yen, operating income of 102 million yen, and net income of 52 million yen for the full year ending December 2026, but as of 1Q, these numbers are not yet convincing to the market.

Can we really return to operating profit? Furthermore, will that surplus generate cash?

The sushi market itself is an area where demand remains both domestically and internationally. However, KOZO is not a large conveyor belt sushi chain that can directly benefit from market growth. Rather, the question is how to rebuild low-profit businesses through purchasing, store restructuring, and improving the profitability of home delivery and ready-made meals. The market doesn't believe in it yet.

First, the conclusion

There are three points to consider when looking at KOZO Holdings toward 2027. However, there are priorities.

Personally, rather than viewing KOZO as a ``growth stock in the sushi market,'' it is closer to reality to view KOZO as a ``restructuring/low-ranking stock to see if it can get out of the red''. If you make a mistake here, the article will look and your investment decisions will be compromised.

It's not as simple as saying that stock prices will grow because the sushi market is growing. The market first looks for operating profits to turn positive. Next is the operating profit margin. And finally, operating CF and cash balance.

Profit rather than sales. Cash rather than profit. KOZO is a stock that you should look at in this order.

Current status of the sushi market

Demand in the sushi market, both domestically and internationally, is not weak.

Globally, the popularity of Japanese food, health consciousness, casual dining out, and demand for delivery are supporting the trend. According to the Global Growth Insights Sushi Restaurant Market Report, the global sushi restaurant market is expected to expand to $20.47 billion in 2025, $20.91 billion in 2026, and $21.35 billion in 2027.

However, the growth rate is not explosive. The outlook is for stable growth at an annual rate of 2%.

In the domestic market, the situation is a little more complicated.

• Major conveyor belt sushi chains can easily capture price revisions, digital ordering, suburban stores, and inbound demand.
• High-quality sushi is likely to benefit from inbound demand and demand from wealthy people *While there is demand for take-out sushi, ready-made meals, and home delivery, it is difficult to manage costs and labor costs.

Particularly for small and medium-sized chains and take-out sushi restaurants, rising costs for rice, seafood, packaging materials, logistics, and personnel are putting pressure on profits.

This is the difficult point for KOZO. Even if the sushi market grows, if purchasing power and store efficiency are weak, a company will remain in the red even if sales increase. The market doesn't view ``buying sushi because it's popular''. It's not that sweet.

KOZO Holdings business structure

KOZO Holdings is a company that has a strong image of a ``boy's sushi'', but it is no longer a simple sushi chain.

Our four main businesses are:

Sales by segment for the first quarter of the fiscal year ending December 2026 were the largest for the distribution business at 2.417 billion yen, followed by the retail and sales business at 1.340 billion yen, the food and beverage business at 1.125 billion yen, and the overseas business at 449 million yen.

If you look only at the scale of sales, it is no longer ``Kozozushi with only one leg''. We are transforming into a group management company that includes distribution, food and beverage, and overseas operations.

The problem is that diversification is not yet profitable. It really hurts here.

In the first quarter, the Retail & Sales, Food and Beverage, Distribution, and Overseas segments all posted losses. Even though the distribution business, the largest segment, has sales of 2.417 billion yen, it is still below the operating surplus of the entire group.

It is difficult to dismiss this as simply "growing up." If there is no profit left even after accumulating sales, it is being absorbed somewhere in the way the business is handled, gross profit, shipping, personnel costs, and fixed costs on the store side. The person reading the financial statements stops there.

How to read 2026 1Q financial results

The numbers for the first quarter of the fiscal year ending December 2026 are summarized as follows.

You can see the increase in revenue. However, if you just say ``It's not bad'' here, it will make the story less readable.

The operating deficit has widened from the same period last year. Looking at the sales and operating income/loss in the financial results, the operating income/loss ratio for 1Q deteriorated from -1.0% in the same period of the previous year to -1.3%.

Sales were 4.923 billion yen, and operating income was -66.6 billion yen. Operating profit margin was -1.3%. Although this thinness may be good for short-term funds in low-priced stocks, it is still a weakness for investors with medium-term holdings. This is because even a small change in costs or labor costs can easily disrupt a profitable plan.

The company's full-year forecast is for sales of 20.5 billion yen, operating income of 102 million yen, ordinary income of 102 million yen, and net income of 52 million yen.

Considering this, in order to generate operating income of 102 million yen for the full year, we need to earn approximately 168 million yen in operating income in the remaining nine months. Just looking at the numbers doesn't mean it's impossible. However, since the first quarter started with a widening deficit, the market is doubtful whether it will really be able to recover in the second half.

What you should be looking at from the second quarter onward is not sales, but the cost of sales ratio, selling, general and administrative expenses, store profits and losses, and operating CF. Cash rather than profit. If you leave this out, you will misread KOZO.

There are positive factors, but they are still weak

That's not to say there aren't positives to KOZO. However, it is still not enough to be bullish.

First, sales are increasing. In the first quarter, sales increased 6.5% compared to the same period last year. We secured increased revenue in multiple businesses, with the distribution business increasing by 13.3%, the food and beverage business increasing by 4.8%, and the overseas business increasing by 4.5%.

Second, our capital adequacy ratio is improving. This rose from 6.6% at the end of the previous fiscal year to 10.9%. This is a plus. However, it is 10.9%. I can't say it's thick.

Furthermore, there is room to raise the low profit margin if product development, joint purchasing, and commercial distribution consolidation within the group are effective. This is understandable as the company's goal.

However, the market does not continue to buy for "target purposes." In the case of low-ranking stocks, there are times when it is easy to receive short-term funds simply by seeing operating profits or a reduction in going concern risk. KOZO is also the type of company where the stock price reaction is likely to be large if the numbers confirm that the company is profitable. Conversely, as long as the numbers don't show up, even if short-term funds come, it's easy to run away.

Risk material

On the other hand, the risks are pretty clear.

Even with increased revenue, deficits remain

The fact that the operating deficit is widening even though sales are increasing is honestly a serious matter. It looks cold here.

This indicates that profitability may not improve just by tracking sales volume. Here's why the market still doesn't trust it.

Burden of ingredients, labor costs, and logistics costs

For sushi, ready-made meals, and food and beverages, rice, seafood, packaging materials, logistics, and labor costs are effective.

If there is a delay in passing on the price, sales may increase but profits will not remain. Our physical strength is different from a company like a major conveyor belt sushi chain, which can absorb large amounts of stock and high turnover.

Financial reserves are not strong yet

Although the equity ratio has improved, it remains at 10.9%.

If you look at it as a low-priced stock, the financial improvement is positive. However, it is not at a level that can be called a stable company. Cash and deposits have also decreased since the end of the previous fiscal year, and if additional deficits continue, it will be easy to be cautious about capital policy.

What is important here is operating CF rather than accounting surplus. Even if you return to profitability, the market will narrow down your valuation if your cash is reduced due to working capital.

Large number of stocks

KOZO has a large number of outstanding shares, and is prone to the supply and demand conditions typical of low-ranking stocks.

Although stock prices may fluctuate in the short term, continuous accumulation of operating profits is necessary for stock prices to rise structurally. For low-ranking stocks, a move of just 1 yen will make the price range seem larger. Short-term funds may be collected there, but funds that remain for a long time are more calm.

Performance scenario towards 2027

When looking at our business performance in 2027, the biggest theme will be "establishment of profitability."

Optimistic scenario: Maintaining a surplus

In the optimistic scenario, progress will be made in product development, joint purchasing, logistics efficiency, and liquidation of unprofitable stores within the group.

In this case, it is possible that we will achieve operating profit for the full year of 2026, and that operating income will grow to several hundred million yen in 2027.

What the market evaluates is not just sales in the 20 billion yen range. The operating profit margin will exceed 1%, and the operating CF will follow.

Neutral scenario: between surplus and deficit

In the neutral scenario, sales would remain in the 20 billion yen range, but operating income would remain in the black or break even due to rising raw material and labor costs.

In this case, the stock price will likely be around the 20 yen level, and will likely move up and down depending on financial results and other factors. Short-term streaks are included. However, it is difficult to make a thorough re-evaluation.

Cautious scenario: deficit increases again

In the cautious scenario, price pass-through will not proceed and the cost of liquidating unprofitable stores will remain.

If we continue to have sales but no profits, the risk of falling into the red in 2027 remains. In this case, financial concerns will once again become an issue, and stock prices will likely remain at a low level.

How to read stock prices

KOZO's stock price is a low-priced stock in the low to mid 20 yen range as of May 2026.

At this level, regular P/E analysis is not very easy to use. This is because profits are small and on the border between deficit and surplus.

The price movements of low-priced stocks are a little special. The price range above and below 1 yen is a few percentage points, making it easy to use short-term funds as material. When the production volume increases, it is easy to suspect that something is wrong, but when the material is thin, it cools down quickly. KOZO is also of this type.

The indicators you should look at are in the following order:

If we were to divide the stock price scenarios, they would be as follows.

However, this is not an investment decision, but a scenario arrangement.

Low-priced stocks may move more based on short-term supply and demand than on business performance. Prices will skyrocket when new materials emerge, and plummet when expectations are dissipated. When looking at KOZO, I would like to first check whether the company will continue to have an operating surplus rather than the stock price range.

And just having an operating surplus is not enough. Will there be sales CF? Will there be cash left? Are there any capital policies that are suspected of being dilutive? After seeing this far, the market finally has a little faith.

Checkpoints that investors should look at

The key points to look at in future financial results can be narrowed down considerably.

• Has operating profit or loss become profitable?
• Is the cost rate decreasing?
• Are the deficits in the retail/sales business and food and beverage business decreasing?
• Is the increase in sales in the distribution business leading to profits?
• Is operating CF turning profitable?
• Is your cash balance continuing to decrease?
• Has the equity ratio deteriorated again?
• Are there any concerns about dilution due to capital policy?

Of particular importance is operating profit. Next is sales CF.

Ordinary and net income may change due to extraordinary profits and foreign exchange gains, but in order to reevaluate KOZO, it is necessary for the main business to become profitable. Low-ranked stocks may be moved by just the headline "Final Profit." However, what will last long is operating income and cash.

Summary

KOZO Holdings is not a stock to be bought solely based on the growth of the sushi market. At least that's the case now.

Rather, it is a low-priced stock that will look at how it can absorb the rising costs of the restaurant and ready-made meals market and get out of the red.

The conditions under which stock prices will be evaluated heading into 2027 are clear.

• Maintain sales at 20 billion yen level
• Don't let the operating surplus be a temporary thing.
• Improve cost ratio and SG&A expenses
• Return operating CF to profitability
• Reverse financial anxiety

If these conditions are met, there is room to reconsider and buy the stock as a low-value stock.

On the other hand, if a company continues to be in the red even with increased sales, the market will be quite calm. The first step in the growth story of the sushi market is to confirm the operating surplus in the financial results. If you want to take it a step further, it's more about cash than profits.

Source/Reference materials

• KOZO Holdings 1st quarter financial results for the fiscal year ending December 2026
• KOZO Holdings IRBANK 9973
• Global Growth Insights: Sushi Restaurants Market Size and Forecast