Thank you, operator, and thank you all for joining Tokyo Lifestyle's fiscal year 2026 earnings conference call today. On today's call, I will provide an overview of our performance for the fiscal year ended March 31st, 2026, followed by a detailed review of our financial results.

Fiscal year 2026 was a year of strong execution across our business, delivering robust revenue growth in all of our core operating channels. Our directly operated stores, franchise network, and wholesale operations each achieved a double-digit growth, demonstrating the effectiveness of our strategy to diversify our portfolio value, broaden our customer base, and accelerate global market expansion.

This result further validates our transformation from a traditional retailer into a diversified consumer lifestyle platform, integrating retail, franchise, wholesale, and luxury goods businesses to create sustainable long-term value. During the year, we continued advancing our asset-light growth strategy by expanding our franchise and wholesale operations with a particular focus on the high-end merchandise segment, while these channels generally generate lower gross margin than our directly operated store.

They required significantly less capital investment and operating expense, allowing us to scale more efficiently and generate attractive long-term returns. As a result, the change in our revenue mix reflects a deliberate optimization of our business model rather than the deterioration in operating performance.

Another standout achievement of the year was the outstanding performance of our luxury goods business. In particular, our luxury goods segment quickly emerged as a meaningful contributor to growth, reflecting strong customer demand and the successful execution of our product expansion strategy.

At the same time, continued expansion of our wholesale customer base and distribution network further strengthened our market reach, diversify our revenue stream, and enhance the resilience of our business. Supporting this growth, our total assets increased by 48% during fiscal year 2026, while we remained profitable for the third consecutive year.

These achievements reflect both the continued expansion of our business and increasing strengthening of our market position. We continued strengthening our international platform by opening four new physical stores and adding 68 new wholesale customers.

At the same time, we expanded strategic partnerships and continued investing in local talents and performance-based incentive programs, further enhance our organizational capabilities to support efficient and sustainable global growth. In addition, we continue optimizing our omni-channel retail network by converting selected underperforming directly operated store into franchise locations managed by experienced local partners.

This initiative have improved overall efficiency of our store network while supporting our asset-light operating model. Looking ahead, we remain committed to executing our long-term growth strategy through continued customer acquisition, stronger global brand recognition, further diversification of our product portfolio And deeper customer engagement across all sales channels.

We plan to establish a new distribution center in Australia in 2026 to support inventory replenishment for our Australia retail operations, while additional distribution centers are being planned in other strategic markets. Over the next three years, we intend to open 20 additional directly operated store across the U.S., Canada, Hong Kong, Australia, Thailand and Taiwan.

While adding 23 new franchise stores in Japan, Southeast Asia, Macau and Europe. As we continue executing our strategy, we remain confident in our ability to generate sustainable long-term growth and create greater value for our shareholders through disciplined execution and continued operational excellence.

Now, I would like to highlight our financial results for fiscal year 2026. Total revenue increased by 77.6%, rising from $210.1 million to $373.2 million.

Revenue from our directly operated store increased by 15.7% year-over-year to $19.8 million. Revenue from our franchise stores and wholesale operations grew by 86.9% to $346.7 million.

This growth was primarily driven by the significant increase luxury product sales. In addition, the expansion of our wholesale customer base further strengthened our wholesale platform, deepened supplier relationships and contributed to continued revenue growth.

Gross profit increased by 17.5% to $28.1 million, compared with $23.9 million in fiscal year 2025. Gross margin declined by 3.9 percentage points to 7.5%, primarily due to a shift in our revenue mix as our rapid growth franchise and wholesale businesses, which generally carry lower gross margin than directly operated stores, accounted for a large proportion of total revenue.

Operating expenses increased by 29.6% to $24.9 million, primarily reflecting higher shipping and logistics costs associated with business growth, increased credit losses, provisions, higher payroll, employee benefits, and performance bonuses resulting from our expanding operations. Increased professional service fees and higher promotion, advertising, and lease expenses related to our directly operated store.

As a result, income from operations was $3.2 million, compared with $4.7 million in fiscal year 2025. Net income was $0.7 million, compared with $6.6 million in fiscal year 2025.

The decrease was primarily attributed to tax-related factors rather than the change in our underlying operating performance. Excluding these tax impacts, our core business continued to deliver solid operating results, supported by strong revenue growth, healthy customer demand and disciplined execution.

Basic earnings per share were $0.02 for fiscal year 2026, compared with $0.16 for fiscal year 2025. Diluted earnings per share were $0.02, compared with $0.16 for fiscal year 2025.

As of March 31st, 2026, the company had cash and cash equivalents of $2.1 million and accounts receivable of $186.8 million due from third parties. Approximately 22.3% of this receivable has been collected subsequent to fiscal year-end, providing additional liquidity to support our working capital needs.

As of March 31st, 2026, merchandise inventory totaled approximately $14.4 million. Based on current demand trends, we believe these inventories are well-positioned to be sold within a relevant short period.

For fiscal year 2026, net cash used in operating activities was $10.3 million, while net cash provided by investing activities and financing activities was $6.1 million and $4.2 million, respectively. Overall, our fiscal year 2026 results demonstrate the resilience, scalability and efficiency of our business model.

Although our reported profitability was affected by tax-related items during the year, our underlying business continued to generate strong revenue growth and healthy operating performance. As the macroeconomic conditions continue to improve and the consumer demand generally recovers across our key markets, we remain confident in our ability to deliver sustainable, profitable growth through disciplined execution, prudent capital allocation and continued operational excellency.

Looking ahead, we remain focused on further strengthening our financial performance through disciplined execution, effective cost management and strategic investment. At the same time, we will continue identifying new growth opportunities and expanding our revenue streams as we work to create sustainable long-term value for our shareholders.

Thank you so much for joining this conference call. If you have any questions, please contact us through email at [email protected] or reach our IR counsel Ascent Investor Relations at [email protected].

Management will respond to your question as soon as possible. We appreciate your interest and support in Tokyo Lifestyle and look forward to speak with you again next time.