Tokyo Lifestyle Touts Global Gains, Pivots to Profitability in 2026

TOKYO, JAPAN – December 29, 2025 – In a clear signal of confidence amid a turbulent global economy, Tokyo Lifestyle Co., Ltd. (Nasdaq: TKLF) has detailed a year of aggressive international expansion and a strategic pivot towards operational excellence. In a year-end letter to shareholders, Representative Director and Principal Executive Officer Mei Kanayama outlined how the retailer of Japanese goods successfully navigated the complexities of 2025 by shifting its focus from pure “scale expansion” to a more disciplined mantra of “quality improvement and efficiency enhancement.”

The letter provides a comprehensive review of a year that saw the company plant its flag in new continents and capture new demographics, all while reinforcing its financial and operational foundations. As the company looks to 2026, the message is clear: the era of rapid growth has built the platform, and the future is about making that platform more profitable and sustainable.

“In 2025, the global macroeconomic environment remained challenging, shaped by geopolitical tensions, supply chain realignments, and volatile foreign exchange fluctuations,” Mr. Kanayama stated in the letter. “Rather than retreating defensively in the face of these pressures, the Company pursued proactive, forward-looking strategic adjustments coupled with disciplined execution.”

A Year of Strategic Global Expansion

While many companies took a defensive posture in 2025, Tokyo Lifestyle embarked on an ambitious, multi-pronged expansion. The company deepened its roots in its core cash-flow markets of Hong Kong and Japan, adding two new directly operated stores in Hong Kong to capitalize on the rebound in tourism. This recovery led to a significant resurgence in sales of high-margin products like cosmetics and luxury goods.

Beyond its home turf, the company made significant inroads across Asia and beyond. In a strategic move to tap into one of the world's largest consumer markets, a wholly-owned subsidiary was established in Shenzhen in June 2025, signaling a deliberate push into mainland China.

Southeast Asia became a key growth region, where Tokyo Lifestyle deployed a capital-efficient expansion model. The strategy, described as “direct-operated flagship benchmarks with franchise replication,” saw the successful launch of flagship stores in Bangkok, Thailand, in February, and Ho Chi Minh City, Vietnam, in October. These locations are intended to serve as showcases for the brand, paving the way for broader franchise-led growth in the region.

Developed markets were also a primary focus. The company’s North American presence grew to seven locations with the opening of a new store in Toronto in May, validating the transferability of its Asian retail concept. In a major milestone for its global ambitions, Tokyo Lifestyle entered the Southern Hemisphere by forming a joint venture in Australia in May, followed by the launch of its first Sydney store in November. This move was bolstered by the introduction of external strategic capital, establishing a firm operational and financial base for future growth in Oceania.

Capturing Gen Z and Mastering Efficiency

A cornerstone of the company’s 2025 success was its ability to adapt its product portfolio to capture new consumer trends. Recognizing the immense spending power and cultural influence of Generation Z, Tokyo Lifestyle rapidly integrated pop culture collectibles into its offerings. The introduction of trendy toys and trading cards, including sought-after items like Pokémon cards and BE@RBRICK figures, proved to be a masterstroke. According to the company, this initiative not only diversified its product mix but also “meaningfully lowered the average age of our customer base, injecting renewed youthful vitality into our brand.”

This product diversification was managed without sacrificing profitability. Despite a substantial increase in its stock-keeping units (SKUs) to approximately 219,800 in the first half of fiscal 2026—up from 165,120 in the prior-year period—the company maintained healthy high single-digit gross profit margins.

This feat was underpinned by what Mr. Kanayama described as a “qualitative leap in operational efficiency.” The most striking metric was the company’s inventory turnover rate, which skyrocketed to 35 times in the first half of fiscal 2026, a dramatic increase from 13 times in the same period of fiscal 2025. This highlights a vastly improved ability to convert inventory into cash, a critical measure of retail health.

Digital transformation played a key role in this efficiency drive. Through an “asset-light” partnership with e-commerce and live streaming specialist HK Artemis, Tokyo Lifestyle adopted a performance-based compensation model that minimized financial risk while opening up new digital sales channels. The company’s balance sheet was further fortified through a new revolving credit facility secured in June and the addition of a Hong Kong-based private strategic investor in December, enhancing liquidity and financial flexibility for future growth.

Charting a Disciplined Course for 2026

Looking ahead, Tokyo Lifestyle plans to build on its expanded global footprint and newfound operational muscle. While acknowledging that competitive intensity remains high, the company’s leadership is adhering to a philosophy of “bold planning, prudent validation and decisive execution.”

The strategic priorities for 2026 are threefold and focus on deepening, rather than just broadening, its market presence:

1. Continuously improving store-level profitability (unit economics): A focus on making each individual store more profitable.
2. Deepening supply chain integration: A move to unlock further margin potential by optimizing how products are sourced and distributed.
3. Expanding asset-light partnership models: Leveraging partners to accelerate global brand penetration without heavy capital expenditure.

In his closing remarks to shareholders, Mr. Kanayama expressed gratitude for their continued trust and reiterated the company's resilience. “Our performance to date demonstrates our ability to navigate economic cycles, both upcycles and downcycles,” he concluded. “Together, we will continue to shape the Company’s future and remain firmly committed to delivering sustainable, long-term value for our shareholders.”