Mercari Earnings: Maintaining Profitability While Exploring Growth Opportunities; Shares Undervalued

Mercari’s June-quarter operating income of JPY 4.7 billion and operating margin of 10.1% were higher than our expectations of JPY 4.2 billion and an 8.3% operating margin. However, we are disappointed by the slowdown in gross merchandise value growth. Despite the company’s commitment a year ago to increasing GMV by 10% or possibly more through effective marketing and product development, GMV growth in the June quarter was only 6.0%. This is a slowdown from 8.3% growth in the March quarter and 10.3% in the December quarter. On the other hand, the marketplace segment’s adjusted core operating margin of 42.9% exceeded our expectations of 39.5%, indicating that Mercari can maintain high profitability by leveraging its dominant position in the domestic online flea market, even if GMV growth slows.