TRIAL Holdings,Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥326.62B
• Operating Income: ¥5.14B
• Net Income: ¥3.25B
• EPS: ¥-8.01

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Trial Holdings (141A0) delivered very strong top-line growth in FY2026 Q1 with revenue up 66.8% YoY to ¥326.6bn, but profit conversion was weak and the company posted a net loss of ¥0.98bn. Gross profit was ¥39.1bn, implying a gross margin of 12.0%, consistent with a low-margin, high-throughput discount retail model. Operating income increased 4.2% YoY to ¥5.14bn, but the operating margin compressed to 1.57%, highlighting significant negative operating leverage in the quarter. Ordinary income was ¥3.25bn, below operating income, suggesting non-operating losses (beyond the small interest expense) weighed on results. Despite positive operating and ordinary income, the company recorded a net loss, likely driven by taxes and/or extraordinary losses; tax expense was ¥2.01bn in the quarter. Interest expense was minimal at ¥18m, and interest coverage is strong at 285.6x, indicating limited financial burden from debt costs. The DuPont ROE breakdown shows a net margin of -0.30%, asset turnover of 0.434, and financial leverage of 5.96x, resulting in a calculated ROE of -0.77%. Balance sheet scale is large with total assets of ¥752.5bn and equity of ¥126.3bn, implying an estimated equity ratio of ~16.8% (based on disclosed assets and equity). Liquidity is tight: current ratio is 94.8% and quick ratio is 57.3%, with negative working capital of ¥7.9bn. Inventories of ¥56.6bn represent ~39.5% of current assets; based on quarterly COGS, implied inventory days are roughly low 30s, which is reasonable for a food/discount retailer but will need monitoring as store count and format mix evolve. Cash flow statements and EBITDA were not disclosed in the XBRL (zeros indicate unreported), limiting cash-based assessment this quarter. Dividend was not paid (DPS=¥0), consistent with the current reinvestment and liquidity posture. Overall, the quarter shows robust scale expansion but margin compression, tax drag, and tight short-term liquidity; sustainability hinges on improving operating efficiency and stabilizing below-OP items.

Profitability Analysis

ROE_decomposition: Net margin -0.30% × asset turnover 0.434 × financial leverage 5.96 = ROE -0.77%. The negative net margin, despite positive operating income, is the primary driver of the negative ROE. margin_quality: Gross margin: 12.0% (¥39.1bn/¥326.6bn). Operating margin: 1.57% (¥5.14bn/¥326.6bn). Ordinary margin: 0.99% (¥3.25bn/¥326.6bn). Net margin: -0.30%. The gap between operating and ordinary income indicates non-operating losses beyond minimal interest costs; the further gap to net income suggests tax expense and/or extraordinary losses. operating_leverage: Revenue +66.8% YoY vs operating income +4.2% YoY implies negative operating leverage. Estimated prior-year operating margin ~2.52% vs current ~1.57% (≈95 bps compression), indicating cost pressures (procurement, shrink, logistics, utilities) and/or price investments outpaced productivity gains.

Growth Assessment

revenue_sustainability: Top-line growth of +66.8% YoY to ¥326.6bn indicates rapid scale-up (likely new store openings and strong traffic). Sustainability will depend on same-store sales, new store ramp quality, and maintaining price leadership without excessive margin sacrifice. profit_quality: OP growth +4.2% despite +66.8% sales suggests mix and cost headwinds; ordinary income below OP and a net loss despite taxes point to below-the-line volatility. Interest costs are negligible; the drag likely relates to non-operating items and tax effects. outlook: Near-term focus should be on recovering operating margin toward prior-year levels via procurement efficiencies, private brand mix, shrink control, and logistics optimization. Stabilization of non-operating and extraordinary items and normalization of effective tax should support a return to positive net margins.

Financial Health

liquidity: Current ratio 94.8% (¥143.2bn/¥151.1bn); quick ratio 57.3% ((¥143.2bn-¥56.6bn)/¥151.1bn). Working capital is negative at -¥7.9bn. Liquidity is tight and relies on inventory turns and supplier credit. solvency: Total liabilities ¥171.3bn vs equity ¥126.3bn; debt-to-equity 1.36x. Interest coverage is very strong at 285.6x (¥5.14bn/¥18m). Using disclosed balances, the estimated equity ratio is ~16.8% (¥126.3bn/¥752.5bn). capital_structure: Leverage (assets/equity) is 5.96x per DuPont, reflecting a capital-intensive retail footprint and working capital funding through payables. The low interest burden suggests conservative financial debt costs or reliance on trade payables rather than interest-bearing debt.

Cash Flow Quality

earnings_quality: Cash flow statements (OCF/ICF/FCF) were not disclosed in this filing; OCF/NI ratios and FCF-based corroboration of earnings cannot be assessed this quarter. FCF_analysis: Free cash flow is not available due to missing OCF and capex disclosures. Given rapid growth, capex and pre-opening expenses are likely elevated, which typically weighs on near-term FCF in expansion phases. working_capital: Inventories ¥56.6bn (~39.5% of current assets). Using quarterly COGS, implied inventory days ~33 (approximate). Negative working capital indicates reliance on supplier financing and fast inventory turns; execution risk rises if sales decelerate or shrink increases.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio is reported as 0.0%. With a quarterly net loss and undisclosed cash flows, distribution capacity is not demonstrated this quarter. FCF_coverage: FCF coverage cannot be evaluated due to unreported OCF and capex. In a high-growth phase with tight liquidity, internal funds are likely prioritized for reinvestment. policy_outlook: Given current margin pressure, negative working capital, and net loss, maintaining a conservative dividend stance appears consistent with preserving financial flexibility until profitability normalizes.

Risk Assessment

Business Risks:

• Margin compression from price investments, procurement cost inflation, and logistics/utility cost pressures
• Inventory execution risk (shrink, obsolescence) in a rapid expansion phase
• Format and mix risk if new stores take longer to ramp or cannibalize existing stores
• Competitive intensity in discount retail and grocery segments driving continued price pressure
• Operational complexity from supply chain scaling and regional distribution capacity

Financial Risks:

• Tight short-term liquidity (current ratio <100%, quick ratio 57%) reliant on inventory turns and payables
• Negative working capital exposure—vulnerable if sales slow or supplier terms tighten
• Below-the-line volatility (non-operating items, extraordinary losses) and tax expense driving swings in net income
• Potential capex and lease commitments associated with footprint growth (cash flow strain not visible due to undisclosed CF data)

Key Concerns:

• Operating margin fell to 1.57% despite +66.8% revenue growth
• Net loss of ¥0.98bn with ¥2.01bn tax expense despite positive operating income
• Cash flow data (OCF/FCF) not disclosed this quarter, limiting assessment of earnings-to-cash conversion
• Short-term liquidity below 1.0x and negative working capital of ¥7.9bn

Investment Implications

Key Takeaways:

• Sales growth is very strong, but profitability lagged with OP margin down ~95 bps YoY to 1.57%
• Ordinary income below operating income and a net loss reflect non-operating and tax headwinds
• Liquidity is tight (current ratio 94.8%, quick ratio 57.3%), requiring disciplined inventory and payables management
• Interest burden is minimal (coverage 285.6x), suggesting balance sheet debt costs are not the core issue
• Cash flow statements and EBITDA are undisclosed, constraining cash-based valuation and quality assessments

Metrics to Watch:

• Operating margin recovery toward >2% and gross margin trajectory
• Same-store sales growth vs. ticket/traffic mix and new store ramp productivity
• Inventory turns and shrink; inventory days trend vs. target
• Non-operating gains/losses and extraordinary items; reconciliation from OP to NP
• Effective tax rate normalization and drivers of tax expense
• Capex and store openings; disclosure of OCF and FCF to gauge self-funding capacity
• Supplier terms and payable days as indicators of working capital stress

Relative Positioning: Within Japan’s discount retail/grocery universe, Trial shows above-peer revenue growth momentum but sits on the lower end of current liquidity and margin resilience; financial cost burden is low, but execution on cost control and cash conversion will determine whether scale advantage translates into sustainable returns.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
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