Kakiyasu Honten Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥17.05B
• Operating Income: ¥324M
• Net Income: ¥177M
• EPS: ¥18.44

Income Statement

Balance Sheet

Cash Flow Statement

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

Kakiyasu Honten (2294) reported FY2026 Q2 consolidated results showing modest topline growth but margin pressure at the operating level. Revenue rose 1.4% year over year to 170.47, while operating income declined 5.3% to 3.24, indicating negative operating leverage. Gross profit was 91.48, implying a high gross margin of 53.7%, but SG&A of 88.05 absorbed most of this, yielding a slim operating margin of roughly 1.9%. Ordinary income decreased 4.7% to 3.44, and net income was broadly flat at 1.76 (-0.2% YoY), reflecting a higher effective tax burden at mid-year (49.4%). EPS (basic) came in at 18.44 yen on average shares of 9.58 million, consistent with reported net income. DuPont decomposition points to low ROE of 1.2% driven by a thin net profit margin of 1.0%, moderate asset turnover of 0.934, and modest financial leverage of 1.26x. Liquidity remains very strong: current assets of 115.30 vs. current liabilities of 36.29 produce a current ratio of 317.7% and sizeable working capital of 79.01. The balance sheet is conservative with total liabilities of 41.52 against equity of 144.46 (total liabilities-to-equity ≈ 0.29x) and cash and deposits of 79.95; interest-bearing debt was not disclosed. Operating cash flow of 4.82 was robust relative to earnings (OCF/NI 2.74x), suggesting good earnings-to-cash conversion in the period. Capital expenditures were 4.86, implying near breakeven free cash flow on an analyst-estimated basis (OCF minus Capex ≈ -0.04), while financing cash outflows were a sizable -8.95, likely reflecting dividends and/or share repurchases. Book value per share is estimated at 1,508 yen, supported by retained earnings of 184.38 and total equity of 144.46. Reported payout ratio is not provided; a calculated payout ratio of 601.1% signals potential mismatch between dividend policy and current earnings trajectory, though period mismatch could be a factor. Despite resilient gross margins, SG&A intensity remains the key swing factor for profitability. Overall, the company demonstrates strong liquidity and balance sheet strength, but weak ROE and thin operating margins limit capital efficiency. Data limitations exist in non-operating expenses, debt details, dividends paid, and detailed SG&A/segment breakdowns; conclusions focus on disclosed items and stated calculated metrics.

Profitability Analysis

ROE_decomposition: DuPont indicates ROE of 1.2% = Net profit margin 1.0% × Asset turnover 0.934 × Financial leverage 1.26x. Low ROE is primarily constrained by slim net margin; leverage is modest and not a key driver. margin_quality: Gross margin is strong at 53.7% (GP 91.48 on revenue 170.47), but SG&A of 88.05 compresses operating margin to about 1.9% (OI 3.24). Ordinary income margin is ~2.0% (3.44/170.47). The elevated effective tax rate of 49.4% further reduces net margin to 1.0%. Non-operating income is minor (0.19) and not a material offset. operating_leverage: YoY revenue +1.4% with operating income -5.3% evidences negative operating leverage, implying cost inflation (notably personnel and rents) or higher store operating costs outpaced sales growth. Depreciation & amortization of 3.01 suggests limited fixed-cost absorption benefit this quarter.

Growth Assessment

revenue_sustainability: Sales growth of 1.4% is modest and likely driven by price/mix more than volume improvement (segment details not disclosed). With inventories only 3.82 and AR at 25.02, working capital intensity appears low, consistent with a deli/meat and prepared foods model. profit_quality: Operating income decline against growing sales points to pressure in SG&A. Gross margin remains healthy, indicating product-level pricing/mix resilience, but corporate/store overheads diluted incremental profitability. Ordinary income trends mirror operating performance given minimal non-operating items. outlook: Sustaining growth will require either stronger same-store sales or cost containment to restore positive operating leverage. Absent SG&A relief or a normalization of the tax rate, net margin recovery may be limited near term. Near-breakeven FCF suggests capacity for organic investment is adequate but constrained if financing outflows remain elevated.

Financial Health

liquidity: Current assets 115.30 vs. current liabilities 36.29 yields a current ratio of 317.7% and quick ratio of 307.2%, underpinned by cash of 79.95. Working capital stands at 79.01, indicating ample short-term liquidity. solvency: Total liabilities 41.52 against equity 144.46 implies a liabilities-to-equity ratio of ~0.29x. Financial leverage (assets/equity) is 1.26x, conservative. Interest-bearing debt was not disclosed; given the large cash balance, the net leverage profile appears conservative. capital_structure: Equity is 79% of total assets (144.46/182.57), suggesting a strong equity cushion. Treasury shares of 2.87 million indicate past shareholder return actions; financing CF of -8.95 this period likely reflects ongoing returns.

Cash Flow Quality

earnings_quality: OCF/Net income is 2.74x (4.82/1.76), indicating healthy conversion. The divergence from accounting profit likely reflects favorable working capital movements or non-cash charges (D&A 3.01). FCF_analysis: Capex was 4.86, almost fully covered by OCF. Analyst-estimated FCF ≈ -0.04 (4.82 - 4.86), effectively breakeven in the period. Investing CF overall was not disclosed beyond Capex. working_capital: Accounts receivable 25.02 and inventories 3.82 are modest relative to revenue, supporting cash generation. Payables of 12.78 help fund operations. Detailed movements are not provided, but the high OCF suggests working capital contributed positively.

Dividend Sustainability

payout_ratio_assessment: A calculated payout ratio of 601.1% appears elevated relative to mid-year earnings, implying potential timing mismatch or reliance on prior-year earnings/cash for dividends. Reported DPS and total dividends paid were not disclosed. FCF_coverage: With analyst-estimated FCF approximately breakeven (-0.04) and financing outflows of -8.95, shareholder returns in the period exceeded internal free cash generation. However, large cash on hand (79.95) and strong equity provide near-term funding capacity. policy_outlook: Given thin operating margin and low ROE, sustaining a high payout would depend on improved profitability or use of balance sheet cash. Clarity on full-year dividend policy and timing is needed; management may prioritize stability but should balance against investment needs and margin recovery.

Risk Assessment

Business Risks:

• Cost inflation in raw meat and food inputs compressing margins
• Labor cost pressure and staffing shortages impacting SG&A
• Demand volatility in department store and restaurant channels
• Pricing power limits in a competitive prepared foods/meat retail market
• Execution risks in store operations and product mix optimization
• Food safety and quality control risks

Financial Risks:

• High effective tax rate (49.4%) depressing net margin
• Potential mismatch between dividend outflows and internally generated FCF
• Limited operating margin (≈1.9%) leaves little buffer for shocks
• Concentration of liquidity in cash; investment returns on surplus cash are low
• Lack of visibility on interest-bearing debt and non-operating expenses due to unreported items

Key Concerns:

• Negative operating leverage despite positive sales growth
• Sustainability of shareholder returns given breakeven FCF
• Persistently low ROE (1.2%) relative to peers and cost of equity

Investment Implications

Key Takeaways:

• Topline growth modest (+1.4% YoY) with operating income decline (-5.3%), indicating cost pressure
• ROE is low at 1.2% due to thin net margin; leverage is conservative and not a driver
• Liquidity and solvency are very strong (current ratio 318%, liabilities/equity ~0.29x, cash 79.95)
• Cash conversion is solid (OCF/NI 2.74x), but FCF is roughly breakeven after Capex
• Financing cash outflows (-8.95) likely for dividends/buybacks outpaced FCF in the period
• High effective tax rate weighs on net profit and EPS

Metrics to Watch:

• Same-store sales growth and average ticket
• SG&A-to-sales ratio and personnel cost ratio
• Operating margin and ordinary income margin recovery
• Effective tax rate normalization
• OCF/NI and FCF trajectory vs. shareholder returns
• Capex pace and new store productivity
• Inventory and receivables turnover

Relative Positioning: Within Japanese prepared foods/meat retail and casual dining peers, Kakiyasu Honten exhibits superior liquidity and conservative leverage but lags on profitability and ROE; margin recovery and cost control are key to catching up.

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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