K.UNO Co., Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥7.00B
• Operating Income: ¥102M
• Net Income: ¥166M
• EPS: ¥21.87

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

K-Uno (259A0) delivered FY2025 Q4 results with top-line growth but sharply weaker profitability and cash generation. Revenue increased 5.2% YoY to ¥7.004bn, indicating demand resilience, likely supported by bespoke jewelry and repair/remake services. Gross profit was ¥3.899bn, implying a strong gross margin of 55.7%, consistent with a high-value-added, custom-centric model. Despite the robust gross margin, operating income fell 60.8% YoY to ¥102m, signaling significant SG&A pressure and weak operating leverage. Ordinary income was ¥75m and net income declined to ¥22m (−86.3% YoY), driving a slim net margin of 0.31%. DuPont decomposition shows ROE of 1.73% = net margin 0.31% × asset turnover 1.542 × financial leverage 3.58; leverage is amplifying a very thin margin to produce a modest ROE. EBITDA was ¥184m with a 2.6% margin, underscoring that fixed costs and/or labor intensity are compressing operating earnings despite healthy gross profitability. Interest expense was ¥7.37m and EBIT-based interest coverage was 13.8x, indicating near-term debt service is manageable on current earnings. Liquidity is adequate with a current ratio of 137.9% and quick ratio of 105.5%, and working capital of ¥897m. The balance sheet shows total assets of ¥4.542bn and equity of ¥1.269bn (implying an equity ratio around the high-20s by our calculation), while the reported equity ratio field is unreported. Operating cash flow was negative ¥44m, materially below net income (OCF/NI = −2.00), pointing to weak earnings quality or working capital draw. Free cash flow was negative ¥183m, funded by ¥191m of net financing inflow; investing outflows totaled ¥139m. Debt-to-equity of 2.67x indicates meaningful leverage, which, coupled with negative FCF, elevates financial risk if earnings softness persists. No dividend was paid (DPS ¥0, payout 0%), which appears prudent given negative FCF and subdued profitability. Several line items (e.g., cash and equivalents, share counts, and equity ratio) show as zero in the dataset and should be treated as unreported rather than actual zeros; conclusions are based on available non-zero data and calculated relationships.

Profitability Analysis

ROE of 1.73% comes from net margin 0.31%, asset turnover 1.542, and financial leverage 3.58. The key drag is margin: while gross margin is a solid 55.7%, operating margin is only 1.46% (¥102m/¥7,004m), reflecting elevated SG&A and weak operating leverage. The YoY decline in operating income (−60.8%) versus revenue growth (+5.2%) indicates that cost growth outpaced sales, likely from labor, store expenses, or marketing in a bespoke model. EBITDA margin of 2.6% is low relative to the gross margin, highlighting significant downstream costs (craftsmanship labor, store network, customer acquisition). Ordinary income of ¥75m below operating income suggests non-operating headwinds; however, interest burden remains modest with EBIT coverage at 13.8x. Net margin at 0.31% is thin, and with financial leverage at 3.58x, small earnings shocks can materially swing ROE. Tax numbers in the dataset appear atypical versus earnings progression, but we rely on the provided net income and DuPont metrics; the tax burden combined with non-operating items appears to have compressed bottom-line results. Overall, profitability quality is mixed: strong gross value-add is offset by rigid SG&A and limited scale, resulting in poor flow-through.

Growth Assessment

Revenue grew 5.2% YoY to ¥7.004bn, a respectable top-line performance for a niche jewelry retailer/manufacturer. However, operating income fell 60.8% YoY to ¥102m, indicating negative operating leverage and cost inflation pressures. The contrast between 55.7% gross margin and 2.6% EBITDA margin suggests that growth was likely promotion- or labor-intensive, diluting incremental profitability. The sustainability of revenue growth depends on discretionary demand, store productivity, and custom order intake; absent margin recovery, growth is not translating into economic value. Profit quality is weak: OCF/NI of −2.00 implies earnings did not convert to cash, likely due to working capital build (e.g., inventories at ¥768m) or collection timing. Near-term outlook hinges on cost control (SG&A discipline), pricing power against precious metal/labor cost inflation, and inventory turns. If the company can stabilize SG&A and improve mix/pricing, modest revenue growth could re-lever earnings; otherwise, further growth without efficiency gains risks continued margin erosion.

Financial Health

Total assets are ¥4.542bn against total liabilities of ¥3.384bn and equity of ¥1.269bn, implying an equity ratio around the high-20% range by calculation (reported equity ratio is unreported in the dataset). Debt-to-equity is 2.67x, indicating a leveraged capital structure. Liquidity appears adequate: current assets ¥3.267bn vs current liabilities ¥2.370bn yields a current ratio of 137.9% and quick ratio of 105.5%. Working capital is ¥897m, providing a buffer for operations and seasonality. Interest expense of ¥7.37m is covered 13.8x by EBIT, suggesting manageable short-term solvency. However, negative operating cash flow (−¥44m) and negative FCF (−¥183m) funded by net financing inflows (+¥191m) indicate reliance on external funding. If profitability remains weak, leverage and refinancing risk could increase, especially if interest rates rise or lenders tighten conditions.

Cash Flow Quality

Operating cash flow was −¥44m against net income of ¥22m, giving OCF/NI of −2.00, signaling poor earnings-to-cash conversion. Free cash flow was −¥183m after ¥139m investing outflows, implying that internal cash generation did not cover reinvestment needs. The gap likely reflects working capital investment, potentially in inventories (¥768m) and/or receivables, typical for bespoke production cycles but still a pressure point. EBITDA of ¥184m offers limited cushion after working capital and capex needs, which explains the dependence on financing cash inflows of ¥191m. Overall, earnings quality is weak this period, and sustainable improvement requires better working capital discipline and operating margin recovery.

Dividend Sustainability

The company paid no dividend (DPS ¥0; payout ratio 0%), which aligns with negative FCF (−¥183m) and modest net income (¥22m). With OCF negative and leverage at 2.67x debt-to-equity, retaining cash appears prudent to support operations and potential inventory/capex needs. FCF coverage of dividends is 0.00x by definition this period. Future distribution capacity will depend on a turnaround in OCF and restoration of operating margins; given current metrics, a conservative policy stance is likely appropriate until cash flow stabilizes.

Risk Assessment

Business Risks:

• Demand cyclicality in discretionary jewelry spending amid macro fluctuations
• Cost inflation for precious metals and gemstones pressuring gross-to-operating margin flow-through
• Labor-intensive bespoke production driving high fixed/semi-fixed SG&A
• Inventory management risk (obsolescence, valuation, and working capital tied up; inventories ¥768m)
• Store network cost base and lease commitments impacting operating leverage
• Domestic market concentration and potential regional demand shocks
• Brand and craftsmanship reputation risks affecting pricing power

Financial Risks:

• High leverage (debt-to-equity 2.67x) magnifying earnings volatility
• Negative operating cash flow (−¥44m) and negative FCF (−¥183m) increasing funding dependence
• Refinancing and interest rate risk despite current interest coverage of 13.8x
• Working capital volatility (OCF/NI −2.00) potentially straining liquidity
• Limited visibility on cash balances (cash reported as unreported in dataset) reducing transparency

Key Concerns:

• Material deterioration in operating income (−60.8% YoY) despite revenue growth
• Thin net margin (0.31%) and low ROE (1.73%) reliant on leverage
• Earnings not converting to cash, necessitating external financing inflows
• Need for SG&A discipline and operating efficiency to restore margins

Investment Implications

Key Takeaways:

• Top-line grew 5.2% YoY, but operating income dropped 60.8%, indicating negative operating leverage
• Strong gross margin (55.7%) is offset by high SG&A, yielding low EBITDA margin (2.6%)
• ROE at 1.73% is driven by leverage rather than margin strength
• OCF/NI of −2.00 and FCF of −¥183m point to weak earnings quality
• Liquidity adequate (current ratio 137.9%, quick ratio 105.5%) but reliant on financing inflows
• Debt-to-equity of 2.67x elevates sensitivity to earnings volatility
• No dividend, appropriately conservative given negative FCF

Metrics to Watch:

• SG&A-to-sales ratio and operating margin trajectory
• OCF/NI and free cash flow recovery
• Inventory turnover and working capital days
• Same-store sales and order backlog in custom jewelry
• Gross margin versus precious metal input costs
• Leverage (net debt/EBITDA if available) and interest coverage
• Asset turnover and DuPont ROE components

Relative Positioning: Within Japanese jewelry retailers/manufacturers, K-Uno exhibits higher gross margins consistent with bespoke value-add but lower scale and weaker operating leverage than larger peers, resulting in inferior EBITDA margins and ROE; financial leverage partly compensates for margin weakness, increasing risk sensitivity.

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
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis