INTERMESTIC INC. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥38.33B
• Operating Income: ¥6.22B
• Net Income: ¥3.73B
• EPS: ¥138.82

Income Statement

Balance Sheet

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

Verdict: A solid Q3 with double-digit top-line and operating profit growth, modest operating margin expansion, and robust balance sheet strength, albeit with limited cash flow disclosure. Revenue rose 14.0% YoY to 383.25, while operating income increased 14.6% YoY to 62.21, outpacing sales by a small margin. Gross profit reached 251.36, implying a 65.6% gross margin, supporting healthy profitability in the core business. Operating margin stood at 16.2%, up roughly 9 bps YoY (prior ~16.15%), indicating slight operating leverage. Net income was 42.48 (+13.8% YoY), translating to an 11.1% net margin, essentially stable with a marginal ~2 bps compression versus last year. The effective tax rate was 31.1%, a notable drag on bottom-line flow-through. DuPont ROE printed at 16.3% (Net margin 11.1% × Asset turnover 1.11 × Leverage 1.32x), reflecting strong profitability with moderate leverage. Liquidity remains a clear strength: current ratio 334% and cash/deposits of 192.53 against short-term loans of 10.0 minimize refinancing risk. Interest coverage is exceptionally high at 248.8x, underscoring low financial risk. ROIC (54.6%) is outstanding, consistent with an asset-light retail model and strong margins. Earnings quality cannot be fully assessed due to unreported operating cash flow; however, low receivables (4.78) and a cash-heavy balance sheet suggest limited collection risk. There are data inconsistencies between cost of sales and gross profit, and between operating/non-operating lines and ordinary income, so margin and profit bridge interpretations should be made cautiously. Dividend capacity appears ample with a calculated payout ratio of 29.0%, though FCF coverage is not verifiable. Forward-looking, sustaining double-digit growth will hinge on maintaining gross margin discipline and SG&A efficiency while navigating consumer demand elasticity and import cost/FX exposure. Overall, fundamentals are strong with slight operating leverage benefits, but confirmation via cash flow disclosure and clarification of line-item inconsistencies would bolster confidence.

Profitability Analysis

ROE decomposition (DuPont): ROE 16.3% = Net Profit Margin (11.1%) × Asset Turnover (1.110x) × Financial Leverage (1.32x). The most notable YoY change is the small expansion in operating margin (+9 bps), while net margin is roughly flat (-2 bps), and leverage remains conservative. Business drivers: sales growth of 14.0% with stable gross margin (65.6%) and controlled SG&A ratio supported operating leverage; the high effective tax rate (31.1%) capped net margin upside. Sustainability: gross margin resilience appears supported by brand/pricing power and mix, but continued leverage depends on SG&A discipline as scale benefits moderate. Warning flags: we cannot verify SG&A growth vs revenue growth due to missing YoY SG&A details; watch for any acceleration in SG&A outpacing sales in coming quarters. Additional notes: non-operating impact is minimal (non-operating income ratio 0.1%), implying core profit quality is driven by operations rather than financial income.

Growth Assessment

Revenue growth of 14.0% YoY indicates healthy demand and/or footprint expansion, consistent with resilient consumer spend in eyewear retail. Operating income growth of 14.6% slightly outpaced sales, evidencing modest operating leverage. Net income grew 13.8%, largely tracking operating trends with a stable tax rate drag. Gross margin at 65.6% signals maintained pricing/mix advantages; sustaining this level will be key to protecting profitability as labor and rent costs rise. Ordinary income grew faster than sales (+16.1% YoY) despite minimal non-operating gains, reinforcing the quality of growth. With asset turnover at 1.11x, scale gains are present but not excessive; store productivity and same-store sales will be key to incremental upside. ROIC at 54.6% suggests high return discipline and efficient invested capital deployment, supportive of continued reinvestment capacity. Outlook hinge points: consumer discretionary trends, FX/import costs (materials and frames), and wage/rent inflation. Pipeline considerations: any store expansion cadence and digital/omnichannel contribution could sustain double-digit growth, but tougher comps may temper growth rates. Data limitations (no segment detail, no OCF) constrain visibility into growth quality across channels and formats.

Financial Health

Liquidity is very strong with current ratio 334% and quick ratio 334%, comfortably above benchmarks; no warning triggers (Current Ratio well >1.0). Cash and deposits of 192.53 exceed short-term loans of 10.0 by a wide margin, minimizing maturity mismatch risk. Total liabilities are 84.36 against equity of 261.00, implying a conservative capital structure (D/E 0.32x); no warning (D/E < 2.0). Interest coverage is exceptionally high at 248.8x, indicating negligible interest burden risk. Working capital is ample at 185.20, and low receivables (4.78) reduce credit risk. Noncurrent liabilities are modest (5.31), suggesting limited long-dated obligations; off-balance sheet commitments are not disclosed in the data provided. Equity base remains solid with retained earnings of 154.97 supporting financial flexibility. Overall solvency and liquidity profiles are robust, with no evident refinancing or covenant pressures.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be assessed; this is a key limitation for earnings quality analysis. Free cash flow and capex are also unreported, preventing verification of cash coverage for dividends and growth investments. Qualitative indicators are favorable: cash-heavy balance sheet, low receivables, and modest debt suggest limited accrual strain and low working capital risk. Without inventory disclosure, we cannot evaluate inventory build/turnover or potential working capital timing effects. No evidence of working capital manipulation is observable from the available data, but confirmation awaits OCF disclosure. Until cash flow statements are available, treat earnings quality assessment as incomplete despite supportive balance sheet signals.

Dividend Sustainability

The calculated payout ratio is 29.0%, comfortably below the 60% benchmark and consistent with sustainable distributions. Absolute dividend amounts and DPS by quarter are unreported, and FCF coverage cannot be calculated due to missing OCF/capex data. Cash reserves (192.53) and low leverage (D/E 0.32x) imply high near-term capacity to fund dividends. Given ROE of 16.3% and ROIC of 54.6%, internal reinvestment opportunities appear attractive; management may balance growth capex with a moderate payout policy. Policy outlook: with earnings growth in double digits and a conservative balance sheet, a stable to modestly progressive dividend trajectory is plausible, subject to confirmation of cash generation when disclosed.

Risk Assessment

Business Risks:

• Consumer demand volatility in discretionary eyewear affecting same-store sales and ticket size
• Gross margin sensitivity to product mix, promotions, and private label penetration
• Cost inflation (wages, rent, logistics) pressuring SG&A and operating leverage
• Supply chain and FX exposure on imported frames and materials impacting COGS
• Execution risk in store expansion and omnichannel integration

Financial Risks:

• Limited visibility due to unreported cash flow statements (OCF/FCF unknown)
• Tax rate volatility (effective tax rate 31.1%) affecting net margin
• Potential inventory risk (levels and turns not disclosed) could tie up cash if demand softens
• Data inconsistencies between line items (COGS vs gross profit; ordinary vs operating/non-op) may mask underlying trends

Key Concerns:

• Sustainability of modest operating leverage if SG&A growth accelerates
• FX depreciation increasing import costs and compressing gross margin
• Dependence on domestic market dynamics with limited geographic diversification disclosed

Investment Implications

Key Takeaways:

• Healthy double-digit growth with slight operating margin expansion (~+9 bps YoY)
• Strong ROE (16.3%) and outstanding ROIC (54.6%) with conservative leverage
• Balance sheet strength (cash 192.53 vs short-term loans 10.0) reduces financial risk
• Dividend capacity ample with 29% payout, though FCF confirmation is pending
• Earnings quality assessment incomplete due to absent OCF/FCF disclosures

Metrics to Watch:

• OCF and FCF conversion versus net income (target OCF/NI ≥ 1.0)
• Gross margin trajectory and FX sensitivity
• SG&A ratio and wage/rent inflation impacts
• Same-store sales and store productivity metrics
• Inventory levels and turnover (once disclosed)
• Effective tax rate normalization

Relative Positioning: Within Japan consumer discretionary/retail peers, the company exhibits above-average profitability (GPM ~66%, OPM ~16%), superior ROIC, and a stronger liquidity profile, offset by limited cash flow disclosure and typical retail exposure to demand and FX-driven COGS volatility.

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