| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2455.5B | ¥2371.6B | +3.5% |
| Operating Income / Operating Profit | ¥170.7B | ¥169.2B | +0.9% |
| Ordinary Income | ¥177.7B | ¥174.7B | +1.7% |
| Net Income | ¥89.6B | ¥102.8B | -12.8% |
| ROE | 5.6% | 6.6% | - |
For the fiscal year ended February 2026, Revenue was ¥2455.5B (YoY +¥83.9B +3.5%), Operating Income was ¥170.7B (YoY +¥1.5B +0.9%), Ordinary Income was ¥177.7B (YoY +¥3.0B +1.7%), and Net Income Attributable to Parent Company Shareholders was ¥106.8B (YoY -¥6.9B -6.1%; Net Income before adjustment for non-controlling interests was ¥89.6B, YoY -12.8%). While top-line growth and operating profitability were maintained, profit growth lagged at the operating stage and final net profit declined. Cost of sales ratio rose sharply to 71.1% (prior year 63.0%), reducing gross margin to 28.9% (prior year 29.2%, -0.3pt). SG&A ratio edged up to 30.1% (prior year 29.9%, +0.2pt), compressing operating margin to 7.0% (prior year 7.1%, -0.1pt). Non-operating items (interest income ¥1.7B, etc.) supported growth at the ordinary income level, but an increase in extraordinary losses of ¥11.7B (loss on disposal of fixed assets ¥11.2B, impairment loss ¥0.5B) and an effective tax rate of 29.9% reduced net income. Meanwhile, Operating Cash Flow (OCF) rose substantially to ¥316.2B (YoY +111.1%), with an increase in accounts payable of ¥92.3B contributing to working capital improvement. Cash and deposits increased to ¥795.3B (YoY +¥196.9B), further strengthening financial soundness. By segment, Retail reported Revenue of ¥2361.9B (+3.4%) and Operating Income of ¥148.6B (-2.5%), lowering margin to 6.3%, while the Convenience Store segment delivered high growth and high profitability with Revenue ¥93.6B (+8.2%) and Operating Income ¥22.1B (+31.6%), margin 23.6%, supporting consolidated profit.
Revenue: Revenue reached ¥2455.5B (+3.5%), showing steady growth. By segment, Retail was ¥2361.9B (96.2% of total, +3.4%) and Convenience Store was ¥93.6B (3.8% of total, +8.2%). Retail likely grew through both same-store sales and new openings across apparel, household goods, and food, but the decline in gross margin (discussed below) suggests price competition or a change in product mix. Convenience Store expanded sales while maintaining high profitability under a franchise revenue model.
Profitability: Operating Income was ¥170.7B (+0.9%), a marginal increase. Cost of sales was ¥1545.1B (increase of ¥395.6B), with cost of sales ratio jumping to 71.1% from the prior year, which may reflect a change in accounting treatment; the resulting gross margin of 28.9% (prior year 29.2%, -0.3pt) represents a small decline. SG&A was ¥739.7B (+¥30.8B +4.4%), pushing the SG&A ratio to 30.1% (+0.2pt), increasing faster than revenue. Key SG&A items: salaries and allowances ¥69.0B (prior ¥64.8B, +6.5%), depreciation ¥69.2B (prior ¥66.7B, +3.7%), rents ¥53.8B (prior ¥53.2B, +1.1%), utilities ¥46.0B (prior ¥48.2B, -4.6%); payroll increases are notable. Operating margin contracted to 7.0% (-0.1pt), driven mainly by Retail margin deterioration (6.3%, down from 6.7%, -0.4pt). Non-operating income totaled ¥7.8B (interest income ¥1.7B, dividend income ¥0.9B, etc.) against non-operating expenses ¥0.8B (interest expense ¥0.2B, etc.), yielding Ordinary Income ¥177.7B (+1.7%). Extraordinary losses rose to ¥11.7B (loss on disposal of fixed assets ¥11.2B, impairment loss ¥0.5B) from ¥4.6B prior, likely one-off costs related to store refurbishments and asset replacement. Profit before tax was ¥166.0B (prior ¥170.1B, -2.4%); after corporate taxes ¥49.6B (effective tax rate 29.9%) and non-controlling interests ¥9.7B, Net Income Attributable to Parent Company Shareholders was ¥106.8B (-6.1%). Net Income before non-controlling interest adjustment was ¥89.6B (-12.8%), reflecting the impact of increased extraordinary losses. In summary, revenue and operating income increased, but Retail gross margin deterioration and higher SG&A constrained operating profit growth, and higher extraordinary losses pressured the bottom line.
Retail segment: Revenue ¥2361.9B (prior ¥2285.1B, +3.4%), Operating Income ¥148.6B (prior ¥152.5B, -2.5%), margin 6.3% (prior 6.7%, -0.4pt). Sales expanded steadily, but margin deteriorated due to gross margin decline and higher SG&A. Segment assets were ¥2109.3B (prior ¥1857.6B, +13.5%), reflecting increases in tangible fixed assets from openings/refurbishments.
Convenience Store segment: Revenue ¥93.6B (prior ¥86.5B, +8.2%), Operating Income ¥22.1B (prior ¥16.8B, +31.6%), margin 23.6% (prior 19.4%, +4.2pt). The franchise revenue model’s high profitability stands out, and store expansion plus operational efficiencies drove substantial margin improvement. Segment assets were ¥94.7B (prior ¥85.8B, +10.4%). Inter-segment eliminations were minor; of consolidated Operating Income ¥170.7B, Retail accounted for ~87% and Convenience Store ~13%. High-margin CVS growth partially offset Retail margin deterioration.
Profitability: Operating margin 7.0% (prior 7.1%, -0.1pt), Net profit margin 4.3% (Net Income Attributable to Parent Company Shareholders ¥106.8B / Revenue ¥2455.5B; prior 4.8%, -0.5pt), ROE 5.6% (per data sheet; down from the 7.0% range prior year). Gross margin 28.9% (prior 29.2%, -0.3pt), SG&A ratio 30.1% (prior 29.9%, +0.2pt) — cost pressures are weighing on profitability. Retail margin deterioration to 6.3% (prior 6.7%) is the main driver.
Cash quality: Operating Cash Flow ¥316.2B is 3.5x Net Income ¥89.6B. OCF/EBITDA ratio is 1.32x (EBITDA = Operating Income ¥170.7B + Depreciation ¥69.2B = ¥239.9B), indicating excellent cash conversion. The accrual ratio (Net Income ¥89.6B - OCF ¥316.2B) / Total Assets ¥2172.7B = -10.4% is negative, highlighting cash generation from working capital improvement.
Investment efficiency: Total Asset Turnover 1.13x (Revenue ¥2455.5B / Average Total Assets ¥2174.8B, down from 1.24x), Inventory turnover days 23.3 days (average inventory ¥15.62B / daily cost of goods sold ¥0.67B) — significantly better than industry median 65.7 days, indicating high efficiency. CapEx/Depreciation 56.2/69.2 = 0.81x, below industry median 1.16x, suggesting emphasis on leveraging existing assets.
Financial soundness: Equity Ratio 74.1% (prior 78.7%, -4.6pt), well above industry median 50.2%. Current Ratio 220% (Current Assets ¥1069.1B / Current Liabilities ¥485.0B), Quick Ratio 188% (Quick Assets ¥913.0B / Current Liabilities ¥485.0B), indicating solid liquidity. D/E ratio (interest-bearing debt ¥0.26B [lease liabilities included] / Equity ¥1564.1B) = 0.002x, effectively debt-free. Interest coverage (OCF ¥316.2B / Interest Paid ¥0.2B) = 1,581x, showing no concerns on interest coverage.
Operating Cash Flow was ¥316.2B (prior ¥150.0B, +111.1%). Profit before tax ¥166.0B plus depreciation ¥69.2B, impairment ¥0.5B, and loss on disposal of fixed assets ¥11.2B and other non-cash charges were added back. Changes in working capital were a major driver, with accounts payable increase of ¥92.3B being the largest positive contributor. Inventory increase -¥4.5B and accounts receivable increase -¥7.6B were minor; the large increase in payables likely reflects both higher purchases and optimized payment terms. After corporate taxes paid ¥50.3B, the subtotal for operating activities reached ¥366.4B. Investing Cash Flow was -¥64.9B (prior -¥62.0B), mainly capital expenditures -¥56.2B (prior -¥61.1B). Given the increase in construction-in-progress ¥33.2B (prior ¥48.0B), store openings/refurbishments are ongoing but somewhat scaled back vs. prior year. Intangible asset acquisitions -¥1.1B and other investing activities ¥1.8B resulted in investing CF roughly in line with prior year. Free Cash Flow was ¥251.3B (OCF ¥316.2B + Investing CF -¥64.9B), a large improvement from prior year ¥88.0B. Financing Cash Flow was -¥54.4B (prior -¥37.9B), including dividends paid -¥49.4B (parent company dividends -¥49.4B, non-controlling interests -¥4.6B), share buybacks ¥0, share disposal proceeds ¥0.3B, and lease liability repayments -¥0.4B. Net cash and cash equivalents increased by ¥196.9B from ¥598.4B at the beginning of the period to ¥795.3B at period-end, expanding liquidity buffers.
Earnings quality is high. Operating Income ¥170.7B was generated from core retail and CVS operations; non-operating income ¥7.8B (interest income ¥1.7B, dividend income ¥0.9B, etc., 0.3% of Revenue) is minor, indicating high reliance on core operations. Extraordinary losses of ¥11.7B (loss on disposal of fixed assets ¥11.2B, impairment loss ¥0.5B) increased substantially from ¥4.6B prior; these are presumed one-off costs related to store refurbishments and asset replacement and may recur depending on future opening/refurbishment plans, though the impact on recurring earnings is limited. OCF ¥316.2B is 3.5x Net Income ¥89.6B, and an accrual ratio of -10.4% indicates very strong cash backing of profits. Accounts payable increase ¥92.3B materially improved working capital, likely through intentional payment-term management. Comprehensive income ¥117.9B (Parent company attributable ¥108.2B) exceeded Net Income Attributable to Parent Company Shareholders ¥106.8B, with other securities valuation differences ¥2.2B contributing slightly; the difference is small and does not materially affect underlying earnings. The gap between Ordinary Income ¥177.7B and profit before tax ¥166.0B is explained by extraordinary losses, indicating transparency in profit structure.
Full-year guidance for the fiscal year ending February 2026: Revenue ¥2572.7B (vs. actual ¥2455.5B, +4.8%), Operating Income ¥175.3B (vs. actual ¥170.7B, +2.7%), Ordinary Income ¥179.8B (+1.2%), Net Income Attributable to Parent Company Shareholders ¥110.3B (vs. actual ¥106.8B, +3.3%; the data-sheet Net Income forecast ¥98.8B is presumed to be pre-adjustment for non-controlling interests). Progress rates are high: Revenue 95.4%, Operating Income 97.4%, Ordinary Income 98.8%, Parent Company Net Income 96.8% — all over 90% completion. The plan assumes continued revenue and profit growth in the remaining period; improvement in Retail gross margin and SG&A control, plus continued high growth in Convenience Store, are key. If extraordinary losses normalize and the effective tax rate stabilizes, achieving the parent company net income target is feasible. Dividend guidance is shown as ¥0 in forecasts, but actual was a year-end dividend of ¥125 (including a commemorative ¥25), so dividend disclosure in guidance appears undetermined.
Year-end dividend was ¥125 (ordinary dividend ¥100, 25th anniversary commemorative dividend ¥25), with no interim dividend, resulting in total annual dividend ¥125. The dividend was maintained from prior year ¥125, but inclusion of the commemorative ¥25 implies a substantive increase. Payout Ratio is ¥125 / EPS ¥172.67 = 72.4% (the data sheet stated 43.1%, presumed to be based on Net Income before non-controlling interest adjustment), well above industry median 27% but supported by Free Cash Flow. Total dividends paid were ¥49.4B (parent company) + ¥4.6B (non-controlling interests) = ¥54.0B; with Free Cash Flow ¥251.3B, FCF coverage is 4.7x, indicating ample capacity. Excluding the commemorative ¥25, base dividend ¥100 implies a payout ratio of 57.9%, suggesting sustainability. No share buybacks were executed; shareholder returns are concentrated on dividends. Shares outstanding at period-end were 63.96M less treasury stock 2.12M = 61.85M shares, nearly identical to the period average 61.84M, indicating no dilution.
Industry positioning (reference, company analysis): Compared with median of the retail industry (retail, n=47 companies, FY2025), the company’s operating margin 7.0% exceeds the industry median 4.6% by +2.4pt, and net margin 4.3% exceeds industry median 3.3% by +1.0pt, indicating a high-profitability profile. Equity Ratio 74.1% far exceeds industry median 50.2%, positioning the company among the most financially sound. ROE 5.6% is slightly below industry median 5.9%, mainly due to low leverage from high equity ratio; Total Asset Turnover 1.13x (industry median 1.17x) also contributes. Inventory turnover days 23.3 is significantly below the industry median 65.7 days, reflecting superior inventory management. Payout Ratio 72.4% (including commemorative dividend) is well above the industry median 27%, but with FCF coverage 4.7x, sustainability is supported. OCF/Net Income ratio 3.5x and cash conversion metrics exceed industry median 1.57x, reflecting high cash quality. CapEx/Depreciation 0.81x is below industry median 1.16x, indicating a growth strategy focused on utilizing existing assets. Revenue growth +3.5% trails industry median +4.3% slightly but remains stable. Overall, the company combines high profitability, strong balance sheet, and robust cash generation, ranking among top companies in the sector, though there is room to improve ROE and growth.
Three key items to watch: First, the large increase in OCF to ¥316.2B (YoY +111.1%) and accumulation of cash deposits to ¥795.3B demonstrate successful accounts payable management and working capital efficiency, materially improving financial flexibility. The accounts payable increase of ¥92.3B may reflect intentional payment-term optimization; monitor sustainability of OCF and supplier relationships. Second, the Convenience Store segment’s high growth and profitability (Revenue +8.2%, Profit +31.6%, margin 23.6% +4.2pt) acts as a corporate buffer offsetting Retail margin deterioration; continued net additions of CVS stores and maintenance of margins are key to stabilizing consolidated results. Third, the simultaneous deterioration in Retail gross margin -0.3pt, SG&A ratio +0.2pt, and margin -0.4pt suggests combined effects of price competition, product mix changes, and higher personnel costs; recovery will require increasing average spend at existing stores and tighter expense control. Extraordinary losses ¥11.7B are largely one-off but may recur with ongoing openings/refurbishments. Dividend ¥125 (including commemorative ¥25) is high but fully covered by FCF; base dividend sustainability is strong and there remains scope for further increases if earnings grow next fiscal year.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on publicly available financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.