| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3786.2B | ¥3722.0B | +1.7% |
| Operating Income / Operating Profit | ¥632.9B | ¥625.5B | +1.2% |
| Ordinary Income | ¥671.6B | ¥646.2B | +3.9% |
| Net Income / Net Profit | ¥412.6B | ¥378.6B | +9.0% |
| ROE | 10.3% | 10.2% | - |
For the fiscal year ending February 2026, results were: Revenue ¥3,786.2B (YoY +¥64.2B +1.7%), Operating Income ¥632.9B (YoY +¥7.4B +1.2%), Ordinary Income ¥671.6B (YoY +¥25.4B +3.9%), and Net Income attributable to owners of the parent ¥463.5B (YoY +¥8.2B +1.8%), with increases across all profit levels. Revenue growth was driven by the Domestic segment (+5.4%) supported by resilience in existing stores and a shift to higher-value products, while Overseas declined -4.5% due to weakening demand and adverse FX, resulting in modest overall top-line growth. Gross margin improved to 50.7% (from 50.5%, approx. +20bp), aided by pricing discipline and a higher mix of private-label products, but SG&A ratio rose to 34.0% (approx. +30bp) due to higher rents, personnel costs, and executive compensation, causing Operating Margin to slightly decline to 16.7% (from 16.8%, approx. -10bp). At the ordinary income level, non-operating items such as interest income ¥10.5B and FX gains ¥2.5B lifted profits, and a statutory effective tax rate of 29.7% produced the final profit. The balance sheet remains very strong with Cash and Deposits ¥2,007B and an Equity Ratio of 88.1%, but inventories increased to ¥1,065.6B (YoY +¥150.2B) and Operating Cash Flow ¥418.1B slowed by -25.5% YoY. Inventory days extended to about 120 days, and cash conversion efficiency declined (Operating CF / Net Income 0.90x, OCF / EBITDA 0.60x), which is a short-term watch point. Guidance for the next fiscal year is Revenue ¥4,008.0B (+5.9%) and Operating Income ¥656.0B (+3.7%) in a conservative range; Dividends are expected at ¥75 per share annually (Payout Ratio 38.2%), a sustainable level.
Revenue increased YoY by ¥64.2B (+1.7%), driven by Domestic +¥145.6B (+5.4%) offset in part by Overseas -¥51.3B (-4.5%). Domestic sales were supported by recovery in existing-store traffic and a shift to higher-value products (sneakers, outdoor-related items), producing Domestic segment net sales of ¥2,731.6B. Overseas contracted due to weaker demand in Korea and Taiwan, FX headwinds (yen appreciation), and intensified competition leading to lower average spend, resulting in Overseas net sales of ¥1,113.8B. Segment mix is Domestic 71.9%, Overseas 28.1%, concentrating geographic revenue risk domestically. Cost of goods sold was controlled at ¥1,867.2B (49.3% of sales), rising only +1.3% YoY, improving gross margin to 50.7% (approx. +20bp) mainly from pricing discipline and a higher share of private-label/high-margin products. SG&A was ¥1,286.2B (34.0% of sales), up +2.7% YoY, with rent ¥366.4B (prior year ¥355.6B, +3.0%), rising personnel costs including executive compensation, advertising ¥77.1B (prior year ¥78.8B) and packing/transport ¥42.8B (prior year ¥42.8B) largely flat. Depreciation was ¥64.0B (prior year ¥63.0B), reflecting proactive capex (¥136.5B, CapEx/Depreciation 2.13x). Operating Income was ¥632.9B (Operating Margin 16.7%), a modest increase of +1.2% YoY. Non-operating income totaled ¥46.6B (interest income ¥10.5B, dividend income ¥4.8B, FX gains ¥2.5B, etc.), less non-operating expenses ¥7.9B (including FX losses ¥2.3B), lifting Ordinary Income to ¥671.6B (+3.9% YoY). Extraordinary income was ¥0.7B (gain on disposal of fixed assets) and extraordinary losses ¥10.3B (impairment losses ¥7.6B, loss on retirement of fixed assets ¥2.6B), net -¥9.6B, small in scale and not materially distorting recurring earnings. Pre-tax income ¥662.0B less income taxes ¥196.8B (effective tax rate 29.7%) and non-controlling interests ¥1.8B resulted in Net Income attributable to owners of the parent ¥463.5B (Net margin 12.2%, nearly unchanged from prior year 12.2%). Comprehensive income ¥488.2B exceeded net income by ¥75.6B, with other comprehensive income contributions from translation adjustments ¥11.3B and valuation differences on securities ¥11.8B. In conclusion, the company achieved modest revenue growth led by Domestic and margin improvement at gross level, but rising SG&A and weaker Overseas profitability limited operating leverage, resulting in modest increases in profits while Operating Margin edged down slightly.
The Domestic segment posted Sales ¥2,731.6B (YoY +5.4%) and Operating Income ¥564.4B (YoY +6.3%), maintaining a high Operating Margin of 20.7% and accounting for about 89% of consolidated Operating Income, remaining the core business. Recovery in existing-store traffic and a shift to higher-value products boosted gross margin and, combined with improved store productivity, drove profit growth. The Overseas segment had Sales ¥1,113.8B (YoY -4.5%) and Operating Income ¥70.3B (YoY -25.8%), with an Operating Margin of 6.3%, about 14.4 percentage points below Domestic, indicating significant profitability gap. Declines were driven by FX headwinds, weaker demand in Korea and Taiwan, increased local labor and logistics costs, and insufficient SG&A control. Overseas Operating Margin at 6.3%—less than one-third of Domestic—creates a profitability gap limiting consolidated ROE and growth ceiling. With Domestic sales composition 71.9% versus Operating Income composition 89.2%, profit concentration is very high and geographic diversification as a hedge is limited.
Profitability: Operating Margin 16.7% (prior 16.8%) far exceeds the industry median 4.6% (IQR 1.7–8.2%), reflecting pricing power and high gross-margin retail model. Net Margin 12.2% (prior 12.2%) ranks above industry median 3.3% (IQR 0.9–5.8%), indicating high quality of recurring earnings. ROE 11.6% (calculated = Net Margin 12.2% × Total Asset Turnover 0.83 × Financial Leverage 1.14) exceeds industry median 5.9% (IQR 2.6–12.0%) but is slightly elevated relative to disclosed historical ROE (10.3% for 2026). DuPont decomposition: Net Margin stable, Total Asset Turnover 0.83x (Revenue ¥3,786B / Total Assets ¥4,552B, down from prior 0.89x) declined due to inventory build, Financial Leverage 1.14x (Total Assets ¥4,552B / Equity ¥4,010B) is very low and stable; ROE improvement opportunity lies in normalizing Total Asset Turnover. ROIC 8.1% (calculated = Operating Income ¥633B × (1-0.30) / Invested Capital ¥3,892B; Invested Capital = Equity ¥3,980B + Interest-bearing Debt ¥12B) is roughly in line with industry median 8% (IQR 3–18%), indicating adequate capital efficiency even under near debt-free operations.
Cash Quality: Operating CF / Net Income 0.90x (¥418B / ¥463B) is below the 1.0x benchmark, indicating mild lag in cash conversion of earnings. OCF / EBITDA 0.60x (Operating CF ¥418B / EBITDA ¥697B, EBITDA = Operating Income ¥633B + Depreciation ¥64B) is below the 0.7x benchmark, with inventory increases and working capital deterioration pressuring cash generation. Free Cash Flow ¥264.1B (Operating CF ¥418.1B - Investing CF ¥154.0B) covers Dividends ¥178B and CapEx ¥136.5B with surplus, so short-term liquidity concerns are limited.
Investment Efficiency: Total Asset Turnover 0.83x (prior 0.89x) is below industry median 1.17x (IQR 0.85–1.55), primarily due to elevated inventory (¥1,065.6B, 23.4% of total assets). Inventory days approx. 120 days (Inventory ¥1,065B ÷ COGS ¥1,867B × 365) is prolonged versus industry median 65.7 days (IQR 17.4–111.4), revealing inventory stagnation risk. CapEx / Depreciation 2.13x (¥136.5B / ¥64.0B) exceeds industry median 1.16x (IQR 0.75–1.92), indicating aggressive store and asset renewal for medium-to-long-term growth.
Financial Soundness: Equity Ratio 88.1% (Equity ¥4,010B / Total Assets ¥4,552B) far exceeds industry median 50.2% (IQR 40.1–63.6%), indicating extremely strong financial foundation. Current Ratio 658.8% (Current Assets ¥3,448B / Current Liabilities ¥523B) and Quick Ratio 455.3% (Quick Assets ¥2,382B / Current Liabilities ¥523B) both far exceed industry median 1.84x (IQR 1.26–2.54), showing exceptional short-term liquidity. Net Debt -¥1,982B (Cash & Deposits ¥2,007B - Interest-bearing Debt ¥12B - Short-term Investments ¥144B) reflects net cash position; Net Debt / EBITDA -2.84x (industry median -0.59x, IQR -2.61–1.32) places the company among the most solvent in the industry. Interest Coverage 1,808x (Operating Income ¥633B / Interest Expense ¥0.35B) indicates minimal interest burden and negligible financial risk.
Operating Cash Flow decreased to ¥418.1B (prior ¥561.3B, -25.5%), primarily due to working capital deterioration. Operating CF before working capital changes (subtotal) was ¥596.2B (prior ¥750.4B), pressured by lower profit levels and corporate tax payments ¥188.7B (prior ¥198.5B). Working capital changes included Inventory increase -¥141.8B and Trade Receivables increase -¥19.5B which consumed cash, partially offset by Trade Payables increase +¥41.6B. Consequently Operating CF / Net Income 0.90x is below the 1.0x benchmark, indicating delayed cash realization of profits. Investing Cash Flow was -¥154.0B, led by CapEx -¥136.5B (prior -¥100.5B, +35.8%), signaling intensified investment in new stores and existing-store renewals. Payments for business transfers -¥23.0B reflect M&A-related cash outflows. Acquisition of marketable securities -¥33.9B and proceeds from sales ¥0.8B resulted in net -¥33.1B, indicating portfolio adjustments. Free Cash Flow ¥264.1B (Operating CF ¥418.1B + Investing CF -¥154.0B) covered dividend payments ¥178.2B (Payout Ratio 38.2%) and CapEx ¥136.5B with residual, supporting financial sustainability. Financing Cash Flow was -¥183.8B, mainly dividend payments -¥178.2B and net repayment of short-term borrowings -¥8.0B, reducing interest-bearing debt and emphasizing cash holdings. Cash and cash equivalents at period-end were ¥2,071.7B (prior ¥1,976.0B, +¥95.7B), with FX effects contributing +¥15.5B. From a cash conversion perspective, OCF / EBITDA 0.60x is below the 0.7x benchmark and inventory normalization is an urgent issue. Working capital turnover days are Inventory 120 days + Accounts Receivable turnover 17.8 days - Accounts Payable turnover 31.7 days = approx. 106 days, well above industry median 39.6 days (IQR 4.0–73.4), so improving working capital efficiency is key to enhancing capital productivity.
Operating Income ¥632.9B is the core of earnings. Non-operating income ¥46.6B (1.2% of sales) consists of interest income ¥10.5B, dividend income ¥4.8B, FX gains ¥2.5B, etc., and is limited in scale. Non-operating income is well below a 5% revenue threshold, so reliance on recurring operations is high. Extraordinary items net -¥9.6B (extraordinary income ¥0.7B - extraordinary losses ¥10.3B) included one-off impairment losses ¥7.6B and loss on retirement of fixed assets ¥2.6B, but the amount is minor (1.4% of Ordinary Income ¥671.6B) and limited in impact on final profit. The gap from Ordinary Income to Net Income is explained by pre-tax profit ¥662.0B vs. Net Income attributable to owners of the parent ¥463.5B, primarily due to effective tax rate 29.7% and non-controlling interests ¥1.8B; there are no accounting irregularities. The accrual ratio ((Net Income ¥463B - Operating CF ¥418B) / Total Assets ¥4,552B) ≈ 1.0%, a low level, indicating relatively good cash backing for earnings. However, Operating CF / Net Income 0.90x and OCF / EBITDA 0.60x below benchmarks signal that inventory increases (-¥141.8B) and accounts receivable increases (-¥19.5B) have worsened working capital and lowered cash quality. Comprehensive income ¥488.2B exceeded Net Income ¥463.5B by ¥24.7B, supported by Other Comprehensive Income ¥23.0B (translation adjustments ¥11.3B, valuation differences on securities ¥11.8B), indicating capital valuation gains. From a sustainability viewpoint, high Operating Margin 16.7% and stability at Ordinary Income level are positive, but inventory stagnation raising potential markdown or valuation loss risk could impair accrual quality. Overall, recurring earnings dominate and one-off items are minor, but cash conversion delays remain a key monitoring point for earnings quality.
Full-year guidance: Revenue ¥4,008.0B (YoY +5.9%), Operating Income ¥656.0B (YoY +3.7%), Ordinary Income ¥674.0B (YoY +0.4%), Net Income attributable to owners of the parent ¥464.0B (YoY +0.1%), a conservative outlook with revenue and operating profit growth but largely flat final profit. Progress vs. current results: Revenue 94.5% (¥3,786B / ¥4,008B), Operating Income 96.5% (¥633B / ¥656B), Ordinary Income 99.6% (¥672B / ¥674B), Net Income 99.9% (¥463.5B / ¥464B), all exceeding standard progress rates, leaving very limited upside for H2. Forecast EPS ¥187.39 vs. current period actual ¥187.17 nearly achieved, and forecast dividend ¥40 annual (including interim ¥35 actual) implies a Payout Ratio of 38.2%, maintaining sound range. The assumed acceleration to +5.9% revenue growth (from this period +1.7%) relies on Overseas demand bottoming and continued resilience in Domestic existing stores. Operating Income growth +3.7% is below revenue growth, implying continued SG&A control pressure. Low growth in Ordinary Income (+0.4%) reflects conservative assumptions on non-operating items and FX risk, and flat Net Income assumes stable effective tax rate and non-recurrence of one-offs. Key to achieving guidance is improvement in Overseas segment profitability (recovering from 6.3% Operating Margin) and normalization of inventory turnover (improving cash conversion); failure to realize these would heighten downside risk in H2.
Annual dividend is ¥75 (interim ¥35, year-end forecast ¥40), with Payout Ratio 38.2% (based on Net Income attributable to owners of the parent ¥463.5B), set at a level sustainable even with slower profit growth. Total dividend amount approx. ¥178B (issued shares 247,619 thousand - treasury shares 2 thousand) yields coverage of Free Cash Flow ¥264.1B at 1.48x, easily funded from internal cash. Prior year dividend was ¥33 (disclosed as annual dividend), so the increase to ¥75 this period reflects significant shareholder return enhancement. Payout Ratio 38.2% slightly exceeds industry median 27% (IQR 20–34%), indicating an active shareholder return stance. No share buyback was disclosed; returns are concentrated in dividends. Total Return Ratio equals the Payout Ratio at 38.2%, with the remaining ~62% retained for growth investments (CapEx/Depreciation 2.13x) and financial buffer. With Net Cash ¥1,982B and Cash & Deposits ¥2,007B, dividend sustainability is very high. Next fiscal year forecast dividend ¥40 (including interim ¥35 actual on an annualized basis) implies maintaining payout around 38%, preserving room for dividend increases as profits grow. From a dividend policy perspective, the company leverages strong Equity Ratio 88.1% and solid finances to prioritize stable dividends and maintain a medium-to-long-term trend of dividend increases.
Industry Position (reference, company analysis): Within retail, the company ranks high on profitability and financial soundness but shows room for improvement in asset efficiency. Operating Margin 16.7% far outperforms industry median 4.6% (IQR 1.7–8.2%, n=47), reflecting high gross margins and pricing power. Net Margin 12.2% also ranks above industry median 3.3% (IQR 0.9–5.8%). ROE 11.6% (calculated) exceeds industry median 5.9% (IQR 2.6–12.0%), indicating good capital efficiency, but Total Asset Turnover 0.83x is below industry median 1.17x (IQR 0.85–1.55), with elevated inventory levels constraining asset efficiency. Inventory days approx. 120 days is about 1.8x the industry median 65.7 days (IQR 17.4–111.4, n=37), placing the company in the lower ranks within the sector. Equity Ratio 88.1% far exceeds industry median 50.2% (IQR 40.1–63.6%), and Current Ratio 658.8% greatly exceeds the industry median 1.84x (IQR 1.26–2.54, n=41). Net Cash position results in Net Debt / EBITDA -2.84x (industry median -0.59x, IQR -2.61–1.32, n=38), placing the company among the most financially secure. Payout Ratio 38.2% is above industry median 27% (IQR 20–34%, n=35), showing proactive shareholder returns. CapEx / Depreciation 2.13x exceeds industry median 1.16x (IQR 0.75–1.92, n=39), indicating strong appetite for growth investment. Overall, high profitability and strong finances are clear, but improving inventory efficiency and Overseas profitability will further strengthen relative industry positioning.
Key points: First, maintenance of high Operating Margin 16.7% and Net Margin 12.2%. Gross Margin improvement to 50.7% stems from pricing discipline and a shift to higher-value products, which is structurally positive and likely sustainable in the short term. However, SG&A ratio rising to 34.0% (higher rent and personnel fixed costs) limits operating leverage and could pressure margins if sales growth decelerates. Second, extremely strong financial position with Equity Ratio 88.1% and Cash & Deposits ¥2,007B. With Net Cash ¥1,982B, the company can combine Payout Ratio 38.2% (coverage 1.48x) and active CapEx (CapEx/Depreciation 2.13x), delivering high downside resilience. Reduction in short-term borrowings (-¥8.0B) and Interest Coverage 1,808x show minimal interest sensitivity and effectively no financial risk. Third, prolonged Inventory Days approx. 120 days and deteriorating cash conversion efficiency (Operating CF / Net Income 0.90x, OCF / EBITDA 0.60x) are near-term watch points. Inventory build to ¥1,065.6B carries future markdown/valuation risk that could undermine Gross Margin sustainability. Working capital turnover approx. 106 days far exceeds industry median 39.6 days, indicating significant room for capital efficiency improvement. Fourth, the profitability gap between Domestic (Operating Margin 20.7%) and Overseas (6.3%) forms a cap on group growth. Overseas accounts for 28.1% of sales but only 11.1% of Operating Income; recovery in demand and cost control overseas is key to achieving next-year guidance. Geographic diversification as a hedge is limited; high domestic dependence (89% of Operating Income) implies vulnerability to economic cycles. Overall, the company’s high profitability and strong balance sheet are positive, but inventory compression and Overseas profitability improvement are catalysts for future re-rating.
This report was generated by AI analyzing XBRL financial statement data to produce an automated earnings analysis. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the firm from public financial statements. Investment decisions are your own responsibility; consult a professional advisor as necessary.