HARD OFF CORPORATION Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥17.26B
• Operating Income: ¥1.33B
• Net Income: ¥1.03B
• EPS: ¥66.58

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

Hard Off Corporation (2674) delivered FY2026 Q2 consolidated results under JGAAP showing resilient top-line momentum but compressed profitability. Revenue rose 6.8% year over year to ¥17.26bn, underscoring steady demand for the company’s reuse formats. Gross profit totaled ¥11.09bn, implying a high gross margin of 64.3%, consistent with a buy-sell/consignment-heavy business model and disciplined procurement. Despite revenue growth, operating income declined 13.3% YoY to ¥1.33bn, placing the operating margin at roughly 7.7% and indicating cost pressure and/or negative mix effects. Ordinary income was ¥1.43bn, benefitting modestly from non-operating gains (ordinary income exceeded operating income by about ¥0.10bn), while interest expense remained de minimis at ¥6.77m. Net income came in at ¥0.93bn, down 9.4% YoY, resulting in a net margin of 5.36%. The DuPont bridge indicates ROE of 5.06%, driven by a mid-single-digit net margin, asset turnover of 0.624x, and conservative financial leverage of 1.51x. Liquidity appears strong: the current ratio is 230% with working capital of ¥7.88bn, implying ample near-term flexibility. Leverage is modest with a reported debt-to-equity ratio of 0.40x and interest coverage of 196x, suggesting low solvency risk. Effective tax rate by reconstruction is approximately 37% (tax expense of ¥0.549bn over estimated pre-tax income of roughly ¥1.474bn), higher than Japan’s statutory baseline when including local taxes and suggesting a normalizing tax burden. Cash flow statements (OCF/FCF) and several balance sheet details (e.g., inventories, cash) are unreported in the XBRL, limiting assessment of earnings-to-cash conversion and working capital dynamics. Dividend information is also unreported for the period; therefore, payout sustainability must be inferred from earnings capacity and balance sheet strength rather than cash data. While some reported headline ratios in the provided metrics default to zero due to missing data, the available non-zero data points support a view of stable revenue growth, healthy gross economics, and tight but adequate operating profitability. Overall, the company maintains a sound financial position, with pressure centered on operating cost control and potential negative operating leverage in the quarter. The outlook will hinge on expense normalization, sourcing quality, same-store traffic, and monetization of non-operating gains not being needed to support earnings. Data limitations prevent a full cash flow quality and dividend coverage assessment, so monitoring subsequent disclosures will be important.

Profitability Analysis

ROE_decomposition: ROE 5.06% = Net margin 5.36% × Asset turnover 0.624× × Financial leverage 1.51×. The profile reflects modest profitability, moderate asset efficiency for a store-based model, and conservative leverage. margin_quality: Gross margin of 64.3% is strong for a reuse retailer, implying solid procurement spreads and consignment economics. Operating margin is about 7.7% (¥1.33bn OI on ¥17.26bn sales), down YoY as OPEX rose faster than revenue. Net margin at 5.36% reflects standard non-operating gains (~¥0.10bn) and a reconstructed effective tax rate of ~37%. operating_leverage: Despite +6.8% revenue growth, operating income fell 13.3% YoY, indicating negative operating leverage in the quarter. OPEX of ~¥9.77bn equates to ~56.6% of sales; small deleveraging of labor, logistics, utilities, or marketing likely pressured margins. Tightening expense discipline and mix optimization are required to restore leverage.

Growth Assessment

revenue_sustainability: Top-line +6.8% YoY to ¥17.26bn suggests steady underlying demand and possibly contribution from store development or category expansion. Sustainability hinges on same-store trends, inventory sourcing quality, and consumer demand for reuse categories. profit_quality: Ordinary income exceeded operating income by ~¥0.10bn, indicating reliance on non-operating contributions (e.g., subsidies, finance income) to offset weaker operations. Interest expense is minimal (¥6.77m), so the gap likely reflects other income lines. Tax burden appears normalizing (~37% ETR). outlook: Near-term growth should be supported by reuse penetration and brand recognition; however, restoring operating margin is key. Focus areas: cost control (labor/logistics/energy), optimization of purchasing spreads, and mix. If costs normalize, incremental sales should translate more effectively to profit.

Financial Health

liquidity: Current assets ¥13.92bn vs current liabilities ¥6.04bn yield a current ratio of 230% and working capital of ¥7.88bn, signaling comfortable short-term liquidity. Quick ratio prints the same due to unreported inventories; true quick liquidity is likely lower but still solid. solvency: Interest coverage is 196× (OI/interest), evidencing low refinancing risk. Financial leverage (Assets/Equity) is 1.51× and D/E ~0.40×, indicating a conservative balance sheet. capital_structure: Total assets ¥27.64bn and reported total equity ¥18.28bn imply liabilities of ~¥9.36bn by derivation, whereas stated total liabilities are ¥7.24bn; classification differences or rounding may exist. Regardless, leverage appears modest and within prudent bounds.

Cash Flow Quality

earnings_quality: Operating cash flow is unreported, preventing a direct OCF-to-NI assessment. With interest expense minimal and working capital ample, structural cash generation is likely positive, but this cannot be confirmed for the period. FCF_analysis: FCF is unreported; capex and depreciation are also unreported, limiting visibility on maintenance vs. growth spending and EBITDA. Without OCF/FCF, payout capacity and reinvestment intensity cannot be quantified. working_capital: Inventories and cash balances are unreported; however, current assets comfortably exceed current liabilities. Monitoring inventory turns and receivable/payable cycles will be crucial to validate cash conversion.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are unreported for the period. EPS is ¥66.58; absent dividend disclosure, headline payout cannot be calculated from the provided data. FCF_coverage: FCF is unreported, so coverage analysis is not possible this quarter. Historically, sustainability for retailers hinges on stable OCF and moderate capex; those inputs are missing here. policy_outlook: Given modest leverage, strong interest coverage, and positive earnings, the balance sheet can support ordinary shareholder returns; however, confirmation requires OCF/FCF visibility and management guidance in subsequent filings.

Risk Assessment

Business Risks:

• Operating cost inflation (labor, logistics, utilities) eroding operating leverage
• Sourcing risk for high-quality used goods affecting spreads and gross margin
• Demand sensitivity to consumer sentiment and discretionary spending
• Store productivity risks (traffic, ticket size, category mix) impacting same-store sales
• Competition from other reuse platforms and e-commerce channels
• Execution risk in store rollout and refurbishment plans

Financial Risks:

• Limited visibility on cash flow due to unreported OCF/FCF and inventories
• Potential tax rate volatility (reconstructed ETR ~37%) impacting net margin
• Possible lease and off-balance sheet commitments not visible in provided data
• Data classification differences between liabilities and equity affecting leverage interpretation

Key Concerns:

• Negative operating leverage despite revenue growth
• Dependence on non-operating income to bridge earnings this quarter
• Insufficient disclosure on cash flow and inventories to verify cash conversion

Investment Implications

Key Takeaways:

• Revenue growth remained healthy at +6.8% YoY to ¥17.26bn
• Operating income declined 13.3% YoY; operating margin ~7.7% indicates cost pressure
• ROE at 5.06% reflects modest profitability and conservative leverage
• Liquidity strong with current ratio ~230% and working capital of ¥7.88bn
• Interest coverage very high (196×), signaling low solvency risk
• Non-operating gains (~¥0.10bn) supported earnings amid weaker operations
• Cash flow and dividend details are unreported, limiting payout and FCF assessment

Metrics to Watch:

• Same-store sales growth and traffic/ticket size trends
• Operating expense ratio and labor/logistics cost trajectory
• Gross margin (procurement spreads, category mix)
• OCF, capex, and FCF once disclosed; OCF/NI conversion
• Inventory turns and days (when reported)
• Effective tax rate and any extraordinary gains/losses
• Ordinary income minus operating income gap (sustainability of non-operating gains)

Relative Positioning: Within Japan’s reuse retail space, the company exhibits strong gross economics and conservative leverage but currently trails best-in-class peers on operating leverage execution in this quarter; balance sheet strength provides flexibility to address cost pressures.

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