EDION Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥385.67B
• Operating Income: ¥13.79B
• Net Income: ¥10.08B
• EPS: ¥88.54

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

Edion (2730) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth but softer profitability. Revenue grew 1.4% YoY to ¥385.7bn, while operating income declined 4.9% YoY to ¥13.8bn, indicating some margin pressure despite a resilient sales base. Gross profit reached ¥114.8bn, implying a gross margin of roughly 29.8%, which is healthy for a consumer electronics retailer but likely down slightly or flat given the operating income contraction. The operating margin stands at 3.6%, and ordinary income was ¥14.4bn, suggesting limited non-operating support. Net income was ¥9.34bn (−6.9% YoY), translating to a net margin of 2.42% and EPS of ¥88.54 for the half. DuPont analysis shows ROE of 4.06%, driven by a low net margin and modest asset turnover of 0.913x, with moderate financial leverage (assets/equity) of 1.84x. The combination of small revenue growth and lower operating profit points to negative operating leverage in the period, likely reflecting mix, promotional intensity, or elevated fixed costs. Cash generation was strong: operating cash flow was ¥28.3bn, equating to an OCF/Net income ratio of 3.03x, indicating robust earnings quality and favorable working capital dynamics in H1. Liquidity is adequate with a current ratio of 133% and a quick ratio of 49%, reflecting the inventory-heavy nature of the business. The balance sheet appears conservative with liabilities/equity of 0.92x and very strong interest coverage at 65.7x, implying low near-term solvency risk. Inventory was ¥120.1bn against H1 COGS of ¥265.7bn, suggesting inventory days around low-80s, a manageable level for the category. While reported metrics list an effective tax rate of 0.0%, this is clearly a data gap; using net income and income tax implies an approximate effective tax rate in the mid-30% range. Several items are unreported in the dataset (equity ratio, investing CF, cash and equivalents, DPS, FCF), limiting precision on FCF and dividend assessment; conclusions below rely on available, non-zero disclosures. Overall, Edion’s profitability remains modest but stable, with strong cash conversion offsetting a low ROE profile. The near-term focus should be on stabilizing margins (especially SG&A intensity) and maintaining healthy inventory turns to preserve cash flow. Absent reported investing cash flows, capex discipline and store refurbishment intensity remain key unknowns for FCF and capital returns.

Profitability Analysis

ROE_decomposition: ROE 4.06% = Net margin 2.42% × Asset turnover 0.913 × Financial leverage 1.84. The low net margin is the primary drag; leverage is moderate and not a major driver. margin_quality: Gross margin ~29.8% is solid for the category, but operating margin of 3.6% fell YoY as operating income declined despite higher revenue. Ordinary margin (~3.7%) only slightly exceeds operating margin, suggesting limited support from non-operating items. Estimated effective tax rate (~34%) normalizes net margin to 2.4%. operating_leverage: Revenue +1.4% YoY vs operating income −4.9% YoY indicates negative operating leverage this half, likely due to higher SG&A (labor, utilities, logistics), promotional activity, or product mix (e.g., lower-margin white goods or campaign discounting). Maintaining cost discipline and improving mix will be crucial to restore leverage.

Growth Assessment

revenue_sustainability: Top-line grew 1.4% amid a mature domestic market; growth likely driven by replacement demand, seasonal appliances, and incremental e-commerce contribution. Comparable-store sales, mix shifts, and promotional cadence will determine sustainability. profit_quality: Ordinary income closely tracks operating income, indicating earnings quality is primarily operational. The strong OCF/NI of 3.03x supports earnings quality, implying constructive working capital movements and non-cash add-backs (e.g., depreciation). outlook: Near-term growth likely mid-single digit at best, contingent on consumer sentiment, housing-related demand, vendor campaigns, and new store refreshes. Upside requires better gross margin mix (vendor rebates, private label, services) and SG&A containment; downside risks include price competition and inventory markdowns.

Financial Health

liquidity: Current ratio 132.6% and quick ratio 49.3% reflect adequate near-term liquidity for a retailer with meaningful inventory. Working capital is ¥46.95bn. solvency: Liabilities/Equity is 0.92x, indicating moderate leverage; interest coverage is very strong at 65.7x, implying low refinancing risk. capital_structure: Assets ¥422.3bn vs equity ¥229.9bn (financial leverage ~1.84x). Equity ratio reported as 0% is unreported; based on balances, a rough equity ratio would be about 54% if calculated as equity/assets.

Cash Flow Quality

earnings_quality: OCF of ¥28.3bn vs net income of ¥9.34bn (OCF/NI 3.03x) suggests solid cash conversion, likely aided by seasonal payables and inventory management. FCF_analysis: Free cash flow not reported. Without investing cash flows (capex) disclosure, we cannot compute FCF. Given D&A of ¥5.47bn, maintenance capex is typically below D&A for some retailers, but this assumption cannot be verified here. working_capital: Inventories of ¥120.1bn vs H1 COGS imply ~82 days of inventory, acceptable for the category. Positive OCF suggests constructive working-capital timing (receivables, payables, and inventory), but detailed drivers are not disclosed.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are not reported; the listed 0.0% is an unreported placeholder. With EPS of ¥88.54 for H1, there appears capacity for dividends, but actual policy and interim payments are not provided in the data. FCF_coverage: FCF is not disclosed; therefore, dividend coverage by FCF cannot be assessed from the provided dataset. policy_outlook: Edion historically emphasizes stable shareholder returns, but without DPS and capex data, we cannot comment on the trajectory. Monitoring full-year guidance, capex plans (store refurbishments, IT, logistics), and working-capital seasonality is essential.

Risk Assessment

Business Risks:

• Intense price competition in consumer electronics retail
• Demand sensitivity to consumer sentiment and housing starts
• Product mix shifts and promotional intensity pressuring gross margin
• Inventory obsolescence and markdown risk on seasonal and tech categories
• Supply chain and logistics cost volatility
• Vendor rebate variability and dependence on key suppliers
• E-commerce competition and omni-channel execution risk

Financial Risks:

• Working-capital swings impacting cash flow seasonally
• Potential undisclosed lease liabilities influencing leverage and interest coverage
• Interest rate risk on variable-rate debt (if applicable)
• Limited visibility on capex intensity without investing CF disclosure
• Tax rate variability versus assumptions

Key Concerns:

• Negative operating leverage with margins under pressure despite sales growth
• Low ROE (4.06%) relative to typical equity costs
• Data gaps for FCF, DPS, equity ratio, cash balance hinder capital allocation analysis
• Inventory level needs continued vigilance to avoid markdowns if demand softens

Investment Implications

Key Takeaways:

• Revenue grew 1.4% YoY, but operating income declined 4.9% YoY, indicating margin pressure
• ROE at 4.06% is constrained by low net margins; leverage is moderate
• Cash conversion is strong with OCF/NI at 3.03x, supporting balance-sheet resilience
• Liquidity and solvency metrics are healthy (current ratio 133%, interest coverage 65.7x)
• Inventory days around low-80s appear manageable, but need close monitoring
• Several critical disclosures (investing CF, cash, DPS, FCF) are unreported, limiting payout visibility

Metrics to Watch:

• Gross margin and SG&A ratio (to gauge operating leverage recovery)
• Comparable-store sales and e-commerce mix
• Inventory turns and markdown rate
• OCF/NI ratio and working-capital movements
• Capex and store refurbishment cadence (when investing CF is disclosed)
• Ordinary income vs operating income spread (non-operating contributions)
• Effective tax rate vs prior periods

Relative Positioning: Within Japan’s consumer electronics retail peer set, Edion exhibits solid balance-sheet strength and cash conversion, but profitability (operating margin, ROE) remains on the lower side, leaving less buffer against competitive pricing and cost inflation.

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