| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥578.8B | ¥540.0B | +7.2% |
| Operating Income / Operating Profit | ¥27.3B | ¥30.5B | -10.5% |
| Ordinary Income | ¥27.5B | ¥30.6B | -10.2% |
| Net Income / Net Profit | ¥19.8B | ¥21.3B | -7.2% |
| ROE | 2.5% | 2.7% | - |
For FY2027 Q1 results, Revenue was ¥578.8B (YoY +¥38.8B +7.2%), Operating Income was ¥27.3B (YoY -¥3.2B -10.5%), Ordinary Income was ¥27.5B (YoY -¥3.1B -10.2%), and Net Income was ¥19.8B (YoY -¥1.5B -7.2%). The company recorded revenue growth but profit decline: top-line expanded steadily, but profitability was depressed by an increase in SG&A. Revenue growth of 7.2% is a healthy pace for a retailer, while Operating Margin fell to 4.7% (down -0.9pt from 5.6% a year earlier) as fixed costs pressured profits. Gross margin was 24.5% (down -0.2pt from 24.7%), SG&A ratio was 22.7% (up +0.9pt from 21.8%), and SG&A growth of +11.6% substantially outpaced revenue growth of +7.2%, causing operating leverage to reverse.
[Revenue] Revenue of ¥578.8B was up ¥38.8B YoY (+7.2%), reflecting a solid growth trend for a retailer. Gross profit was ¥141.9B (gross margin 24.5%), up ¥8.6B YoY, but gross margin contracted by -0.2pt from 24.7% a year earlier. Strengthened promotions and product-mix effects may have tightened pricing. Accounts receivable were ¥27.1B, up +38.2% YoY, suggesting sales growth and timing of billing impacts, but this represents only 2.0% of total assets and credit risk is limited.
[Profitability] SG&A was ¥131.4B (SG&A ratio 22.7%), up ¥13.7B YoY (+11.6%), exceeding revenue growth by 4.4pt. Main increases included Depreciation & Amortization ¥13.5B (YoY +¥2.2B), Repairs ¥4.3B (YoY +¥1.3B), and Advertising ¥4.0B (YoY +¥0.2B), indicating expansion of fixed-cost type expenditures. With an owned-store–centric model, rent is very low at ¥0.7B (SG&A ratio 0.1%), while depreciation burden is structurally heavy. As a result, Operating Income declined to ¥27.3B, down ¥3.2B YoY (-10.5%), and Operating Margin fell to 4.7% (down -0.9pt from 5.6%). Non-operating items comprised Interest Income ¥0.1B and Interest Expense ¥0.3B for a net -¥0.2B small charge. Ordinary Income was ¥27.5B, down ¥3.1B YoY (-10.2%). Extraordinary items were minor (Extraordinary Gains ¥0.1B, Extraordinary Losses ¥0.0B). After deducting Income Taxes ¥7.8B (effective tax rate 28.2%), Net Income was ¥19.8B, down ¥1.5B YoY (-7.2%). In conclusion, revenue increased but profits decreased, as the company could not absorb the SG&A expansion.
[Profitability] Operating Margin 4.7% (down -0.9pt from 5.6%), Net Profit Margin 3.4% (down -0.5pt from 3.9%) — profitability declined due to higher SG&A ratio. ROE was 2.5%, remaining low for a retailer. DuPont decomposition: Net Profit Margin 3.4% × Total Asset Turnover 0.422 × Financial Leverage 1.74 = ROE 2.5%, indicating margin deterioration is compressing capital efficiency. [Cash Quality] Working capital structure: Accounts Payable ¥253.9B, Inventories ¥51.4B, Accounts Receivable ¥27.1B, yielding a Cash Conversion Cycle of approximately -39 days (Inventory ~11 days, Receivables ~4 days, Payables ~54 days) — strong cash generation capacity. Contract liabilities ¥35.2B, being largely advance receipts, support working capital. [Investment Efficiency] Total Asset Turnover improved to 0.422 (from 0.397), indicating better asset efficiency relative to sales expansion. [Financial Soundness] Equity Ratio 57.6% (up +0.6pt from 57.0%), D/E ratio 0.13x (Interest-bearing debt ¥100.4B ÷ Net Assets ¥789.7B) — financial leverage remains low. Interest Coverage was 94x (Operating Income ¥27.3B ÷ Interest Expense ¥0.3B), indicating very high interest resilience. Current Ratio 85.9% and Quick Ratio 73.4% are low, warranting attention to short-term liquidity. Asset retirement obligations ¥37.9B account for 6.5% of total liabilities, indicating relatively high cash-out sensitivity upon future store removals.
Due to a payables-dominant business model, with Accounts Payable ¥253.9B versus Inventories ¥51.4B and Accounts Receivable ¥27.1B, the Cash Conversion Cycle is approximately -39 days, maintaining a structure that generates cash from working capital. Contract liabilities ¥35.2B (advance receipts) further bolster working capital. The rise in fixed-cost ratio (Depreciation ¥13.5B) is an accounting expense lead, but does not directly translate into excessive cash deterioration. However, with a Current Ratio of 85.9% and a high short-term liabilities ratio, attention is needed for cash flow volatility arising from quarterly working capital swings. Cash and Deposits of ¥230.9B remained nearly flat YoY, sustaining stable liquidity buffers.
Most earnings derive from recurring operating activities; non-operating income was ¥0.5B (0.09% of Revenue) and non-operating expenses were ¥0.3B (0.05% of Revenue), levels that do not distort core business evaluation. Extraordinary items (Extraordinary Gains ¥0.1B, Extraordinary Losses ¥0.0B) were immaterial. The gap between Operating Income ¥27.3B and Net Income ¥19.8B aligns with tax burden ¥7.8B (effective tax rate 28.2%), and no one-off factors inflating or deflating profits were identified. Earnings are considered high quality, supported by recurring earning power.
Full Year / FY forecast: Revenue ¥2,456.2B (YoY not disclosed), Operating Income ¥125.9B (YoY +0.9%), Ordinary Income ¥125.8B (YoY +0.1%), Net Income ¥86.6B (YoY -3.6%). Q1 progress ratios were Revenue 23.6%, Operating Income 21.7%, Ordinary Income 21.9%, Net Income 22.8% — versus standard progress of 25%, Operating Income lags by -3.3pt (about -13% in magnitude). The SG&A uptick (depreciation, repairs, etc. fixed-cost increases) appears to be the main cause; achieving full-year Operating Income target hinges on gross margin improvement and SG&A restraint from Q2 onward.
Forecast year-end dividend is ¥36.00 per share, implying a Payout Ratio of approximately 8.9% against FY forecast EPS ¥405.66, which is low. The actual Q1 dividend was ¥34.00, unchanged from the same period last year. While the low payout ratio suggests room for higher shareholder returns, given the capital-intensive store model, the company likely prioritizes internal retention for growth investment while balancing dividends. With low financial leverage and Interest Coverage of 94x, dividend sustainability does not appear to be a concern.
Profitability risk: Operating Margin 4.7% (down -0.9pt from 5.6%), SG&A ratio 22.7% (up +0.9pt from 21.8%) — SG&A growth +11.6% outpaced Revenue growth +7.2% by 4.4pt, creating reverse operating leverage. Expansion of fixed-cost items such as Depreciation ¥13.5B (YoY +¥2.2B) and Repairs ¥4.3B (YoY +¥1.3B) could further deteriorate operating leverage in a sales slowdown.
Liquidity risk: Current Ratio 85.9% and Quick Ratio 73.4% indicate low short-term liquidity. Against Short-term Liabilities ¥411.4B, Cash and Deposits ¥230.9B and Accounts Receivable ¥27.1B show a material maturity mismatch with Accounts Payable ¥253.9B. Although the retail negative working capital model absorbs part of this, resilience to quarterly inventory and payable fluctuations needs confirmation.
Future cash-out risk: Asset retirement obligations ¥37.9B represent 6.5% of total liabilities and imply relatively high sensitivity to cash outflow at store or equipment removal. Store closures or regulatory changes could trigger one-off cash expenditures.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.7% | 3.4% (0.8%–7.7%) | +1.3pt |
| Net Profit Margin | 3.4% | 2.2% (0.5%–6.2%) | +1.2pt |
Profitability exceeds the industry median, and the company maintains relatively favorable margins among retailers.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 7.2% | 7.7% (0.8%–14.6%) | -0.5pt |
Revenue growth is slightly below the industry median but within the IQR, indicating a standard growth pace.
※Source: Company compilation
SG&A expansion (SG&A ratio +0.9pt, growth +11.6%) exceeded Revenue growth +7.2%, reversing operating leverage. The increase in fixed-cost items such as depreciation and repairs is the main cause. Focus will be on whether gross margin improvements (managing markdown rates & shrinkage, increasing private brand ratio) and SG&A containment (labor-saving measures, logistics efficiency) from Q2 onward can confirm a trough in Operating Margin.
Working capital structure generates cash (Cash Conversion Cycle ~ -39 days) and Contract Liabilities ¥35.2B support working capital. However, a low Current Ratio of 85.9% implies low short-term liquidity; continuous monitoring of funding resilience against quarterly inventory and payable swings is necessary.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by our firm based on public financial statements. Investment decisions are your own responsibility; please consult a professional advisor as necessary.