| Metric | This Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥81.1B | ¥79.3B | +2.2% |
| Operating Income / Operating Profit | ¥2.8B | ¥3.8B | -26.0% |
| Ordinary Income | ¥2.7B | ¥3.3B | -17.5% |
| Net Income / Net Profit | ¥2.0B | ¥2.1B | -8.4% |
| ROE | 2.2% | 2.5% | - |
FY2026 Q1 results showed Revenue ¥81.1B (YoY +¥1.7B +2.2%), Operating Income ¥2.8B (YoY -¥1.0B -26.0%), Ordinary Income ¥2.7B (YoY -¥0.6B -17.5%), and Quarterly Net Income attributable to owners of the parent ¥2.0B (YoY -¥0.2B -8.4%). The company experienced revenue growth but profit decline: revenues were resilient while SG&A ratio rose to 60.4% (YoY +0.9pt), deteriorating operating efficiency and lowering the operating margin to 3.4% (YoY -1.3pt). The Company-operated (directly managed) business drove growth, accounting for 95.5% of sales, while the higher-margin franchising business decelerated with sales -9.6%, reducing its contribution to profits. Progress against the Full Year plan (Revenue ¥326.5B, Operating Income ¥5.1B) is typical at 24.8% for Revenue in Q1, but Operating Income and Net Income are advanced at 54.3% and 179% respectively, implying the company plan may be conservative. Equity Ratio is 36.6% and Cash & Deposits amount to ¥72.8B, signifying a stable financial base, but the decline in operating margin raises concerns about earnings resilience in a rising interest rate environment.
[Revenue] Revenue was ¥81.1B, up ¥1.7B (＋2.2%) year-on-year. By segment, Company-operated Revenue was ¥77.4B (YoY +2.8%) and Franchise (FC) Revenue was ¥3.7B (YoY -9.6%). Within Company-operated, flagship brands led growth: Kagura Shokudo Kushikatsu Monogatari ¥21.5B (YoY +¥2.0B), Maido Ookini Shokudo ¥13.0B (YoY +¥0.7B), Sachi Fukuy a ¥8.4B (YoY +¥0.3B). Some brands declined: Tempura Ebinoya ¥4.5B (YoY -¥0.8B), Men no Sho Tsurumaru ¥3.9B (YoY -¥0.1B). The FC business saw declines across all revenue sources: franchise fees ¥0.4B (YoY -¥0.1B), royalty income ¥1.8B (YoY ±¥0.0B), initial fees ¥0.2B (YoY -¥0.1B), running fees ¥1.2B (YoY -¥0.2B), indicating sluggish franchise network expansion. Sales composition was Company-operated 95.5%, FC 4.5%, increasing Company-operated dependency from 94.9% in the prior year.
[Profitability] Gross profit was ¥51.8B with gross margin 63.9% (Prior 64.3%, -0.4pt). SG&A was ¥49.0B, raising SG&A ratio to 60.4% (Prior 59.5%, +0.9pt), as increases in fixed costs such as labor, rent and utilities outpaced cost absorption. As a result, Operating Income was ¥2.8B (YoY -26.0%) and operating margin declined to 3.4% (Prior 4.7%, -1.3pt). Segment operating income: Company-operated ¥7.3B (margin 9.5%, YoY -7.1%), FC ¥2.7B (margin 73.4%, YoY -5.6%); both segments saw profit declines, and the shrinkage in high-margin FC sales depressed consolidated margins. Non-operating income was ¥0.4B (including dividend income ¥0.1B), non-operating expenses were ¥0.5B (including interest expense ¥0.3B, compressed from prior ¥0.5B), indicating improvement in financial costs. Ordinary Income was ¥2.7B (YoY -17.5%). Extraordinary losses included impairment loss ¥0.7B (stores decided to close) and other ¥0.1B, totaling ¥0.1B, resulting in profit before income taxes ¥2.6B (YoY +4.0%). After income taxes ¥0.6B, Quarterly Net Income attributable to owners of the parent was ¥2.0B (YoY -8.4%), with net margin 2.4% (Prior 2.7%, -0.3pt). In conclusion, while revenues rose, profits fell as delayed responses to cost inflation pressured profitability.
Company-operated business: Revenue ¥77.4B (YoY +2.8%), Operating Income ¥7.3B (YoY -7.1%), margin 9.5% (Prior 10.5%, -1.0pt). Kagura Shokudo Kushikatsu Monogatari drove growth at ¥21.5B, and Maido Ookini Shokudo remained solid at ¥13.0B; however, even Company-operated pre-allocation margins declined year-on-year, with notable increases in SG&A ratios at Company-operated stores. FC business: Revenue ¥3.7B (YoY -9.6%), Operating Income ¥2.7B (YoY -5.6%), margin 73.4% (Prior 70.3%, +3.1pt), maintaining high profitability but with lower absolute contribution to consolidated profits. All FC revenue streams (franchise fees, royalty, initial, running) decreased, likely due to slowed new franchising and closures of existing stores. Corporate-level expenses ¥7.2B (Prior ¥7.0B, +3.6%) are head office administrative costs, increasing faster than Revenue growth (+2.2%), reversing fixed-cost leverage. Profitability gap among segments widened; FC recovery is key to improving consolidated margins.
[Profitability] Operating margin 3.4% (Prior 4.7%, -1.3pt), Net margin 2.4% (Prior 2.7%, -0.3pt). The slight decline in gross margin to 63.9% (Prior 64.3%, -0.4pt) and rise in SG&A ratio to 60.4% (Prior 59.5%, +0.9pt) weakened fixed-cost absorption and operating leverage. ROE is 2.2%, consistent with Net margin 2.4% × Total asset turnover 0.34 × Financial leverage 2.73, but remains low compared to historical levels. [Cash Quality] Interest expense among non-operating expenses is ¥0.3B; interest coverage (Operating Income ¥2.8B / Interest expense ¥0.3B) is 8.7x, indicating sufficient debt service capacity, though lower operating margins reduce tolerance to interest rate rises. [Investment Efficiency] Total asset turnover is 0.34x (annualized ~1.4x), standard for restaurant retail, but ROA is around 0.8%, indicating low asset profitability and need to improve asset returns. [Financial Soundness] Equity Ratio is 36.6% (Prior 35.5%), current ratio 152.9% indicating solid short-term liquidity, and Cash & Deposits are ¥72.8B. Interest-bearing debt totals ¥82.4B (Long-term borrowings ¥47.5B + short-term equivalent ¥34.9B), and Debt-to-Equity is about 94% against Equity ¥87.7B, indicating a stable financial structure. Asset retirement obligations (ARO) are ¥10.9B, representing 7.2% of total liabilities, so managing future cash outflows for store updates/closures is important.
As the cash flow statement is not disclosed, funding trends are inferred from the balance sheet. Cash & Deposits were ¥72.8B, down ¥7.0B (-8.8%) from ¥79.8B a year earlier, likely used for temporary working capital increases and repayment of interest-bearing debt. In working capital, Accounts Receivable increased to ¥7.2B (Prior ¥6.6B, +¥0.6B), while Accounts Payable was ¥16.2B (Prior ¥16.1B, +¥0.1B), indicating increased cash outflows in the operating cycle. Consumption tax and similar payables rose to ¥3.0B (Prior ¥2.1B, +¥0.9B), so tax timing factors affected short-term liquidity. Inventories decreased to ¥1.7B (Prior ¥2.0B, -¥0.3B), improving inventory efficiency. Tangible fixed assets rose to ¥48.1B (Prior ¥46.7B, +¥1.4B), suggesting new store openings or store CAPEX. Long-term borrowings decreased to ¥47.5B (Prior ¥52.0B, -¥4.5B), reflecting repayment progress; short-term equivalent borrowings included in current liabilities ¥34.9B (Prior ¥35.7B, -¥0.8B) also decreased, indicating continued improvement in financial condition. Cash levels remain ample, supporting growth investment and store openings, but persistent low operating margins would weaken operating cash generation and risk accelerating cash depletion.
Of Quarterly Net Income attributable to owners of the parent ¥2.0B, an extraordinary loss ¥0.7B (impairment loss for stores decided to close) is a one-off item, with limited impact on pre-tax profit ¥2.6B. Non-operating income ¥0.4B (including dividend income ¥0.1B) is recurring but small. Of non-operating expenses ¥0.5B, interest expense ¥0.3B is a recurring financial cost; payment fees ¥0.0B are also ongoing. Total comprehensive income was ¥2.4B, ¥0.4B above net income of ¥2.0B, contributed by other comprehensive income: foreign currency translation adjustment ¥0.1B and valuation difference on available-for-sale securities ¥0.3B. Securities valuation gains are unrealized and non-cash, affecting earnings quality. With Ordinary Income ¥2.7B and Net Income ¥2.0B, the effective conversion after tax and non-controlling interests is 74.1%, a reasonable level considering tax effects. From an accrual perspective, receivables increase +¥0.6B, inventories decrease -¥0.3B, payables increase +¥0.1B, implying net working capital increase ~+¥0.4B, about 14% of Operating Income ¥2.8B, indicating a somewhat lower cash conversion rate. Overall earnings quality is generally acceptable, but persistent low operating margins could impair operating cash generation.
Full Year guidance: Revenue ¥326.5B (YoY +2.3%), Operating Income ¥5.1B (YoY -29.7%), Ordinary Income ¥4.5B (YoY -25.2%), Net Income attributable to owners of the parent ¥1.1B. Progress vs. Q1 results: Revenue 24.8%, Operating Income 54.3%, Ordinary Income 59.8%, Net Income 179.1%, indicating substantial front-loading in profitability. As of Q1, over half of full-year Operating Income and considerably more than planned Net Income have been achieved, suggesting the company plan may be highly conservative. While second-half seasonality, increased promotional expenses, and store opening/closure costs are expected, current progress suggests room for upward revision of full-year guidance. However, if fixed cost pressures (labor, rent, utilities) persist into H2, there is risk of further operating margin deterioration; margin trends from Q2 onward will be critical. Dividend forecast remains unchanged at ¥0 for the full year, prioritizing internal reserves.
Dividend forecast this quarter is ¥0 and full-year dividend forecast remains ¥0, implying a payout ratio of 0%. The policy appears to prioritize internal reserves to stabilize the financial base and fund growth investments. With Cash & Deposits ¥72.8B and maintained operating cash generation capacity, liquidity is secured, but the low operating margin of 3.4% means stable shareholder returns require improvements in operating efficiency and sustained margin recovery. Resumption of dividends would likely require operating margin recovery to above 5% and stabilization of Ordinary Income not reliant on one-off items. No share repurchase has been disclosed; shareholder returns are not being implemented at this time.
Risk of prolonged low operating margin: Operating margin of 3.4% declined 1.3pt from 4.7% a year earlier; while gross margin mildly decreased (-0.4pt), SG&A rose +0.9pt. Fixed cost increases (labor, rent, utilities) are outpacing revenue growth (+2.2%), and price pass-through and efficiency measures have lagged. Continued margin decline would weaken resilience to rising interest rates and reduce investment capacity. Controlling SG&A at Company-operated stores and restoring FC growth are keys to improvement.
FC business slowdown risk: FC Revenue ¥3.7B (YoY -9.6%) and Operating Income ¥2.7B (YoY -5.6%) indicate deceleration, reducing contribution from a high-margin source (margin 73.4%). Declines across franchise fees, royalty, initial and running income suggest slower new加盟 (franchise) pace and closures of existing stores. FC constitutes 4.5% of sales but contributes 27.0% of segment profits (¥2.7B/¥10.0B total segment profit), so delay in FC network recovery would hinder consolidated margin improvement.
Working capital and liquidity risk: Consumption tax and similar payables rose to ¥3.0B (Prior ¥2.1B, +¥0.9B), creating short-term cash timing pressure. Receivables increased by ¥0.6B and net working capital rose ~¥0.4B. While Cash & Deposits ¥72.8B and current ratio 152.9% support short-term liquidity, weaker operating cash generation could accelerate cash depletion and impact growth investment and financial stability. Asset retirement obligations ¥10.9B (7.2% of liabilities) could require cash outflows upon store closures, increasing liquidity strain depending on pace of network restructuring.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.4% | – | – |
| Net Margin | 2.4% | – | – |
As a retail (restaurant) business, Operating Margin 3.4% and Net Margin 2.4% are low in absolute terms and likely below industry peers.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 2.2% | – | – |
Revenue growth of +2.2% aligns with restaurant industry recovery trends, but deteriorating margins relative to growth indicate substantial room to improve capital efficiency.
※ Source: Company compilation
Operating margin 3.4% (YoY -1.3pt) shows deterioration driven by SG&A ratio rise (+0.9pt). Progress on price revisions, menu engineering, shift optimization and other efficiency measures to address fixed cost inflation will be critical. The evolution of SG&A ratio and whether operating margin reverses from Q2 onward will determine full-year results.
Q1 progress vs. full-year plan shows Operating Income 54.3% and Net Income 179%—a substantial lead—suggesting the company plan may be very conservative. Even accounting for H2 seasonality and cost increases, there is potential for upward revision. However, if the operating margin slump persists, H2 profitability could worsen; confirming margin trends in Q2 results is important.
FC business, with margin 73.4%, remains high-margin but is slowing (Sales -9.6%, Operating Income -5.6%). Recovery in new franchise openings and royalty growth would directly improve consolidated ROE; progress in FC turnaround is a structural indicator of profitability improvement.
This report was automatically generated by AI analyzing XBRL earnings summary data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional as necessary.