| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥377.1B | ¥353.3B | +6.7% |
| Operating Income / Operating Profit | ¥22.1B | ¥26.4B | -16.3% |
| Ordinary Income | ¥23.4B | ¥27.3B | -14.0% |
| Net Income / Net Profit | ¥12.7B | ¥17.4B | -26.8% |
| ROE | 5.6% | 7.9% | - |
For the fiscal year ended March 2026, Revenue was ¥377.1B (YoY +¥23.8B +6.7%), Operating Income was ¥22.1B (YoY -¥4.3B -16.3%), Ordinary Income was ¥23.4B (YoY -¥3.8B -14.0%), and Net Income was ¥12.7B (YoY -¥4.7B -26.8%). The Restaurant Business (+26.3%) and Other Businesses (+33.7%) led top-line growth, while the core Yakiniku Business contracted -1.7%. Gross profit margin declined to 59.7% (prior year 61.1%, -140bp) reflecting higher cost of sales, and SG&A ratio slightly worsened to 53.8% (prior year 53.6%, +20bp). Operating margin fell to 5.9% from 7.5% (-160bp). Special losses of ¥2.99B for impairment and total special losses of ¥4.48B reduced Net Income substantially (-26.8%). The revenue-up/profit-down dynamic indicates deterioration in unit economics from higher food costs and labor; the core Yakiniku segment’s Operating Income decline of -24.0% was the primary driver of the company-wide profit decline. Operating Cash Flow was ¥37.8B (YoY +39.5%), producing 2.98x of Net Income, and Free Cash Flow was ¥29.7B—sufficient to cover capital expenditures of ¥17.0B and dividends of ¥6.98B, preserving financial soundness.
[Revenue] ¥377.1B (+6.7%) was driven by the Restaurant Business at ¥96.9B (+26.3%) and Other Businesses at ¥21.3B (+33.7%). The Other category, including izakaya-style operations, is small in scale but shows the highest growth rate, suggesting contributions from new formats. Yakitori Business was steady at ¥39.2B (+5.7%). The core Yakiniku Business declined to ¥219.8B (-1.7%), reducing its share of revenue mix from 63.3% last year to 58.3%. While revenue diversification is progressing, weakness at existing Yakiniku stores weighed on the overall top line. Segment data show Yakiniku Operating Income at ¥13.9B (prior year ¥18.3B, -24.0%), with margin down to 6.3% (prior year 8.2%, -190bp). The Restaurant Business also saw margin compression to 6.3% (prior year 7.3%, -100bp), meaning revenue gains were offset by cost increases. Yakitori maintained a relatively strong margin at 8.8% (prior year 9.5%, -70bp).
[Profit and Loss] Cost of sales was ¥152.2B (cost ratio 40.3%, prior year 38.9%, +140bp), rising due to higher food prices and shifts in sales mix toward Yakiniku and Restaurants. Gross profit totaled ¥225.0B (+3.7%), lagging revenue growth and making the decline in gross profit the primary cause of operating profit deterioration. SG&A was ¥202.9B (prior year ¥189.5B, +7.1%), rising faster than revenue (+6.7%). SG&A ratio increased to 53.8% (prior year 53.6%), suggesting fixed-cost inflation in labor and rent. Operating Income of ¥22.1B (-16.3%) reflects lower gross margin and higher SG&A. Non-operating income was ¥1.48B (interest income ¥0.27B, rental income ¥0.41B, etc.) and non-operating expenses ¥0.13B (interest expense ¥0.07B, etc.), both minor, so Ordinary Income ¥23.4B (-14.0%) largely tracked the operating-stage decline.
Special income was ¥1.93B (insurance proceeds ¥0.74B, etc.) while special losses were ¥4.48B (impairment losses ¥2.99B, loss on disposal of fixed assets ¥0.60B, loss on sale of fixed assets ¥0.85B, etc.), which in aggregate reduced profit before tax by ¥2.5B. Impairments are presumed to be temporary factors related to underperforming stores and format reviews. After corporate taxes of ¥8.19B (effective tax rate 39.2%), Net Income was ¥12.7B (-26.8%). Comprehensive income was ¥12.7B, equal to Net Income, with no items in other comprehensive income. The proportion of one-off items was (special loss net ¥2.55B ÷ profit before tax ¥20.9B = 12.2%), indicating that excluding special items, the deterioration in core earnings is relatively smaller. Conclusion: revenue growth but profit decline, as cost inflation and same-store weakness prevented operating leverage, and special losses depressed Net Income.
Yakiniku Business: Revenue ¥219.8B (-1.7%), Operating Income ¥13.9B (-24.0%), margin 6.3% (prior year 8.2%). It remains the core at 58.3% of revenue, but declines in same-store sales and a 190bp margin deterioration drove the company-wide profit decline. Pressure from rising average check, raw material costs, and labor suggests either delayed price pass-through or demand elasticity effects. Yakitori Business: Revenue ¥39.2B (+5.7%), Operating Income ¥3.4B (-2.6%), margin 8.8% (prior year 9.5%). Restaurant Business: Revenue ¥96.9B (+26.3%), Operating Income ¥6.1B (+8.4%), margin 6.3% (prior year 7.3%). Its share expanded to 25.7%, driving growth with both revenue and profit increases, though margin compressed—indicative of store openings and startup costs. Other Businesses: Revenue ¥21.3B (+33.7%), Operating Income ¥1.1B (+12.9%), margin 4.9% (prior year 5.9%). Scale expansion is prioritized for new formats, keeping margins relatively low. Segment total Operating Income was ¥24.5B (prior year ¥28.4B); after company-level cost allocation of ¥2.38B (prior year ¥1.99B), consolidated Operating Income was ¥22.1B. Recovery of the core Yakiniku business is the highest priority to improve company profitability.
[Profitability] Operating margin of 5.9% declined -160bp from 7.5%, though it remains 1.3pt above the industry median of 4.6% (retail, FY2025), but is well below the company’s past performance. Net margin of 3.4% fell -150bp from 4.9%, near the industry median of 3.3%. ROE 5.6% declined -250bp from 8.1%, slightly below the industry median of 5.9%. ROE decomposition: Net margin 3.4% (primary deterioration driver), total asset turnover 1.27 (flat), financial leverage 1.32x (low and stable), indicating profitability decline is the main cause of ROE compression. ROA 3.3% (prior year 5.6%) is at industry median 3.3% but worse than the company’s prior performance.
[Cash Quality] Operating Cash Flow ¥37.8B equals 2.98x Net Income ¥12.7B, supported by non-cash add-backs including depreciation ¥8.97B and goodwill amortization ¥2.40B, and efficient working capital management (accounts payable +¥2.64B, inventory +¥3.39B). Cash conversion ratio (Operating CF ÷ operating CF subtotal) is 0.87, below the industry median 1.57, but this reflects corporate tax payments timing; cash generation remains healthy. Operating CF ÷ EBITDA (EBITDA = Operating Income + depreciation = ¥31.1B) is 1.22x, meaning over 90% of EBITDA converted to cash.
[Investment Efficiency] Capital expenditures ¥17.0B versus depreciation ¥9.0B, so CapEx ÷ Depreciation = 1.89x, well above the industry median 1.16x—indicative of an active growth investment phase. Total asset turnover 1.27 (prior year 1.27) exceeds the industry median 1.17, showing relatively good asset efficiency. No explicit numeric ROIC provided; however, ROIC is presumed to have deteriorated year-on-year due to lower operating margin.
[Financial Soundness] Equity ratio 75.9% (prior year 78.9%) is 25.7pt above the industry median 50.2%, extremely strong. Current ratio 226% (prior year 279%) exceeds industry median 184%, indicating ample short-term liquidity. Cash and deposits ¥88.3B are 1.71x current liabilities ¥51.5B, implying minimal liquidity risk. Interest-bearing debt totals ¥9.04B (short-term borrowings ¥3.0B, long-term borrowings ¥5.74B, bonds redeemable within one year ¥0.30B); net debt (interest-bearing debt minus cash) is -¥79.3B, effectively net cash. D/E 0.04x and net debt ÷ EBITDA -2.55x are far more conservative than the industry median -0.59x. Interest coverage (EBIT ÷ interest expense) is ¥22.1B ÷ ¥0.07B = 315x, indicating overwhelming capacity to service interest.
Operating CF was ¥37.8B (prior year ¥27.1B, +39.5%), computed as operating CF subtotal ¥43.5B less corporate taxes paid ¥7.8B. The subtotal added back non-cash items to Operating Income ¥22.1B: depreciation ¥9.0B, goodwill amortization ¥2.40B, impairment losses ¥2.99B, asset retirement obligations ¥0.85B, etc. Working capital movements (accounts payable +¥2.64B, inventory -¥3.39B, other current assets -¥0.68B, accrued corporate tax +¥2.10B, etc.) netted a slight cash inflow. Insurance proceeds ¥0.74B and compensation receipts ¥1.19B were positive special factors. Investing CF was -¥8.14B: capital expenditure -¥17.0B (new stores and renovations) offset by net change in time deposits +¥23.0B (withdrawals ¥23.0B - placements ¥53.0B) and acquisition of subsidiary shares -¥13.52B. FCF was ¥29.7B (Operating CF ¥37.8B + Investing CF -¥8.14B), slightly up from prior year FCF (¥27.1B + ¥0.54B = ¥27.6B). Financing CF was -¥12.24B, driven by dividend payments ¥6.98B, long-term borrowings repayments ¥1.37B, lease liability repayments ¥0.33B, net reduction in short-term borrowings ¥3.25B, and bond redemption ¥0.30B. Cash and cash equivalents increased from ¥75.5B at the beginning of the period to ¥92.95B at period-end (+¥17.4B), confirming simultaneous accumulation of retained cash and execution of growth investment and shareholder returns. CapEx ¥17.0B is 1.89x depreciation ¥9.0B, signaling an expansion phase in store assets and front-loaded investment to build medium-term revenue base.
Ordinary Income ¥23.4B vs Operating Income ¥22.1B implies non-operating impact +¥1.3B, minor. Breakdown of non-operating income ¥1.48B: interest income ¥0.27B, rental income ¥0.41B, other ¥0.38B; rental income suggests effective utilization of group assets and is relatively recurring. Non-operating expenses ¥0.13B (interest expense ¥0.07B, other ¥0.02B) are negligible, so financial costs are virtually zero. Net special losses amounted to -¥2.55B: special income ¥1.93B (insurance proceeds ¥0.74B, etc.) is temporary, and special losses ¥4.48B (impairment ¥2.99B, disposal of fixed assets ¥0.60B, loss on sale ¥0.85B, etc.) are also largely one-off. Impairments reflect asset revaluation due to store underperformance or format review and suggest structural reform. Adjusting for one-off items, pro forma Net Income is ¥12.7B + ¥2.55B = approximately ¥15.3B, indicating core profitability is higher than simple Net Income comparisons suggest. Comprehensive income ¥12.7B equals Net Income, with no other comprehensive income items (currency translation adjustments, securities valuation, etc.), so earnings quality is pure. Operating CF ¥37.8B vs Net Income ¥12.7B yields a cash conversion of 2.98x; accruals (Net Income - Operating CF) are -¥25.1B, illustrating strong cash backing for profits. Accounts receivable ¥0.21B (prior year ¥0.13B) and contract liabilities ¥2.17B (prior year ¥1.33B) are both immaterial, indicating no distortion in revenue recognition—quality of earnings is high.
Full-year forecast: Revenue ¥411.0B (YoY +9.0%), Operating Income ¥25.0B (+13.1%), Ordinary Income ¥25.4B (+8.3%), Net Income ¥14.5B (+14.1%), EPS ¥70.57. Actual results of Revenue ¥377.1B represent 91.8% of the full-year forecast; Operating Income ¥22.1B is 88.4%; Net Income ¥12.7B is 87.6%—these progress rates assume significant revenue and profit ramp in H2. In H1, recovery in the core Yakiniku segment lagged, and the H1 operating margin of 5.9% is below the full-year target 6.1% (¥25.0B ÷ ¥411.0B). Achieving the full-year targets requires H2 recovery in existing stores, full pass-through of price adjustments, and full contribution from new openings and M&A; achieving these is challenging. Dividend forecast is annual ¥34 (interim ¥17, year-end ¥17); the interim and expected year-end totaling ¥34 has effectively been achieved. Full-year dividend payout ratio forecast is 24.1% (¥17 ÷ ¥70.57), while the realized payout ratios are 40.2% (¥34 ÷ prior-year EPS ¥84.50) or 55.0% (¥34 ÷ current EPS ¥61.84), showing divergence. The company’s forecast used pre-stock-split (1:3 on October 2024) old-base annual ¥102 (post-split ¥34) for dividend reference; EPS forecast ¥70.57 is post-split. The company indicates a policy to maintain the dividend amount.
Annual dividend ¥34 (interim ¥17, year-end ¥17), unchanged from prior year (old-base annual ¥102 ÷ 3 = ¥34). Dividend payout ratio versus EPS ¥61.84 is 55.0%, significantly above the industry median 27%, reflecting a high-return stance. However, with Operating CF ¥37.8B and FCF ¥29.7B, total dividends ¥6.98B (payout ratio calculation: ¥6.98B ÷ ¥12.7B = 55.0%) are sustainably covered; FCF-to-dividend ratio is 23.5%, indicating sustainability. No share buybacks were disclosed; total return ratio equals dividend payout ratio at 55.0%. The significant increase in payout ratio from 40.2% (prior-year EPS ¥84.50 basis) reflects maintained dividend despite profit decline, suggesting a commitment to a minimum dividend. The 1:3 stock split in October 2024 aimed to lower the trading unit and improve liquidity. Dividend amount remained effectively unchanged on a split-adjusted basis (old-base annual ¥102 = post-split ¥34), indicating continuity in shareholder return policy. With cash ¥88.3B and net cash ¥79.3B plus stable Operating CF ¥37.8B, the company has ample capacity to maintain dividends during this downturn. Future dividend increases would be contingent on performance recovery and Operating CF growth; maintaining payout ratios above 50% is a medium-term challenge.
Prolonged underperformance of core Yakiniku business: Yakiniku accounts for 58.3% of revenue; revenue -1.7% and Operating Income -24.0% are pressuring consolidated results. Continued declines in same-store traffic, consumer reaction to higher average checks, and intensified competition could delay recovery, risking miss of full-year guidance and dividend sustainability. The H1 operating margin of 5.9% (down -160bp from 7.5%) makes margin recovery of the core format top priority.
Persistent cost inflation risk: Cost ratio 40.3% (prior year 38.9%, +140bp) and SG&A ratio 53.8% (prior year 53.6%, +20bp) rising simultaneously suggest inflation in food costs, labor, and rent. If price pass-through is delayed or demand elasticity prevents effective price increases, it will be difficult to restore gross margin and operating leverage, making revenue growth ineffective at producing profit growth. Accounts payable increase to ¥16.6B (prior year ¥13.2B, +26.4%) reflects larger procurement scale; if negotiation power with suppliers weakens or terms deteriorate, cost ratios may rise medium-term.
Reoccurrence of special losses and asset retirement obligation risk: Impairment losses ¥2.99B suggest store profitability deterioration and format review; risk of further closures and impairment remains. Asset retirement obligations ¥5.50B (7.7% of liabilities) are potential cash outflows at future exits/renovations; during portfolio optimization such one-off losses may recur. Fixed assets ¥180.0B (60.7% of total assets), mostly tangible fixed assets ¥112.3B (land ¥44.6B, buildings ¥56.8B), mean store asset impairment sensitivity is high.
[Industry Position] (reference data, company analysis) Within retail (including foodservice), the company ranks among the top group for financial soundness. Equity ratio 75.9% is 25.7pt above industry median 50.2%, and net debt ÷ EBITDA -2.55x (industry median -0.59x) is substantially conservative. Current ratio 226% exceeds industry median 184%, indicating superior short-term liquidity. On profitability, operating margin 5.9% is 1.3pt above the industry median 4.6% but has substantially declined from the company’s prior 7.5%. Net margin 3.4% is close to industry median 3.3%, placing the company mid-range. ROE 5.6% is slightly below industry median 5.9% and has converged toward the industry average from prior year 8.1%. Growth: revenue growth +6.7% exceeds industry median +4.3%, driven by high growth in the Restaurant Business. EPS growth -26.8% is well below the industry median +6% due to the profit decline. Cash generation is ample (Operating CF ¥37.8B, FCF ¥29.7B), though cash conversion ratio 0.87 is below industry median 1.57 (affected by corporate tax payment timing). Investment posture: CapEx ÷ Depreciation 1.89x is well above industry median 1.16x, reflecting a growth investment phase. Dividend payout 55.0% is more than double the industry median 27%, highlighting a strong return policy. Overall, financial safety and cash generation are industry-leading, profitability is slightly below industry average, and recovery of core Yakiniku profitability is key to regaining a top industry position.
Three primary takeaways:
Revenue growth paired with profit contraction and ineffective operating leverage. Revenue +6.7% versus Operating Income -16.3% and Net Income -26.8%; simultaneous gross margin -140bp and SG&A ratio +20bp compressed operating margin by -160bp. Yakiniku’s revenue -1.7% and Operating Income -24.0% led the decline, with cost inflation in food, labor, and rent eroding unit economics. Price adjustments, menu optimization, and operational efficiencies to restore gross and SG&A margins are prerequisites for recovery in H2 and beyond.
Continued strong cash generation and financial flexibility. Operating CF ¥37.8B is 2.98x Net Income ¥12.7B, and FCF ¥29.7B comfortably funds dividends ¥6.98B and CapEx ¥17.0B. Equity ratio 75.9%, net cash ¥79.3B, and D/E 0.04x confirm effectively debt-free status, allowing dividend maintenance (payout 55.0%) even amid profit decline. Medium-term, the company can pursue growth investment (CapEx ÷ Depreciation 1.89x, M&A ¥13.5B) while returning cash to shareholders; upside for dividend increases exists when profitability and Operating CF recover.
Progress in segment diversification but residual reliance on the core format. Restaurant Business expanded to 25.7% of revenue (+26.3%), and Other Businesses grew +33.7%, reducing Yakiniku dependence from 63.3% to 58.3%. Diversification has advanced, but Yakiniku still comprises nearly 60% of revenue, and delayed recovery there is the largest company risk. Full-year forecast achievement (Operating Income ¥25.0B, +13.1%) requires significant H2 improvements driven by same-store recovery, price effects, and new openings. One-off items such as impairment ¥2.99B are temporary, but similar losses may recur during portfolio optimization and require monitoring.
This report is an AI-generated financial analysis derived from XBRL financial statement data and is for informational purposes only. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are aggregated by the firm using public financial statements as reference. Investment decisions are your responsibility; consult a professional advisor as needed.