Komehyo Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥95.65B
• Operating Income: ¥1.76B
• Net Income: ¥1.97B
• EPS: ¥61.75

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

Komehyo Holdings (2780) reported strong top-line growth in FY2026 Q2, with revenue up 37.7% YoY to ¥95.6bn, reflecting robust transaction volumes and likely continued expansion of the reuse/luxury resale market. Despite this, profitability compressed sharply: operating income fell 43.7% YoY to ¥1.76bn, and net income dropped 65.5% YoY to ¥0.68bn, driving the net margin down to 0.71%. Gross profit reached ¥16.35bn, implying a gross margin of 17.1%, which is modest for a reuse retailer and suggests elevated procurement costs, a weaker sales mix, or promotional intensity. The operating margin was 1.84%, pointing to higher SG&A per yen of sales or reduced gross spread per unit. Ordinary income at ¥1.34bn was below operating income, indicating non-operating headwinds (e.g., FX losses or financing-related costs) beyond the reported interest expense of ¥95m. ROE, via DuPont, stands at 2.06% (net margin 0.71% × asset turnover 0.985 × leverage 2.96), underscoring that margin pressure is the primary driver of the weak return profile despite acceptable asset efficiency. Asset turnover near 1.0x is reasonable for a merchandise-heavy model, but leverage (assets/equity 2.96x) is doing more of the work than margins to sustain ROE. Liquidity is adequate on headline measures: the current ratio is 159% and working capital is ¥25.45bn, though the quick ratio at 66% highlights significant reliance on inventories (¥40.0bn) to support operations. The equity ratio printed as 0.0% in the dataset, but a simple calculation indicates ~33.8% (¥32.8bn equity/¥97.1bn assets), implying a balanced, though not overly conservative, capital structure for a retailer. Interest coverage appears comfortable at 18.4x based on operating earnings and reported interest, but the fall from operating to ordinary income suggests other non-operating drags. Reported cash flow figures are unprovided (0 placeholders), limiting direct assessment of operating cash flow and free cash flow; given the inventory build embedded in growth, OCF likely faced pressure in the period. EPS was ¥61.75, coherent with the low net margin outcome and implying subdued equity returns for the half. No dividend figures are disclosed in the dataset (0 placeholders), so payout analysis cannot be confirmed; historically, payout may depend on full-year results and cash flow. Overall, Komehyo delivered strong scale expansion but with meaningful margin compression, likely due to procurement dynamics, mix shifts, and operating cost growth, which, combined with non-operating losses, weighed on profitability. Balance sheet resilience appears reasonable, but working capital intensity is elevated and must be converted to cash in H2 to de-risk. Given the data limitations (cash flows, depreciation, DPS unreported), conclusions on earnings quality and dividend capacity are provisional and hinge on the second half.

Profitability Analysis

ROE_decomposition: ROE 2.06% = Net margin 0.71% × Asset turnover 0.985 × Financial leverage 2.96. The low net margin is the dominant drag; asset efficiency is reasonable, and leverage provides a mechanical uplift. margin_quality: Gross margin 17.1% suggests tighter spreads on merchandise, likely from higher purchase prices, mix toward lower-margin items, or promotional activity. Operating margin at 1.84% implies SG&A growth outpaced gross profit growth. Ordinary income below operating income indicates non-operating costs (e.g., FX losses, valuation losses on financial instruments, or other expenses) further diluted profitability. operating_leverage: Revenue grew 37.7% YoY while operating income fell 43.7% YoY, signaling negative operating leverage this half—costs and/or gross margin compression more than offset volume gains. This points to sensitivity of profits to gross spread and expense control, and potentially the timing of inventory sourcing and store/IT investment.

Growth Assessment

revenue_sustainability: Top-line growth of +37.7% YoY is robust, likely driven by higher transaction volumes and store/online expansion in luxury resale. Sustainability depends on procurement capacity, consumer demand for pre-owned luxury, and competitive dynamics. profit_quality: Net margin 0.71% and ordinary income below operating income flag quality concerns in the period. The gap suggests non-operating headwinds; without cash flow data, earnings cash conversion cannot be validated. The elevated inventory base indicates growth is being funded by working capital. outlook: Recovery in margins will hinge on stabilizing procurement spreads, mix optimization toward higher-margin categories (e.g., jewelry/watches with favorable gold/brand dynamics), disciplined SG&A, and potential normalization of non-operating items. H2 seasonality and improved sell-through of built inventories are key to restoring profitability.

Financial Health

liquidity: Current ratio 159.2% and working capital of ¥25.45bn provide a buffer. Quick ratio 66.2% underscores reliance on inventory monetization for liquidity. Cash and cash equivalents are unreported in this dataset. solvency: Debt-to-equity 1.69x (liabilities/equity) indicates moderate leverage; interest coverage at 18.4x appears comfortable. Calculated equity ratio is ~33.8% (¥32.8bn/¥97.1bn), despite the reported 0.0% placeholder. capital_structure: Total liabilities of ¥55.43bn vs equity of ¥32.80bn reflect a retail-typical structure reliant on payables and short-term funding. Interest expense of ¥95m implies some interest-bearing debt, but the absolute burden is manageable given operating income levels.

Cash Flow Quality

earnings_quality: OCF is unreported, preventing a direct OCF/Net Income check. Given the significant inventory balance (¥40.0bn) amid rapid growth, working capital likely absorbed cash, pressuring OCF in the half. FCF_analysis: Free cash flow is unreported. With investing and financing cash flows also unreported, no triangulation is possible. The period likely required cash to fund inventory and potential store/IT investments, delaying FCF until sell-through improves. working_capital: Inventory intensity is high; quick ratio at 66% indicates dependence on converting inventories to cash. Efficient inventory turnover in H2 will be critical for cash generation and to mitigate funding needs.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout are unreported (0 placeholders). Given EPS of ¥61.75 and low ROE, a conservative payout would be prudent, but no conclusion can be drawn without policy disclosure. FCF_coverage: FCF is unreported; therefore, coverage cannot be assessed. Near-term coverage will depend on the pace of inventory monetization and capex requirements. policy_outlook: Historically, Japanese retailers’ dividend decisions hinge on full-year results and cash flow. With margin compression in H1, maintaining or adjusting dividends will likely depend on H2 recovery; management commentary is needed.

Risk Assessment

Business Risks:

• Procurement spread compression in the reuse/luxury category due to higher buy-in costs and competitive sourcing.
• Demand volatility for discretionary luxury goods amid macro uncertainty and FX movements affecting tourist and domestic demand.
• Inventory valuation and obsolescence risk if sell-through slows or fashion/brand cycles shift.
• Non-operating volatility (e.g., FX, valuation losses) impacting ordinary income.
• Execution risk in scaling stores/online platforms while maintaining margin discipline.

Financial Risks:

• Working capital intensity and potential cash flow pressure from inventory builds.
• Exposure to short-term funding costs; rising interest rates could lift financing expense from current ¥95m.
• Leverage sensitivity: liabilities/equity at 1.69x and leverage of 2.96x increase risk if margins stay compressed.
• Potential high effective tax or below-the-line impacts that depress net income relative to pre-tax.

Key Concerns:

• Sharp decline in operating and net income despite strong revenue growth.
• Ordinary income below operating income, implying additional non-operating headwinds.
• High inventory balance requiring strong H2 sell-through to protect liquidity and cash flow.

Investment Implications

Key Takeaways:

• Top-line momentum is strong (+37.7% YoY), but profitability is under pressure (OP -43.7% YoY; net margin 0.71%).
• ROE of 2.06% is weak; margin recovery is essential given asset turnover is acceptable and leverage already elevated.
• Liquidity is adequate on current ratio, but quick ratio of 66% highlights inventory dependence.
• Ordinary income below operating income suggests non-operating drags; monitoring FX/valuation items is important.
• Cash flow data are unreported; working capital suggests OCF was likely constrained in H1.

Metrics to Watch:

• Gross margin and buy-sell spread by category (luxury bags, watches, jewelry).
• SG&A ratio and store/online productivity (sales per store, per employee).
• Inventory turnover days and aging profile; inventory to sales ratio.
• Ordinary income drivers (FX gains/losses, investment securities P/L) and interest expense trend.
• H2 operating cash flow and free cash flow; capex plans and funding mix.

Relative Positioning: Within Japan’s reuse/luxury retail space, Komehyo’s scale supports revenue growth, but current-period margins lag peers with steadier spreads and tighter cost control; sustained improvement in procurement economics and SG&A efficiency is needed to close the profitability gap.

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