HONEYS HOLDINGS (2792) FY2026 Q3 Earnings Report

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Executive Summary

The cumulative results for Q3 FY2026 showed declines in both revenue and earnings, with the most important point being that the decline in earnings significantly exceeded the decrease in revenue. Revenue was ¥40.31B (down -2.8% YoY), Operating Income was ¥2.23B (down -30.4%), Ordinary Income was ¥2.28B (down -30.1%), and Net Income was ¥1.40B (down -29.8%). While the decline in gross profit margin was limited to approximately 0.3pt, SG&A expenses increased by 0.9% amid declining revenue, reducing fixed-cost absorption capacity. As a result, the Operating Income margin contracted by approximately 2.2pt to 5.5%, from 7.7% in the same period of the previous year.

Factors Affecting Performance

【Revenue】Revenue was ¥40.31B, down 2.8% YoY. The Group discontinued the Myanmar segment and changed to a single Japan segment beginning in Q1; therefore, the factors driving changes by segment have not been disclosed.

【Profit and Loss】Gross profit was ¥23.35B (¥24.12B in the same period of the previous year), and the gross profit margin edged down to 57.9% from 58.2% in the same period of the previous year. Meanwhile, SG&A expenses increased by 0.9% YoY to ¥21.12B, and the SG&A ratio rose by approximately 1.9pt to 52.4% from 50.5% in the same period of the previous year. Consequently, Operating Income was ¥2.23B (down -30.4%), with the increase in the SG&A ratio having a greater impact than the decline in the gross profit margin. As extraordinary losses, the Company recorded an impairment loss of ¥0.12B and a loss on disposal of fixed assets of ¥0.05B, which reduced earnings as temporary factors. Ordinary Income and Net Income also declined at approximately the same rates, indicating that the impact of non-operating and extraordinary income and expenses was limited. In conclusion, the Company experienced declines in both revenue and earnings, primarily due to insufficient fixed-cost absorption amid declining revenue.

Segment Analysis

Beginning with the Q1 consolidated accounting period, the Group changed its reportable segments to a single “Japan” segment, and information on revenue and profit or loss by segment has not been disclosed. The former “Myanmar” segment accounted for only a negligible proportion of the total, and its disclosure has therefore been omitted because it was deemed immaterial for disclosure purposes.

Key Financial Indicators

【Profitability】The Operating Income margin was 5.5%, down approximately 2.2pt from 7.7% in the same period of the previous year, while the Net Income margin also declined by approximately 1.3pt to 3.5% from 4.8% in the same period of the previous year. Annualized ROE remained at 4.0%; the decline was primarily attributable to the lower Net Income margin, while the impact of financial leverage (1.16x) was limited.【Cash Flow Quality】Comprehensive Income was ¥4.00B, significantly exceeding Net Income of ¥1.40B, mainly due to a ¥2.43B improvement in the valuation of deferred hedge gains and losses.【Investment Efficiency】Total asset turnover was approximately 0.98x on an annualized basis, indicating limited revenue-generating capacity relative to the asset base. Inventory was ¥9.80B, a commensurate level relative to the scale of revenue.【Financial Soundness】The Equity Ratio was 86.1%, and Net Assets were ¥47.18B, representing a strong capital base. Liquidity was extremely high, with Current Assets of ¥33.10B compared with Current Liabilities of ¥3.89B.

Cash Flow Analysis

Because the cash flow statement is not included in the disclosed data, cash trends are analyzed based on changes in the balance sheet. Cash and deposits increased to ¥14.34B from ¥13.36B in the same period of the previous year, indicating expanded financial capacity. Meanwhile, accounts receivable declined significantly to ¥2.75B from ¥4.51B in the same period of the previous year, while accounts payable also decreased to ¥0.34B from ¥0.63B, indicating a change in the composition of working capital. Inventories were ¥9.80B, nearly unchanged from ¥9.85B in the same period of the previous year, with no significant change in inventory levels. Fixed Liabilities exceeded Current Liabilities, and the proportion of long-term liabilities, including asset retirement obligations of ¥1.79B, was high. Accordingly, the impact on short-term liquidity is considered limited.

Earnings Quality

The Company recorded an impairment loss of ¥0.12B and a loss on disposal of fixed assets of ¥0.05B as extraordinary losses relative to its recurring earnings structure. These items should be viewed separately from Operating Income as temporary factors. Non-operating income was ¥0.18B, remaining below 0.5% of revenue, indicating a low degree of dependence on non-operating income. Meanwhile, non-operating expenses included a foreign exchange loss of ¥0.09B, making the impact of foreign exchange relatively significant on the expense side. Comprehensive Income of ¥4.00B substantially exceeded Net Income of ¥1.40B; this difference was primarily attributable to a ¥2.43B valuation gain on deferred hedge gains and losses. It should be noted that this does not represent the Company’s recurring earnings power.

Earnings Forecast and Guidance

The full-year Company forecast is Revenue of ¥57.50B (down -0.3% YoY), Operating Income of ¥5.60B (down -5.2%), and Ordinary Income of ¥5.60B (down -6.5%). There have been no revisions to either the earnings forecast or the dividend forecast. The Q3 cumulative progress rates are 70.1% for Revenue of ¥40.31B, 39.8% for Operating Income of ¥2.23B, and 40.7% for Ordinary Income of ¥2.28B. Revenue progress is generally on track after taking seasonality into account; however, progress toward the Operating Income and Ordinary Income targets is significantly behind schedule, and achieving the full-year plan will require an improvement in the Q4 profit margin to above the prior-year level.

Shareholder Returns

The Q2 dividend was ¥25.00 per share, and the full-year forecast dividend is ¥55.00. Based on the full-year Net Income forecast of ¥3.60B, the forecast Payout Ratio is approximately 42.6%. The strong financial base, including an Equity Ratio of 86.1% and cash and deposits of ¥14.34B, provides support for the dividend. However, the cumulative Q3 progress rate toward the full-year earnings forecast is only 38.9%, and the realization of the annual dividend of ¥55 depends on the level of earnings achieved in Q4.

Risk Factors

1. Inventory and working capital efficiency: Inventories were ¥9.80B, and inventory turnover days were 158 days on an annualized basis, exceeding the general benchmark for retail businesses. Clearing inventory amid weak sales may require increased discounting, which could place additional downward pressure on the gross profit margin.

2. Declining fixed-cost absorption capacity: While revenue declined by 2.8% YoY, SG&A expenses increased by 0.9%, resulting in a 30.4% decline in Operating Income. If the recovery in revenue is delayed, the potential for improvement in the 52.4% SG&A ratio will be a key monitoring point.

3. Asset retirement obligations and profitability of store assets: Asset retirement obligations were ¥1.79B, accounting for 23.9% of total liabilities. The Company also incurred an impairment loss of ¥0.12B and a loss on disposal of fixed assets of ¥0.05B. If the store network is further reviewed, additional expenses may be recognized.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Profitability exceeds the industry median, and although it has declined from the previous year, the relative level has been maintained.

Growth and Capital Efficiency

The Revenue growth rate is significantly below the industry median, indicating relative underperformance within the industry in terms of top-line growth.

※Source: Compiled by the Company

Key Points from the Financial Results

1. While the Company has a strong financial base supported by an Equity Ratio of 86.1% and high Current Ratio, its profitability structure offers room for improvement, with an Operating Income margin of 5.5% and annualized ROE of 4.0%.

2. Although the decline in the gross profit margin was limited to approximately 0.3pt, the SG&A ratio increased by approximately 1.9pt. This indicates that the primary cause of the deterioration in profitability was insufficient fixed-cost absorption amid declining revenue.

3. The progress rate for Operating Income against the full-year plan was 39.8%, and achievement of the plan incorporates a substantial improvement in the profit margin in Q4 to above the prior-year level. The likelihood of achieving the unchanged earnings forecast will need to be confirmed through future disclosures.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,558–¥1,648 at ±1% for the Cost of Equity, and ¥1,599–¥1,604 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value Per Share.
• Net Assets as of the quarter-end are used (there is a timing gap relative to the full-year forecast).
• Because Net Assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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