BANNERS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.47B
• Operating Income: ¥147M
• Net Income: ¥106M
• EPS: ¥6.59

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

For FY2026 Q2 (consolidated, JGAAP), Banners Co., Ltd. (30110) delivered modestly lower top- and bottom-line results while maintaining solid cash conversion and adequate short-term liquidity. Revenue declined 1.1% YoY to ¥2,474m, with operating income down 4.3% YoY to ¥147m, indicating mild negative operating leverage amid a largely stable gross margin profile. Gross profit of ¥618m implies a 25.0% gross margin, supporting an operating margin of roughly 5.9% and a net margin of 4.0%. Ordinary income (¥135m) was below operating income due to net financial/non-operating costs, including ¥15.9m of interest expense, yielding a reported interest coverage of 9.2x. Net income was ¥100m (down 4.4% YoY), with EPS of ¥6.59, implying an indicative share count of about 15.2 million shares based on net income, though share data were not disclosed. DuPont analysis shows an ROE of 3.72%, decomposed into a 4.04% net margin, 0.281x asset turnover, and 3.28x financial leverage, underscoring modest profitability, slow asset turns, and meaningful leverage. Operating cash flow was strong at ¥268m (OCF/NI of 2.68x), suggesting healthy earnings quality and/or working capital release, although detailed drivers were not disclosed. Liquidity appears serviceable with a current ratio of 139.6% and a quick ratio of 85.2%, while working capital stood at ¥580m; however, the unreported cash and cash equivalents figure limits assessment of immediate liquidity buffers. Capital structure is relatively leveraged (debt-to-equity 2.31x), consistent with the financial leverage factor in DuPont and the reduction from operating to ordinary income. Inventory of ¥798m represents a sizable component of current assets, warranting monitoring of turnover and potential markdown risk in a slowing top line. The provided effective tax rate metric shows 0.0%, but based on the reported income tax of ¥36.2m and ordinary income of ¥135m, the implied tax rate is closer to ~27%, suggesting the 0.0% figure reflects calculation/labeling limitations. Dividend payments were not disclosed for the period (DPS 0.00, payout 0.0%), and free cash flow was not computable due to unreported investing cash flows; thus, dividend capacity should be assessed using OCF until capex is disclosed. Overall, fundamentals indicate resilient cash generation and acceptable near-term liquidity against a backdrop of modest profitability and elevated leverage. Revenue softness and operating deleverage are the primary near-term pressures. Data limitations (several zero placeholders and missing cash, investing CF, and share data) constrain the depth of analysis, so conclusions should be viewed as provisional. Outlook hinges on stabilizing sales, maintaining gross margins, disciplined SG&A control, and clear disclosure of capex and cash balances.

Profitability Analysis

ROE of 3.72% reflects: net margin 4.04% x asset turnover 0.281x x financial leverage 3.28x. The margin is modest for the leverage level, indicating returns are constrained more by profitability and asset intensity than by capital structure. Operating margin is approximately 5.9% (¥147m / ¥2,474m), with gross margin of 25.0%, implying SG&A and other operating costs consume ~19.1% of sales. EBITDA of ¥241m yields a 9.7% EBITDA margin, offering a reasonable cushion above operating income for depreciation expense (¥94.0m). Ordinary income below operating income reflects net financial costs; interest expense of ¥15.9m reduced earnings, consistent with leverage usage. The 9.2x interest coverage indicates manageable debt service capacity at present profit levels. The YoY revenue decline of 1.1% versus a larger 4.3% decline in operating income points to mild negative operating leverage/cost stickiness; continued top-line pressure could disproportionately affect earnings if costs are not flexed. Margin quality appears stable at the gross level, but ordinary and net margins are sensitive to financing costs and tax. The effective tax rate shown as 0.0% in the metrics likely reflects a placeholder; based on reported tax of ¥36.2m and ordinary income of ¥135m, the implied tax burden is about 27%, which aligns with typical ranges for Japan. Asset turnover at 0.281x (interim) is low, suggesting a capital-intensive or inventory-heavy model and posing a structural drag on ROE absent stronger margins.

Growth Assessment

Revenue decreased 1.1% YoY to ¥2,474m, indicating mild demand softness or potential mix effects. Operating income fell 4.3% YoY to ¥147m, highlighting negative operating leverage as fixed/semi-fixed costs were not fully offset. Net income declined 4.4% to ¥100m, roughly in line with operating trends, as non-operating items and taxes were relatively stable in aggregate. Gross margin at 25.0% suggests pricing and procurement discipline, but sustaining this margin is important if sales remain under pressure. Profit quality is supported by OCF/NI of 2.68x, implying that earnings were backed by cash generation in the half; however, the absence of investing CF disclosure precludes assessing maintenance vs. growth investment needs. Near-term growth outlook depends on stabilizing volumes and controlling SG&A to mitigate deleverage. Without segment or geographic breakdowns, it is difficult to identify specific drivers; management commentary (not provided) would be valuable for assessing demand normalization, pricing power, and cost pass-through. Inventory at ~¥798m relative to half-year sales indicates working capital tied up; efficient sell-through will be important for growth and margin protection. Overall, revenue sustainability appears tentative, and profit momentum will hinge on expense discipline and any cyclical recovery.

Financial Health

Total assets were ¥8,812m and total liabilities ¥6,210m, with reported total equity of ¥2,687m, indicating a leveraged balance sheet. The debt-to-equity ratio of 2.31x and financial leverage factor of 3.28x point to material balance sheet gearing. Liquidity is acceptable on standard metrics: current ratio 139.6% and quick ratio 85.2%; the latter below 100% suggests reliance on inventory to meet short-term obligations. Working capital of ¥580m provides a buffer, though the quality of working capital (inventory mix/ageing, receivables) is not disclosed. Interest expense of ¥15.9m versus EBITDA of ¥241m and EBIT of ~¥147m results in comfortable coverage (9.2x), but headroom could tighten if profits slip. The equity ratio was shown as 0.0% (undisclosed); based on the balance sheet totals, the implied equity-to-asset ratio appears around the low 30% range, but we defer to disclosed figures given potential classification nuances. Unreported cash and cash equivalents prevent assessment of immediate liquidity reserves and net debt, which are key for solvency analysis.

Cash Flow Quality

Operating cash flow of ¥268m versus net income of ¥100m yields an OCF/NI ratio of 2.68x, indicating strong cash realization from earnings and/or working capital release in the period. Depreciation and amortization totaled ~¥94m, consistent with EBITDA-EBIT reconciliation, and supports non-cash add-backs to OCF. Working capital dynamics are not disaggregated, but inventory and receivables/payables management likely contributed to cash generation; monitoring inventory turns will be important given the revenue softness. Investing cash flow was not disclosed (shown as 0), so free cash flow cannot be reliably computed; the listed FCF of 0 reflects missing data rather than actual zero. As a result, we cannot judge the sustainability of OCF after maintenance capex or growth investments. Financing cash flow was an outflow of ¥158m, suggesting debt reduction, lease payments, dividends, or other financing uses; details are not provided. Overall earnings quality appears solid on OCF conversion, but the absence of investing CF and cash balance data limits a full FCF and liquidity assessment.

Dividend Sustainability

DPS is reported as 0.00 and payout ratio 0.0% for the period, indicating no interim dividend disclosure. Given the lack of investing CF and cash balance data, FCF coverage cannot be assessed; the displayed FCF coverage of 0.00x is a placeholder rather than an economic measure. From a capacity perspective, OCF of ¥268m provides headroom for potential distributions, but leverage (D/E 2.31x) and the need to fund maintenance/growth capex (undisclosed) may constrain policy. With net income at ¥100m, a hypothetical payout would need to preserve interest coverage and liquidity, particularly as the quick ratio is below 100%. Policy outlook is unclear without management guidance; priority may reasonably be placed on balance sheet resilience and investment. Absent capex and cash disclosures, dividend sustainability cannot be conclusively evaluated.

Risk Assessment

Business Risks:

• Top-line softness (-1.1% YoY) raising the risk of negative operating leverage if costs remain sticky
• Margin pressure from input cost inflation or pricing competition, given modest 5.9% operating margin
• Inventory risk (¥798m) including potential slow-moving stock and markdowns in a softer demand environment
• Dependence on non-operating items and financing costs that can swing ordinary income
• Limited disclosure on segments, customers, and geographies, restricting visibility into demand drivers

Financial Risks:

• Elevated leverage (debt-to-equity 2.31x; DuPont financial leverage 3.28x) increases sensitivity to earnings volatility
• Interest rate risk affecting interest expense and coverage (currently 9.2x) if rates or spreads rise
• Liquidity reliance on inventory given quick ratio of 85.2% and unreported cash balances
• Refinancing and covenant risk if profitability weakens and working capital needs rise
• Capex visibility risk: unreported investing CF hampers assessment of maintenance needs and FCF

Key Concerns:

• Negative operating leverage with revenue down and operating income down more sharply
• High balance sheet leverage alongside modest ROE (3.72%) and asset turnover (0.281x)
• Insufficient disclosure on cash, capex, and investing flows, limiting FCF and liquidity analysis

Investment Implications

Key Takeaways:

• Modest profitability with operating margin ~5.9% and net margin 4.0% amid slight revenue decline
• ROE of 3.72% constrained by low asset turnover despite meaningful leverage
• Strong cash conversion (OCF/NI 2.68x) supports earnings quality
• Adequate near-term liquidity (current ratio 139.6%) but sub-1.0 quick ratio implies reliance on inventory
• Interest coverage of 9.2x is comfortable but sensitive to earnings pressure
• Dividend capacity not assessable due to missing investing CF and cash balances
• Inventory level significant relative to sales, requiring disciplined working capital management

Metrics to Watch:

• Revenue trajectory and same-store/volume indicators (when available)
• Gross and operating margin trends, including SG&A ratio
• OCF/NI ratio and working capital turns (inventory days, receivable/payable days)
• Capex and total investing cash flows to establish true FCF
• Net debt, cash balances, and interest coverage
• Debt-to-equity and equity ratio movements
• Ordinary income versus operating income to track non-operating/financing impact

Relative Positioning: Relative to a typical TSE small/mid-cap with moderate leverage, the company exhibits higher leverage, modest profitability, and strong cash conversion, but limited disclosure on cash and capex constrains a full comparison; maintaining margins and improving asset turns would be key to enhancing ROE.

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