Alpen Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥65.42B
• Operating Income: ¥616M
• Net Income: ¥804M
• EPS: ¥15.72

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

Alpen Co., Ltd. (TSE:3028) reported FY2026 Q1 consolidated results under JGAAP with revenue of ¥65.4bn, up 4.9% YoY, but profitability compressed as operating income fell 22.4% to ¥0.62bn and net income declined 24.7% to ¥0.61bn. Gross profit was ¥25.0bn, implying a solid gross margin of 38.2%, yet SG&A and other operating expenses of roughly ¥24.39bn consumed nearly all gross profit, resulting in a sub-1% operating margin (0.94%). Ordinary income (¥0.97bn) exceeded operating income, indicating positive non-operating contributions of about ¥0.36bn that partially cushioned weaker core earnings. Net margin was 0.93%, consistent with the DuPont input, and EPS was ¥15.72 for the quarter. Based on DuPont decomposition for the quarter, ROE was approximately 0.50%, driven by a very thin net margin (0.93%), modest asset turnover (0.310x on a quarterly basis), and financial leverage of about 1.75x. Balance sheet strength appears solid: equity of ¥120.7bn against assets of ¥210.9bn implies an equity ratio around 57% (the 0.0% equity ratio shown is an unreported placeholder). Liquidity is healthy with a current ratio of 155% and working capital of ¥40.4bn, although the quick ratio of 44% underscores the heavy inventory mix typical of retailers. Inventories stood at ¥81.0bn versus quarterly cost of sales of ¥37.4bn, suggesting approximately 195 days of inventory on hand (quarter-basis estimate), likely reflecting seasonality and product breadth but requiring vigilant management. Interest expense was modest at ¥24m, yielding strong interest coverage of 25.7x on operating income, and higher on an ordinary basis. The effective tax rate calculated from disclosed taxes (¥428m) and net income (~¥606m) is approximately 41–42%, indicating the 0.0% shown is a data placeholder. Cash flow statement items (OCF/FCF) and depreciation were not disclosed in the XBRL, limiting assessment of earnings quality and capex intensity this quarter. Dividend information is also not disclosed; therefore, payout and FCF coverage cannot be assessed from this dataset. Overall, Alpen delivered steady top-line growth but faced operating leverage headwinds, relying on non-operating income to lift ordinary profit, while maintaining a robust balance sheet and ample liquidity. Near-term focus should be on expense discipline, inventory efficiency, and conversion of earnings to cash given the lack of disclosed cash flow data. We acknowledge data limitations (notably zeros indicating undisclosed items) and base our analysis on the available figures only.

Profitability Analysis

• ROE decomposition (DuPont): Net margin 0.93% × asset turnover 0.310 × financial leverage 1.75 ≈ 0.50% quarterly ROE.
• Margins: Gross margin 38.2% (¥25.0bn/¥65.4bn) is healthy for specialty retail, but operating margin compressed to 0.94% (¥0.62bn/¥65.4bn) as SG&A and other operating costs rose to roughly 37.3% of sales (¥24.39bn/¥65.4bn).
• Ordinary margin improved vs operating due to non-operating gains: ordinary income margin ~1.49% (¥0.97bn/¥65.4bn), implying ~¥0.36bn net non-operating income.
• Tax burden: Effective tax rate ~41–42% (¥428m / (¥606m + ¥428m)), indicating a normalizing tax load; the reported 0.0% is a placeholder.
• Operating leverage: Despite 4.9% revenue growth, operating income fell 22.4% YoY, indicating negative operating leverage (cost growth/outlays outpaced gross profit gains). Fixed cost absorption appears weak this quarter.
• Expense mix: With gross profit at ¥25.0bn and operating income at ¥0.62bn, the cost base consumed ~97.5% of gross profit; small changes in SG&A can disproportionately affect earnings.
• Interest burden: Minimal at ¥24m; operating interest coverage ~25.7x, suggesting financing costs are not constraining profitability.
• Quality of earnings: Reliance on non-operating income to bridge from operating to ordinary profit raises the importance of core margin recovery in subsequent quarters.

Growth Assessment

• Revenue growth: +4.9% YoY to ¥65.4bn signals resilient demand across categories; however, the growth did not translate to operating profit growth.
• Profit trajectory: Operating income (-22.4% YoY) and net income (-24.7% YoY) indicate deterioration in underlying profitability, likely from higher SG&A (labor, rent, utilities, logistics) and/or markdowns not fully visible in disclosed data.
• Sustainability: Maintaining top-line momentum will depend on traffic, ticket size, and product mix (including private brands) as well as promotional intensity amid competitive pressures.
• Outlook considerations: Inventory of ¥81.0bn against quarterly COGS of ¥37.4bn implies sizable stock positioning; successful sell-through at full price is critical for margin recovery in coming quarters.
• Non-operating contribution: Ordinary income exceeded operating income by ~¥0.36bn; continued reliance on such items may not be sustainable.
• Price/cost dynamics: Imported merchandise exposure means FX and freight can impact gross margin; current 38.2% gross margin provides a buffer but leaves limited room after SG&A.
• Overall: Top-line growth appears intact, but earnings quality hinges on cost control and inventory efficiency to restore positive operating leverage.

Financial Health

• Liquidity: Current ratio 155.1% (¥113.6bn/¥73.2bn) and working capital ¥40.36bn indicate ample short-term liquidity. Quick ratio 44.4% reflects inventory-heavy current assets, common in retail but a watchpoint if demand softens.
• Solvency/capital structure: Total equity ¥120.7bn vs assets ¥210.9bn implies an equity ratio of ~57.2% (the 0.0% shown is undisclosed), and liabilities/equity of ~0.70x, indicating conservative leverage.
• Interest burden: Interest expense ¥24m is small relative to earnings; interest coverage ~25.7x on operating income suggests low refinancing risk.
• Balance sheet resilience: Strong equity base offers capacity to absorb cyclical swings and invest in store refurbishments, omnichannel, and systems as needed.

Cash Flow Quality

• Disclosure gap: Operating, investing, and financing cash flows are not disclosed in this dataset (zeros are placeholders), preventing direct assessment of OCF/FCF and accruals.
• Earnings-to-cash conversion: Cannot be measured this quarter; however, inventory at ¥81.0bn relative to quarterly COGS suggests material working capital embedded in stock, which could depress OCF if sell-through is slow.
• Working capital dynamics: With current assets ¥113.6bn and inventories ¥81.0bn, non-inventory current assets are ~¥32.5bn; careful management of inventory days (~195 days on a quarter basis) and payables will be key to preserving cash.
• Capex intensity: Depreciation and capex not disclosed; store network and logistics typically require steady maintenance capex—cash flow coverage should be revisited once OCF/Capex data are available.

Dividend Sustainability

• Payout: Dividend per share and payout ratio are not disclosed in this dataset; EPS is ¥15.72 for Q1 but cannot be annualized without guidance.
• Coverage: Free cash flow is undisclosed; therefore, FCF coverage of dividends cannot be assessed from these figures.
• Capacity indicators: Strong equity ratio (~57%), low interest burden, and positive net income indicate capacity to sustain distributions in principle, but confirmation requires visibility on OCF and capex.
• Policy outlook: Without disclosed dividend policy or actual DPS, we refrain from inferring changes; monitor management commentary and year-to-date cash generation.

Risk Assessment

Business Risks:

• Inventory risk and markdown pressure if demand weakens or weather is unfavorable for seasonal categories
• Competitive intensity from domestic specialty retailers and e-commerce platforms pressuring pricing and promotions
• Seasonality and event/weather dependence impacting traffic and sell-through
• FX and freight cost volatility affecting import costs and gross margins
• Product mix shifts (private brand vs. national brands) impacting margin structure
• Labor and utility cost inflation elevating SG&A

Financial Risks:

• High inventory relative to quarterly COGS could strain operating cash flow if turnover slows
• Potential lease liabilities and fixed cost base magnify negative operating leverage in downturns
• Exposure to interest rate normalization on floating-rate borrowings, albeit current interest burden is low
• Tax rate volatility (~41–42% this quarter) affecting net income predictability

Key Concerns:

• Operating income decline (-22.4% YoY) despite revenue growth indicates cost pressure
• Reliance on non-operating income to lift ordinary profit above operating profit
• Undisclosed cash flow data and depreciation obscure earnings quality and investment needs
• Inventory days (~195 on a quarter basis) require robust sell-through to avoid margin erosion

Investment Implications

Key Takeaways:

• Top-line grew 4.9% YoY, but operating profit fell 22.4%, evidencing negative operating leverage
• Gross margin of 38.2% remains solid, yet SG&A intensity near 37% of sales compressed operating margin to 0.94%
• Ordinary income benefited from ~¥0.36bn non-operating gains; core earnings need support
• Balance sheet is strong with ~57% equity ratio and debt-to-equity of ~0.70x
• Liquidity is ample (current ratio 155%), but quick ratio 44% highlights inventory-heavy working capital
• Cash flow and capex not disclosed; FCF and dividend coverage cannot be verified this quarter

Metrics to Watch:

• Quarterly SG&A growth vs sales growth (operating leverage)
• Inventory turnover and markdown rates; inventory days trend vs seasonal plan
• Gross margin trajectory (FX, freight, and mix effects)
• Operating cash flow and free cash flow once disclosed
• Ordinary vs operating income gap (sustainability of non-operating gains)
• Effective tax rate normalization

Relative Positioning: Within Japan’s sporting goods retail segment, Alpen shows steady sales momentum and a conservative balance sheet but currently lags on earnings momentum due to cost pressures and inventory intensity; near-term performance hinges on improving sell-through and SG&A discipline.

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