Beauty Kadan Holdings Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.77B
• Operating Income: ¥-82M
• Net Income: ¥-59M
• EPS: ¥-19.90

Income Statement

Balance Sheet

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

Revenue declined 2.0% YoY to 1,771 million yen, indicating a mild top-line contraction at the start of FY2026. Gross profit was 182 million yen, implying a gross margin of 10.3%, which is thin for a consumer/retail-oriented business and leaves limited cushion to cover operating expenses. Operating income was a loss of 82 million yen, reportedly flat YoY, suggesting ongoing profitability challenges despite modest revenue movement. Ordinary loss was 83 million yen, with interest expense of 3.9 million yen not the primary driver of the overall loss. Net loss was 88 million yen, translating to a net margin of -4.97% and EPS of -19.90, underscoring continued earnings pressure. DuPont metrics show ROE of -17.5%, driven by negative margins (-4.97%), moderate asset turnover (0.646x), and high financial leverage (5.45x). The SG&A burden is heavy: implied SG&A is approximately 264 million yen, about 14.9% of revenue, which turns a low gross margin into an operating loss. Liquidity appears adequate with a current ratio of 145% and working capital of roughly 610 million yen, supported by a high share of current assets (about 72% of total assets). The balance sheet shows total assets of 2,742 million yen and equity of 503 million yen; on this basis the equity ratio is approximately 18.3% (the reported 0.0% figure appears to be unreported rather than actual), reflecting a leveraged capital structure. The debt-to-equity ratio presented (4.55x) aligns with total liabilities to equity and highlights high leverage. Interest coverage is deeply negative (-21x) due to the operating loss, though absolute interest expense remains small. Cash flow statements are unreported this quarter, limiting visibility into operating cash generation, working capital movements, and capex needs. With DPS at 0 and losses persisting, distributions are conservatively paused, consistent with capital preservation under leverage. The near-term outlook hinges on stabilizing gross margin and tightening SG&A to move toward breakeven. Key data gaps include cash and equivalents, D&A, inventories, and cash flow statements, which constrain assessment of earnings quality and funding risk. Overall, the company faces margin compression and high leverage, but maintains short-term liquidity; execution on pricing, mix, and cost control will be critical to improving profitability.

Profitability Analysis

ROE of -17.5% decomposes into net profit margin of -4.97%, asset turnover of 0.646x (revenue 1,771m yen / assets 2,742m yen), and financial leverage of 5.45x (assets 2,742m yen / equity 503m yen). Gross margin is 10.3%, which is low and signals limited value-add or price power at the current mix and cost structure. Operating margin is -4.6% (operating loss 82m yen), implying SG&A of roughly 264m yen (14.9% of revenue); SG&A intensity is the primary driver turning a thin gross margin into an operating loss. Ordinary and net margins (-4.7% and -5.0%) track operating losses closely, indicating limited non-operating noise other than small interest expense. Interest coverage is -21.0x, reflecting an operating loss rather than excessive interest burden in absolute terms. With revenue down 2% YoY and operating loss flat YoY, operating leverage appears unfavorable: small revenue changes are not yet translating into margin improvement due to fixed-cost absorption. Without D&A disclosure, EBITDA cannot be reliably assessed; the reported EBITDA of 0 should be treated as unreported rather than a true zero.

Growth Assessment

Top-line declined 2.0% YoY, suggesting soft demand or pricing pressure early in the fiscal year. Given the gross margin of 10.3%, mix and/or procurement costs likely pressured margin, limiting growth conversion to profit. The flat YoY operating loss implies that any revenue softness was offset by some expense discipline, but not enough to break even. Sustainability of revenue hinges on demand normalization, potential price pass-through, and product mix upgrades; no evidence of these shifts is available in the quarter’s disclosures. Profit quality is weak due to negative operating income; improvements would require either gross margin expansion (pricing, vendor terms, mix) or material SG&A savings. With cash flow data unreported, we cannot corroborate earnings with cash generation, increasing uncertainty around the durability of any improvements. Near-term outlook is cautious: modest revenue trends and thin margins suggest that achieving breakeven will depend on cost control and incremental gross margin gains more than on volume growth alone.

Financial Health

Total assets are 2,742m yen, equity 503m yen, and total liabilities 2,287m yen. Based on these figures, the equity ratio is approximately 18.3% (reported 0.0% appears unreported), indicating a leveraged balance sheet. The debt-to-equity ratio shown (4.55x) matches total liabilities to equity, underscoring high leverage. Current assets are 1,966m yen versus current liabilities of 1,356m yen, producing a current ratio of 145% and working capital of about 610m yen, which is adequate for near-term liquidity. Quick ratio equals the current ratio here because inventories are unreported; true quick liquidity may be lower if inventories are material. Interest expense is modest at 3.9m yen, but recurring operating losses constrain debt service capacity. With negative profitability and a small equity base, solvency risk would rise if losses persist and erode equity further. Cash and equivalents are unreported, which limits visibility on immediate liquidity buffers and net debt.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported for the quarter, so OCF/NI and FCF metrics cannot be interpreted; the displayed zeros should not be treated as actual results. Earnings quality cannot be validated via cash conversion given the lack of OCF data. Working capital dynamics are unclear without inventories, receivables, and payables detail; this is important in a distribution/retail-like model where inventory and payables timing drive cash generation. Depreciation and amortization are also unreported, preventing separation of operating performance from non-cash charges and accurate EBITDA estimation. In the absence of cash flow data, we cannot assess capex intensity, acquisition outflows, or changes in leverage that would influence free cash flow.

Dividend Sustainability

DPS is 0.00, with a reported payout ratio of 0.0%. Given negative net income and high leverage, a conservative dividend stance aligns with balance sheet preservation. FCF coverage is shown as 0.00x but is not meaningful due to unreported cash flows. Sustainability of future dividends depends on restoring operating profitability and generating positive, repeatable free cash flow; current results do not support near-term distributions. Company policy signals prudence amid losses, and any change would likely require clear evidence of margin and cash flow improvement.

Risk Assessment

Business Risks:

• Low gross margin (10.3%) limits buffer to absorb cost inflation or demand shocks
• SG&A intensity (~14.9% of revenue) creating structural drag on operating profit
• Demand softness (revenue -2.0% YoY) and potential competitive pricing pressure
• Supplier cost pass-through risk and procurement volatility
• Potential seasonality and mix risk affecting quarterly margins
• Execution risk on cost reductions and operating efficiency

Financial Risks:

• High leverage (liabilities/equity ~4.55x) with equity ratio ~18.3%
• Negative operating income leading to weak interest coverage (-21x)
• Potential erosion of equity if losses persist
• Limited visibility on cash and equivalents and net debt due to unreported cash data
• Working capital funding risk if inventories and receivables expand

Key Concerns:

• Sustained operating losses despite modest revenue decline
• Thin gross margin constraining path to profitability
• Data gaps in cash flow, inventories, and D&A hindering assessment of earnings quality and liquidity

Investment Implications

Key Takeaways:

• ROE is negative at -17.5% due to loss-making operations and high leverage (5.45x assets/equity)
• Gross margin of 10.3% is insufficient to cover SG&A (~14.9% of sales), driving an operating loss of 82m yen
• Liquidity is adequate near term (current ratio 145%, working capital ~610m yen) despite high leverage
• Interest burden is not the principal issue; core operations are the key drag
• Cash flow visibility is limited; OCF and capex data are unreported this quarter
• Dividend remains suspended (DPS 0), consistent with capital preservation under losses

Metrics to Watch:

• Gross margin progression and procurement/pricing actions
• SG&A ratio and evidence of cost control
• Operating income trajectory toward breakeven
• Equity ratio and liabilities/equity trend
• Operating cash flow and free cash flow once disclosed
• Inventory levels and turnover (when reported)
• Revenue trend (YoY and QoQ) for demand normalization

Relative Positioning: Within domestic small-cap consumer/retail distributors, the company currently sits in the weaker profitability cohort given negative operating income, thin gross margins, and elevated leverage, albeit with acceptable short-term liquidity.

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