HIRAKI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.12B
• Operating Income: ¥-50M
• Net Income: ¥38M
• EPS: ¥-12.57

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

Hiraki Co., Ltd. (30590) reported FY2026 Q2 consolidated results under JGAAP showing top-line pressure and a small operating loss, but with notable improvement in operating performance year over year. Revenue was ¥6,123 million, down 6.5% YoY, reflecting softer demand and/or strategic adjustments in merchandising and pricing. Gross profit of ¥2,973.9 million translated to a robust gross margin of 48.6%, indicating resilient product economics and/or a favorable mix despite sales contraction. Operating income was a loss of ¥50 million, an improvement of 56.0% YoY, implying better cost discipline and operating efficiency even as sales declined. Ordinary income and net income were losses of ¥46 million and ¥61 million, respectively, with net margin at -1.0%. DuPont decomposition yields an ROE of -0.95%, driven by a negative net margin and modest asset turnover of 0.391x, partially offset by financial leverage of 2.45x. Operating cash flow was positive at ¥237.2 million, which is solid relative to the net loss (OCF/NI of -3.89), suggesting favorable working capital movements and non-cash add-backs underpinning cash generation. EBITDA was ¥93.4 million (1.5% margin), signaling limited but positive cash earnings capacity before non-cash charges. Liquidity appears strong with a current ratio of 298.5% and working capital of ¥6,861.0 million, indicating ample short-term buffers. Total liabilities were ¥8,506.2 million versus equity of ¥6,394.0 million, resulting in a debt-to-equity ratio of 1.33x and financial leverage of 2.45x. Financing cash flow was positive at ¥834.2 million, indicating increased external funding during the period, while investing cash flow was not disclosed. Several key data points, including inventories, cash and equivalents, equity ratio, investing cash flow, and share-related metrics, were not reported in XBRL and therefore treated as undisclosed rather than zero. The tax line shows ¥23.6 million despite a loss, likely reflecting non-operating tax items or timing differences; the effective tax rate metric is not meaningful this quarter. Dividends were not paid (DPS ¥0, payout ratio 0%), consistent with the current loss profile and a likely conservative capital allocation stance. Overall, the company demonstrates stabilized gross profitability and improved operating control, but remains challenged by weak sales momentum and low asset turnover. The balance sheet provides liquidity headroom, though leverage warrants monitoring given negative EBIT and reliance on external financing in the period.

Profitability Analysis

ROE of -0.95% decomposes into a net margin of -1.0%, asset turnover of 0.391x, and financial leverage of 2.45x. The negative ROE is primarily attributable to the small net loss; leverage is not excessive but magnifies the impact of thin profitability. Gross margin of 48.6% is strong, evidencing sound sourcing and product mix; however, operating margin is -0.8% (¥-50 million / ¥6,123 million), indicating SG&A intensity and limited operating leverage at current volumes. EBITDA margin of 1.5% shows some buffer from non-cash charges (D&A ¥143.4 million), but scale remains insufficient to cover fixed costs. Interest expense was ¥16.4 million; EBIT-based interest coverage is negative (reported -3.0x) due to negative EBIT, while EBITDA/interest is about 5.7x, implying cash earnings can service interest if maintained. Ordinary loss of ¥46 million is close to operating loss, suggesting limited non-operating drag. Overall margin quality looks decent at the gross level, but operating leverage is unfavorable under current sales; restoring top-line growth or deeper SG&A efficiencies is key to return to positive operating margins.

Growth Assessment

Revenue declined 6.5% YoY to ¥6,123 million, indicating a soft demand environment and/or tighter merchandising. The improvement in operating income (+56% YoY) despite lower sales suggests cost actions and mix optimization are bearing fruit. Sustainability of gross margin at 48.6% is a positive sign, but maintaining it amid promotional pressure and input cost volatility (notably FX for imports) is a risk. Profit quality is mixed: EBITDA is positive, but EBIT and net income remain negative, pointing to incomplete recovery. OCF positivity against a net loss implies working capital support this quarter; repeatability depends on inventory and receivables dynamics (not disclosed). Near-term outlook hinges on peak-season sell-through, channel mix (e-commerce vs. catalog/retail), and pricing discipline. With asset turnover at 0.391x for the period, utilization remains modest; any revenue reacceleration would materially improve ROE via operating leverage. Absent disclosed capex/investing flows, visibility into capacity expansion or digital investments is limited. Overall, growth drivers appear constrained near term, but cost discipline offers a path to breakeven as demand stabilizes.

Financial Health

Total assets are ¥15,661 million against equity of ¥6,394 million and liabilities of ¥8,506 million, yielding leverage of 1.33x (Liabilities/Equity) and financial leverage of 2.45x (Assets/Equity). Liquidity is strong: current assets ¥10,317 million vs. current liabilities ¥3,456 million drive a current ratio of 298.5% and working capital of ¥6,861 million. Quick ratio equals the current ratio due to undisclosed inventories; treat this as a proxy, not a definitive quick measure. Financing cash flow of ¥834 million was positive, indicating incremental borrowings or other external funding that bolstered liquidity. Interest expense of ¥16.4 million is manageable relative to EBITDA, but negative EBIT reduces coverage on a strict basis. Equity ratio was not disclosed (zero placeholder) despite equity of ¥6,394 million; solvency should be assessed via the provided leverage metrics. Overall solvency appears acceptable with moderate leverage, but sustained losses could pressure covenants or funding costs if not reversed.

Cash Flow Quality

Operating cash flow was ¥237.2 million despite a net loss of ¥61 million, producing an OCF/NI ratio of -3.89; this suggests strong cash conversion from non-cash charges (notably D&A of ¥143.4 million) and favorable working capital contributions. EBITDA of ¥93.4 million supports the positive OCF, implying incremental working capital inflows and/or tax timing effects (tax expense ¥23.6 million despite a loss). Free cash flow cannot be reliably assessed because investing cash flow was not disclosed (reported as zero placeholder). The positive financing cash flow of ¥834.2 million indicates reliance on external funding this period, which improves liquidity but reduces visibility into organic cash self-sufficiency. With inventories undisclosed, it is unclear whether OCF benefited from inventory drawdown; the sustainability of OCF will depend on maintaining disciplined purchasing and receivables management. Overall, earnings quality is mixed: cash generation outpaces accounting earnings this quarter, but with incomplete visibility into working capital drivers and capex.

Dividend Sustainability

DPS was ¥0.00 with a payout ratio of 0.0%, consistent with the current net loss and prudent capital preservation. Given negative EBIT and reliance on financing inflows, reinstating distributions would likely require stabilizing operating profit and clearer free cash flow visibility. FCF coverage cannot be calculated due to undisclosed investing cash flow; thus, dividend capacity assessment must be anchored to EBITDA-to-interest coverage and prospective OCF rather than FCF at this time. Balance sheet liquidity is sound (current ratio ~3.0x), but leverage at 1.33x suggests a preference to retain earnings until profitability normalizes. Policy-wise, the company appears conservative; outlook for dividends will depend on restoring positive ordinary income and demonstrating consistent OCF without working-capital one-offs.

Risk Assessment

Business Risks:

• Demand volatility in footwear/apparel retail impacting same-store sales and e-commerce order volumes
• Promotional intensity and pricing pressure that could erode the 48.6% gross margin
• Inventory management risk leading to markdowns or obsolescence (inventories not disclosed)
• FX exposure on imported merchandise (yen weakness inflating COGS)
• Logistics and freight cost inflation affecting delivery economics
• Channel mix shift from catalog/brick-and-mortar to online, requiring continued investment
• Seasonality of sales and weather sensitivity impacting quarterly performance

Financial Risks:

• Negative EBIT leading to weak interest coverage on an EBIT basis (-3.0x)
• Reliance on external financing in the period (financing CF +¥834 million)
• Potential covenant or refinancing risks if losses persist
• Limited visibility on capex and cash reserves due to undisclosed investing CF and cash balance
• Sensitivity of ROE to asset turnover given leverage of 2.45x

Key Concerns:

• Sustained top-line decline (-6.5% YoY) with low asset turnover (0.391x)
• Operating loss persists despite solid gross margin, indicating high SG&A burden
• Incomplete disclosure for inventories, cash, equity ratio, and investing CF limits analysis precision

Investment Implications

Key Takeaways:

• Revenue contracted 6.5% YoY to ¥6,123 million while operating loss narrowed to ¥50 million (+56% YoY).
• Gross margin remains strong at 48.6%, but operating leverage is still negative at current scale.
• ROE is -0.95% driven by -1.0% net margin and modest asset turnover (0.391x) with leverage of 2.45x.
• OCF of ¥237 million is positive despite a net loss, but sustainability depends on working capital.
• Liquidity is ample (current ratio ~3.0x; working capital ¥6.86 billion), though leverage is moderate at 1.33x.
• Financing inflows of ¥834 million supported liquidity, highlighting some dependence on external funding.
• Key disclosures (inventories, cash, investing CF, equity ratio, shares) were not reported, constraining precision.

Metrics to Watch:

• Same-store/e-commerce sales growth and ASPs to gauge revenue inflection
• SG&A as a percentage of sales to track operating leverage
• Inventory levels and turnover (once disclosed) to assess markdown risk and OCF sustainability
• EBIT and EBITDA interest coverage to monitor financing risk
• Capex and investing CF to evaluate FCF and reinvestment needs
• Asset turnover and working capital days (AR/AP/Inventory) to enhance ROE

Relative Positioning: Within Japanese specialty retail/footwear peers, Hiraki exhibits stronger-than-typical gross margins but weaker operating profitability and asset turnover at present; liquidity is comparatively solid, while leverage is moderate and requires monitoring until EBIT turns positive.

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
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