JB Eleven Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.36B
• Operating Income: ¥2M
• Net Income: ¥-45M
• EPS: ¥-4.74

Income Statement

Balance Sheet

Cash Flow Statement

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

Verdict: JB Eleven delivered solid top-line growth in FY2026 Q2 but profits collapsed, resulting in a net loss and very thin operating profitability. Revenue rose 11.3% year over year to 43.62, reflecting demand recovery and store activity, while gross profit reached 29.34 with a high gross margin of 67.3%. However, SG&A increased to 29.32, effectively consuming nearly all gross profit and leaving operating income at just 0.02, down 95.1% YoY. Ordinary income fell 97.0% YoY to 0.01, and profit before tax swung to -0.17, culminating in a net loss of -0.44. Operating margin compressed to about 0.05% from roughly 1.04% a year ago (≈ -99 bps), indicating severe margin pressure despite revenue growth. Non-operating items were roughly neutral on balance (income 0.21 vs expenses 0.22), but a tax expense of 0.28 despite a pre-tax loss exacerbated the bottom-line deficit and pushed the effective tax rate to a distorted -168.2%. Cash earnings were more resilient: operating cash flow was positive at 1.98, supported by 1.52 of depreciation and amortization, but heavy capital expenditures of 3.48 drove an estimated negative proxy free cash flow of about -1.50. Balance sheet liquidity is adequate but tight with a current ratio of 1.15, while solvency indicators are stretched: debt-to-equity is 1.69x and interest coverage is only 0.13x, highlighting heightened debt service risk. Equity stood at 20.08 against total assets of 54.11, implying financial leverage of 2.69x and contributing to a negative ROE of -2.2%. ROIC is extremely low at 0.1%, underscoring weak capital efficiency in the current environment. Goodwill and other intangibles total about 7.07, introducing potential impairment risk if profitability does not normalize. Earnings quality signals are mixed: OCF exceeds net income (ratio -4.49x due to negative NI), which is supportive for liquidity, but does not offset the structural profitability gap. Dividend information is unreported; given negative earnings and negative proxy FCF, distribution capacity appears constrained near term. Forward-looking, management likely needs to accelerate price/mix actions, labor and energy cost controls, and store portfolio optimization to restore operating leverage and improve interest coverage. Overall, the quarter shows revenue recovery overshadowed by cost inflation and operating deleverage, requiring decisive cost and pricing measures to stabilize margins and protect balance sheet flexibility.

Profitability Analysis

ROE (-2.2%) = Net Profit Margin (-1.0%) × Asset Turnover (0.806x) × Financial Leverage (2.69x). The largest adverse driver is the margin collapse: operating margin fell to about 0.05% from roughly 1.04% a year ago (≈ -99 bps), and the net margin printed at -1.0% despite double-digit revenue growth. Business-wise, SG&A absorbed nearly all gross profit (29.32 vs 29.34), suggesting elevated labor, utilities, and possibly rent and promotional spend that outpaced pricing benefits. This looks partly cyclical (cost inflation/utility spikes) but also reflects insufficient pricing/pacing of efficiency measures; absent swift actions, recovery may be gradual rather than immediate. Asset turnover at 0.806 is reasonable for dining but cannot compensate for subscale margins; leverage at 2.69x amplifies small margin swings into large ROE volatility. SG&A growth likely exceeded revenue growth given the sharp profit deterioration, indicating negative operating leverage. Sustainability: margin recovery depends on cost normalization and/or menu price optimization; current levels are not sustainable for debt service, as interest coverage is only 0.13x.

Growth Assessment

Top-line: Revenue grew 11.3% YoY to 43.62, indicating traffic and/or average check improvement. Profit quality: Operating income plunged 95.1% YoY to 0.02, and ordinary income fell 97.0%, showing that growth was non-accretive due to cost pressure. Gross margin stayed high at 67.3%, implying that cost of food inputs was not the primary drag; the issue is SG&A intensity (labor/energy/rent). Non-operating result was slightly negative net (0.21 in income vs 0.22 in expenses), while a sizable tax expense (0.28) during a loss magnified the net loss. EBITDA of 1.54 (3.5% margin) provides some cash cushion but is insufficient relative to interest obligations. Outlook: Near-term growth sustainability depends on maintaining traffic while executing price/mix actions to offset costs and elevating store productivity to reduce SG&A as a percentage of sales. Priorities include labor scheduling optimization, energy savings, selective store closures/renegotiations, and digital/CRM to drive higher-margin sales. Without visible cost relief, profit normalization may lag revenue.

Financial Health

Liquidity is adequate but not comfortable: current ratio is 1.15 and quick ratio 1.15, above 1.0 but below a healthy 1.5 benchmark. Working capital stands at 2.04, offering a modest buffer. Solvency is stretched: debt-to-equity is 1.69x (above the 1.5x conservative benchmark, though below the 2.0x explicit warning threshold) and interest coverage is 0.13x, indicating weak capacity to service interest from current EBIT. Long-term loans total 16.19, with noncurrent liabilities at 20.14, implying meaningful refinancing and maturity management needs; we lack disclosure on short-term loans, but current liabilities of 13.88 should be monitored against operating cash generation. Maturity mismatch risk is moderate: current assets (15.92) exceed current liabilities (13.88), but limited cushion necessitates careful cash management. Off-balance sheet obligations were not disclosed; restaurant leases could be material under JGAAP presentation practices and would elevate effective leverage if capitalized.

Cash Flow Quality

OCF of 1.98 versus net income of -0.44 yields an OCF/NI ratio of -4.49x, which triggers a quality flag by rule but practically indicates cash earnings outpaced accounting profit due to non-cash D&A (1.52) and possible working capital timing. Proxy free cash flow is approximately -1.50 (OCF 1.98 minus capex 3.48), implying internal cash did not cover investment needs this half. Financing cash flow was +0.56, and share repurchases of -0.50 indicate some shareholder returns despite pressure; sustainability is questionable given negative proxy FCF. We do not have a breakdown of working capital changes, so potential revenue cut-off or payables timing benefits cannot be confirmed; no clear signs of manipulation are detectable from available data. Overall, cash conversion from EBITDA appears reasonable, but capex intensity and interest burden weigh on FCF.

Dividend Sustainability

Dividend disclosures are unreported; the calculated payout ratio (-53.7%) is not decision-useful given negative earnings. With net loss of -0.44 and proxy FCF of about -1.50, intrinsic capacity to fund dividends appears limited in the period. Policy outlook likely prioritizes balance sheet stability and interest coverage improvement over cash distributions. Any dividend continuation would need to be modest and financed by cash on hand (9.44) or incremental debt, which is not prudent given leverage and coverage metrics. Until operating margin recovery and positive FCF are restored, dividend sustainability is weak.

Risk Assessment

Business Risks:

• Cost inflation (labor, utilities) driving SG&A to absorb gross profit
• Execution risk in pricing/mix actions potentially impacting traffic
• Store-level productivity shortfalls leading to negative operating leverage
• Brand competitiveness and consumer demand sensitivity in dining sector
• Potential goodwill impairment (goodwill 3.41) if profitability does not recover

Financial Risks:

• Low interest coverage (0.13x) indicating heightened debt service risk
• Elevated leverage (D/E 1.69x) constraining financial flexibility
• Negative proxy free cash flow (-1.50) amid sizable capex (3.48)
• Tax expense in a loss period (0.28) further pressuring cash and earnings
• Refinancing/maturity management risk given 16.19 in long-term loans

Key Concerns:

• Operating margin near zero (~0.05%) after -99 bps YoY compression
• OCF quality flag (OCF/NI -4.49x) despite positive OCF
• ROIC at 0.1% far below cost of capital, risking value erosion
• Tight liquidity (current ratio 1.15) vs investment and debt service needs
• Data limitation: lack of detailed SG&A breakdown and investing CF obscures drivers

Investment Implications

Key Takeaways:

• Revenue recovery (+11.3% YoY) did not translate into profits; net loss of -0.44
• Operating margin compressed to ~0.05% from ~1.04% YoY (≈ -99 bps)
• Interest coverage at 0.13x and D/E 1.69x elevate balance sheet risk
• Positive OCF (1.98) offset by capex (3.48), yielding negative proxy FCF (~-1.50)
• ROE -2.2% and ROIC 0.1% signal weak capital efficiency and value pressure

Metrics to Watch:

• Same-store sales and price/mix to sustain double-digit revenue growth
• SG&A ratio trajectory (labor, energy, rent) and store productivity KPIs
• Operating margin and EBITDA margin recovery vs interest expense
• Free cash flow after maintenance capex and any capex deferrals
• Liquidity runway (cash 9.44, current ratio 1.15) and refinancing plans

Relative Positioning: Within the casual dining/restaurant peer set, JB Eleven shows better top-line momentum but significantly weaker operating leverage and coverage metrics this quarter; near-term positioning is defensive until cost structure normalization and margin recovery are evidenced.

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