MatsukiyoCocokara & Co. FY2027 Q1 Earnings Report

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Executive Summary

The current Q1 delivered increases in both revenue and earnings, representing a high-quality result in which the earnings growth rate exceeded the revenue growth rate, driven by an improvement in the gross profit margin. Revenue was ¥289.35B (+5.7% year on year), Operating Income was ¥21.49B (+8.5%), Ordinary Income was ¥22.82B (+8.8%), and Net Income was ¥14.96B (+14.9%). Revenue growth was driven by improvements in same-store sales and category mix in the Matsumotokiyoshi Group Business. The improvement in the gross profit margin (35.7%, +1.2pt year on year) exceeded the increase in the SG&A expense ratio (28.3%, +1.1pt), resulting in higher Operating Income.

Factors Affecting Results

【Revenue】Revenue was ¥289.35B, representing a 5.7% year-on-year increase. By segment, the Matsumotokiyoshi Group Business accounted for the largest revenue scale at ¥183.89B (63.6% of total, +4.8%), while the Management Support Business generated ¥216.33B (before elimination of intersegment transactions, +17.2%). The Cocokara Fine Group Business was broadly flat at ¥97.45B (33.7% of total, -0.0%), and the And Company Business recorded ¥6.18B following the new consolidation of Universal Drug.

【Profit and Loss】Operating Income was ¥21.49B (+8.5% year on year), and the Operating Income margin improved by +0.2pt from the previous year to 7.4%. While the gross profit margin improved by +1.2pt, the SG&A expense ratio also increased by +1.1pt due to higher personnel expenses and rents. This resulted in a slowdown in operating leverage, with SG&A expenses increasing by +9.9%, exceeding the +5.7% growth in revenue. Ordinary Income was ¥22.82B (+8.8%), with non-operating items having only a minor impact and being almost entirely net income-related (non-operating income of ¥1.36B versus expenses of ¥0.02B). Extraordinary items included impairment losses of ¥0.11B, losses on disposal of property, plant and equipment of ¥0.07B, and gains on sales of property, plant and equipment of ¥0.15B. Although the net impact was negative, it was limited. Net Income was ¥14.96B (+14.9%), with growth becoming stronger at lower levels of the income statement due to the stabilization of the tax burden, resulting in a conclusion of higher revenue and earnings.

Segment Analysis

Segment profit, before adjustments including external customers, increased in both core businesses: ¥16.10B for the Matsumotokiyoshi Group Business (+12.3% year on year, 8.8% profit margin) and ¥5.44B for the Cocokara Fine Group Business (+9.0%, 5.6% profit margin). In the Matsumotokiyoshi Group Business, profit growth of +12.3% exceeded revenue growth of +4.8%, resulting in margin expansion and confirming contributions from price and mix improvements. The Cocokara Fine Group Business delivered higher profit despite broadly flat revenue, suggesting progress in cost efficiency. The And Company Business, which was newly consolidated, remains in its launch phase, with profit of ¥0.01B and a 0.2% profit margin.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 7.4% from 6.9% in the previous year, while the Net Income margin improved to 5.2% from 4.8%. The improvement in the gross profit margin (35.7%, +1.2pt year on year) was the primary driver of higher profitability. 【Cash Quality】Non-operating income was primarily composed of dividends received of ¥0.17B and interest received of ¥0.03B, indicating a low degree of dependence on temporary non-core gains and losses. The impact of extraordinary items was also limited at a net negative ¥0.28B, meaning that the majority of profit was generated by the core business. 【Investment Efficiency】ROE was 2.8%, while the Equity Ratio was 73.0%, both indicating a strong financial position. A low total asset turnover ratio is a structural factor suppressing the ROE level. 【Financial Soundness】Cash and deposits were ¥101.47B, while interest-bearing debt was minimal, consisting of ¥1.52B in short-term borrowings. The Company maintained extremely strong financial soundness, with an Equity Ratio of 73.0%.

Cash Flow Analysis

Cash and deposits were ¥101.47B, down ¥18.27B from ¥119.75B in the previous year. The primary reason was a decrease in current liabilities associated with the leveling of income taxes payable, which declined from ¥18.89B in the previous year to ¥6.66B. Inventories were ¥166.45B, up +4.0% year on year, broadly in line with revenue growth of +5.7%. However, accounts payable increased by only +1.1%, indicating the burden on working capital, with the increase in inventory not fully covered by accounts payable. The small scale of both non-operating and extraordinary gains and losses is positive from the perspective of cash quality, as nearly all profit was generated by core operations. Going forward, improving working capital efficiency through enhanced inventory turnover and a review of supplier payment terms will be key to increasing cash-generating capacity.

Earnings Quality

The impact of non-operating income of ¥1.36B, primarily comprising dividends received of ¥0.17B and interest received of ¥0.03B, and extraordinary items, which had a net impact of -¥0.28B, was limited. Since Operating Income of ¥21.49B generated by the core business accounted for the majority of Pretax Income of ¥22.55B, earnings quality can be assessed as high. Extraordinary losses included impairment losses of ¥0.11B and losses on disposal of property, plant and equipment of ¥0.07B; however, both were temporary factors and do not impair recurring earnings power. Comprehensive Income was ¥14.34B, representing a slight divergence from Net Income attributable to owners of the parent of ¥14.86B, primarily due to valuation differences on securities of -¥0.68B. As this divergence was attributable to market conditions, analysis based on Net Income is appropriate when assessing the intrinsic earnings power of the business.

Earnings Forecast and Guidance

Against the Full-Year earnings forecasts of Revenue of ¥115.50B, Operating Income of ¥8.75B, and Ordinary Income of ¥9.15B, progress in the current Q1 was 25.1% for Revenue, 24.6% for Operating Income, and 24.9% for Ordinary Income, broadly in line with straight-line quarterly progress of 25%. There were no revisions to either the earnings forecast or the dividend forecast during the current quarter, and the Company’s plan can currently be assessed as progressing broadly in line with expectations.

Shareholder Returns

The Company’s forecast EPS is ¥149.18, and its forecast annual dividend is ¥56.00, implying a Payout Ratio of approximately 37.5%. There was no revision to the dividend forecast during the current quarter. Against a backdrop of effectively zero net debt and a high Equity Ratio of 73.0%, the Company has secured a foundation for continuing stable dividends.

Risk Factors

1. Slowing operating leverage due to higher SG&A expenses: The SG&A expense ratio increased by +1.1pt year on year to 28.3%, while the increase of +9.9% exceeded revenue growth of +5.7%. If increases in personnel expenses (salaries and allowances of ¥27.66B, +8.2% year on year) and rental expenses (¥20.41B, +4.2%) continue, the effect of gross profit margin improvements may be offset and the pace of margin expansion may slow.

2. Working capital burden: Inventories increased to ¥166.45B (+4.0% year on year), while accounts payable increased by only ¥120.99B (+1.1%), indicating that the increase in inventory was not fully covered by supplier payment terms. If this situation continues, it may affect cash-generating capacity.

3. Low capital efficiency: ROE was 2.8%, and total asset turnover was also low, suggesting a structure in which capital is not being fully utilized despite the high financial soundness represented by an Equity Ratio of 73.0%. The scale of intangible assets, including goodwill of ¥100.18B, is also substantial, making continued verification of the effectiveness of their utilization important.

Industry Benchmark (For Reference; Company Research)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin both substantially exceed the median for the retail industry, positioning it among the industry leaders in profitability.

Growth and Capital Efficiency

The Revenue growth rate is below the industry median, indicating that the Company’s growth speed is moderate within the industry relative to its high profitability.

※Source: Company research

Key Points from the Results

1. In the current quarter, the improvement in the gross profit margin (+1.2pt) exceeded the increase in the SG&A expense ratio (+1.1pt), resulting in a structure in which the Operating Income growth rate exceeded the revenue growth rate. This improvement in the gross profit margin appears to have been driven by structural factors such as an increase in the private-label product ratio and improvements in category mix, making its sustainability an important focus of analysis.

2. A gap was identified in which the SG&A expense growth rate (+9.9%) exceeded the revenue growth rate (+5.7%). The extent to which the Company can absorb the effects of personnel cost and rent inflation going forward may become a key inflection point for the margin trend.

3. Despite high financial soundness, reflected in an Equity Ratio of 73.0% and interest-bearing debt of ¥1.52B, ROE remained low at 2.8%. Working capital efficiency, including the asymmetry between inventory growth and accounts payable growth, represents a structural constraint on improving capital efficiency.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥1,396–¥1,478 at ±1% in the Cost of Equity, and ¥1,435–¥1,439 at ±0.1 in ω.

Notes:

• Net assets as of the end of the quarter are used (there is a time lag relative to the Full-Year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these are not forecasts of the market stock price or recommendations of specific investment actions, and do not predict or guarantee future stock prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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