| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥486.0B | ¥422.1B | +15.1% |
| Operating Income / Operating Profit | ¥47.8B | ¥40.4B | +18.4% |
| Ordinary Income | ¥48.6B | ¥40.8B | +19.0% |
| Net Income / Net Profit | ¥19.6B | ¥18.9B | +3.5% |
| ROE | 15.2% | 18.0% | - |
For the fiscal year ended Feb 2026, Revenue was ¥486.0B (YoY +¥63.9B, +15.1%), Operating Income was ¥47.8B (YoY +¥7.4B, +18.4%), Ordinary Income was ¥48.6B (YoY +¥7.8B, +19.0%), and Net Income attributable to owners of the parent was ¥19.6B (YoY +¥0.7B, +3.5%). The core Reuse Business accounted for 97.6% of sales, delivering Revenue of ¥474.1B (+15.2%) and Operating Income of ¥67.9B (+12.2%), achieving double-digit revenue and profit growth. Gross margin was maintained at 59.1% (prior year 59.1%), and Operating Margin improved by 0.2pt to 9.8% (prior year 9.6%). The limited growth in Net Income (+3.5%) versus the rise in Ordinary Income (+19.0%) was due to an increase in Extraordinary Losses of ¥2.8B (impairment loss ¥2.7B, prior year ¥1.6B) and higher corporate taxes ¥14.2B (prior year ¥12.1B). Operating Cash Flow was solid at ¥32.4B (+15.0% YoY), but an inventory increase of ¥11.6B pressured cash, leaving Free Cash Flow at ¥12.6B. ROE remained high at 15.2%, indicating efficient capital use.
Revenue progressed strongly to ¥486.0B (+15.1%). The core Reuse Business, accounting for 97.6% of sales, recorded ¥474.1B (+15.2%), while Other Businesses (rental, systems, real estate, etc.) achieved ¥17.3B (+16.4%); both segments delivered double-digit sales growth. Gross profit was ¥287.3B with a gross margin of 59.1%, unchanged from the prior year, confirming stability in product mix and pricing. SG&A expenses were ¥239.5B (prior year ¥208.9B, +14.7%), increasing slightly below the revenue growth rate (+15.1%), and the SG&A ratio improved by 0.2pt to 49.3% (prior year 49.5%). As a result, Operating Income was ¥47.8B (+18.4%) and Operating Margin improved 0.2pt to 9.8% from 9.6%, reflecting operating leverage. Non-operating income/expense netted ¥0.8B (interest income ¥0.1B, foreign exchange gains ¥0.4B, interest expense ¥0.5B, etc.), a minor impact, resulting in Ordinary Income of ¥48.6B (+19.0%). In Extraordinary items, an impairment loss of ¥2.7B (prior year ¥1.6B) drove Extraordinary Losses to ¥2.8B, partially offset by Extraordinary Gains of ¥0.8B, producing Profit before Income Taxes of ¥46.6B (+18.0%). After deducting corporate taxes of ¥14.2B (prior year ¥12.1B, effective tax rate 30.5%) and Non-controlling Interests of ¥0.7B, Net Income attributable to owners of the parent was ¥19.6B (+3.5%). The gap between Ordinary Income growth (+19.0%) and Net Income growth (+3.5%) was largely due to the increase in impairment losses and higher tax burden. Comprehensive Income totaled ¥32.4B, with negligible impact from Foreign Currency Translation Adjustments of ¥0.0B and other OCI items. In conclusion, the results confirmed continued revenue and profit growth and an improvement in core profitability.
The reportable Reuse Business posted Revenue of ¥474.1B (prior year ¥411.7B, +15.2%) and Operating Income of ¥67.9B (prior year ¥60.5B, +12.2%), with an Operating Margin of 14.3% (prior year 14.7%), a 0.4pt decline but still at a high level. As the core business, it represents 97.6% of consolidated sales and 99.1% of segment profit and was the driver of the company's revenue and profit growth. Other Businesses (rental, systems, real estate, etc.) recorded Revenue of ¥17.3B (prior year ¥14.9B, +16.4%) and Operating Income of ¥0.6B (prior year ¥0.2B, +244.4%), improving Operating Margin to 3.6% (prior year 1.2%). While the margin improvement in Other Businesses is noteworthy, absolute amounts are small and the overall impact is limited. Consolidated Operating Income after company-wide adjustments was ¥47.8B (Operating Margin 9.8%). Segment assets were ¥193.4B for the Reuse Business and ¥4.7B for Others; the asset efficiency of the Reuse Business (Revenue / Segment Assets = 2.45x) remained at the prior-year level (2.46x).
Profitability: Operating Margin 9.8% (prior year 9.6%), Net Margin 4.0% (prior year 4.5%), ROE 15.2%. ROE, by DuPont decomposition, equals Net Margin 4.0% × Total Asset Turnover 1.91x × Financial Leverage 2.02x. Although lower than prior-year ROE 18.2%, ROE remains well above the industry median of 5.9%. The Operating Margin of 9.8% exceeds the industry median 4.6% by 5.2pt, confirming high profitability. Cash quality: Operating Cash Flow ¥32.4B vs Net Income ¥19.6B yields an OCF/NI multiple of 1.65x, favorable; however, OCF/EBITDA is only 0.58x against EBITDA ¥55.7B (Operating Income ¥47.8B + Depreciation ¥8.0B), substantially below the industry median 1.57x. The primary cause is working capital deterioration due to inventory increase of ¥11.6B. Investment efficiency: Total Asset Turnover 1.91x (industry median 1.17x) is high, and CapEx/Depreciation ratio 1.58x (industry median 1.16x) indicates continued growth investment. Financial soundness: Equity Ratio 50.6% (prior year 50.4%), Current Ratio 172.7% (prior year 169.6%), both stable. Interest-bearing debt totaled ¥72.2B (short-term borrowings ¥40.2B, current portion of long-term borrowings ¥13.3B, long-term borrowings ¥18.7B), Net Debt ¥22.1B, Net Debt/EBITDA 0.40x — a healthy level. Conversely, Inventory Days were 167 days (prior year 137 days), worsening by 30 days and far above the industry median 66 days. Working Capital Turnover Days 146 days (prior year 100 days) and Cash Conversion Cycle 175 days (prior year 134 days) both lengthened, making inventory efficiency a key area for improvement.
Operating Cash Flow was ¥32.4B (prior year ¥28.2B, +15.0%). Starting from Profit before Income Taxes ¥46.8B before tax adjustments, addbacks included Depreciation ¥8.0B, Impairment Loss ¥2.7B and other non-cash expenses. In working capital, inventory increase ¥11.6B and trade receivables increase ¥2.8B pressured cash, while trade payables increased only ¥0.7B. After paying corporate taxes ¥14.9B, Operating Cash Flow generated was ¥32.4B. Although the OCF/Net Income multiple is a healthy 1.65x, OCF/EBITDA remained at 0.58x due to inventory build-up, reducing cash conversion efficiency. Investing Cash Flow was -¥19.9B, primarily driven by CapEx ¥12.6B (mainly store investments) and net deposits of security deposits/guarantees ¥4.2B. The CapEx/Depreciation ratio of 1.58x indicates a continued growth investment stance. Free Cash Flow was ¥12.6B (prior year ¥9.4B), sufficiently covering dividend payments of ¥8.7B (annual dividend ¥40). Financing Cash Flow was +¥7.4B, including a net increase in short-term borrowings of ¥11.3B and long-term borrowings raised ¥18.5B, offset by repayments ¥13.7B and dividend payments ¥8.7B. Cash and deposits at period-end were ¥50.1B (prior year ¥30.1B, +¥20.0B), indicating ample liquidity. Overall, although inventory-driven working capital deterioration suppressed cash generation, funding was maintained to balance growth investment and shareholder returns.
Profits this period were driven by core operations; Non-operating Income was ¥1.4B (0.3% of Revenue) and Non-operating Expense ¥0.6B (0.1% of Revenue), so non-operating items had minimal impact. The divergence between Ordinary Income ¥48.6B and Net Income ¥19.6B is attributable to Extraordinary Losses ¥2.8B (impairment loss ¥2.7B) and a tax burden at an effective rate of 30.5%, and is not structural. The impairment loss is considered a temporary factor associated with optimization of the store portfolio and unlikely to materially impair recurring profit levels going forward. Operating Income ¥47.8B vs Operating Cash Flow ¥32.4B gives a ratio of 0.68x, primarily due to working capital increases (Inventory +¥11.6B, Trade Receivables +¥2.8B). Comprehensive Income ¥32.4B materially exceeds Net Income ¥19.6B; this is not driven by Non-controlling Interests ¥0.7B but is presumed to reflect retained earnings carried forward included in comprehensive income calculation, with Foreign Currency Translation Adjustment ¥0.0B and other OCI ¥0.3B having minimal impact. The accrual ratio (Working Capital Increase / Operating Cash Flow) is approximately 45%, relatively high, confirming that inventory increases are impeding cash generation. Most non-operating income comprised foreign exchange gains ¥0.4B and subsidy income ¥0.3B — temporary and small in amount. Overall, earnings quality is sound and primarily operational, but inventory-driven deterioration in cash conversion efficiency represents room for improvement.
For FY2027 ending Feb 2027, the full-year forecast is Revenue ¥543.0B (YoY +11.7%), Operating Income ¥50.6B (YoY +6.0%), Ordinary Income ¥50.6B (YoY +4.2%), and Net Income attributable to owners of the parent ¥33.9B (YoY +73.0%). The projected substantial increase in Net Income to ¥33.9B from ¥19.6B in FY2026 is likely premised on the cessation of one-off items such as impairment losses in the current period and normalization of tax burden. Revenue is expected to continue double-digit growth (+11.7%), but Operating Income growth (+6.0%) is expected to lag revenue growth, with Operating Margin slightly lower at around 9.3% (current period 9.8%). EPS forecast is ¥144.83 (current ¥135.29), and the annual dividend forecast is ¥22 (current ¥40); the lower dividend forecast warrants attention. On a progress basis, current results represent 89.5% of the full-year Revenue forecast, 94.4% of Operating Income, and 96.0% of Ordinary Income, implying that incremental gains in Q4 are assumed to achieve the plan. Achieving the full-year forecast depends on normalizing inventory turnover to restore cash generation, stable growth at existing stores, and realization of new store and renovation effects.
The annual dividend was ¥40 (interim ¥19, year-end ¥21), a substantial increase from ¥18 in the prior year. Payout Ratio was 31.1% (Total dividends ¥6.1B against Net Income ¥19.6B), a conservative level slightly above the industry median 27%. The ratio of total dividends to Free Cash Flow is 48%, indicating dividends are well covered by FCF. No share buybacks were executed this period; shareholder returns remain dividend-centric. The annual dividend forecast for FY2027 is ¥22 (current ¥40), implying a cut, but with forecast EPS ¥144.83 the implied payout ratio is about 15%, conservative. The rationale for the lower dividend forecast is not disclosed but may reflect retaining funds for growth investment or a revision of dividend policy. Dividend sustainability is assessed as viable given cash and deposits ¥50.1B, Operating Cash Flow ¥32.4B, and Free Cash Flow ¥12.6B; even maintaining a ~30% payout ratio would be sustainable. Total Return Ratio, calculated solely from dividends, is approximately 31%.
Prolonged Inventory Turnover Days Risk (Inventory Days 167 days, YoY +30 days): Inventory of ¥90.9B (18.7% of Revenue) remains high, far exceeding the industry median 66 days. Product obsolescence or downward price pressure could compress gross margin and cash flows. The deterioration in CCC to 175 days (prior year 134 days) indicates declining working capital efficiency and may increase borrowing dependence.
Refinancing Risk from Concentration of Short-term Liabilities (Short-term interest-bearing debt ¥53.5B, 42.5% of total liabilities): Short-term borrowings ¥40.2B and current portion of long-term borrowings ¥13.3B comprise significant short-term debt. Although the Current Ratio is a healthy 172.7%, the cash/short-term interest-bearing debt ratio is 0.94x, below 1x. If financial conditions worsen, refinancing costs could rise and strain liquidity.
Risk of Further Impairments and Store Profitability Deterioration (Impairment loss ¥2.7B, 1.7x prior year ¥1.6B): Increasing impairment losses suggest emergence of unprofitable stores, and ongoing costs to replace store portfolios may continue. Asset retirement obligations ¥9.4B (7.5% of liabilities) present potential cash outflows upon store closures/renovations, and burdens may increase with store network expansion.
[Industry Position] (Reference — Company analysis) Relative positioning within the retail segment compared with the FY2025 industry median is shown. Profitability: Operating Margin 9.8% (industry median 4.6%) exceeds by 5.2pt; ROE 15.2% (industry median 5.9%) exceeds by 9.3pt, confirming a high-profit profile. Net Margin 4.0% (industry median 3.3%) also exceeds the median. Growth: Revenue growth 15.1% (industry median 4.3%) substantially outperforms, indicating sustained high growth. Asset efficiency: Total Asset Turnover 1.91x (industry median 1.17x) is high, showing effective asset utilization. Conversely, cash quality lags: Cash Conversion Rate 0.58x (industry median 1.57x) is much lower, mainly due to inventory increases. Inventory efficiency: Inventory Days 167 days (industry median 66 days) are 101 days longer, indicating significant room for improvement. Working capital efficiency: Operating Working Capital Days 146 days (industry median 40 days) are 106 days longer, underperforming peers. Financial soundness: Equity Ratio 50.6% (industry median 50.2%) is comparable; Current Ratio 172.7% (industry median 184%) is slightly lower but within a healthy range. Net Debt/EBITDA 0.40x (industry median -0.59x, negative indicates effectively no debt) shows the company has net interest-bearing debt but at a low level, indicating sufficient financial capacity. Payout Ratio 31.1% (industry median 27%) is slightly higher, reflecting an active shareholder return stance. Overall, strengths are high profitability, high growth, and high asset turnover; weaknesses are low inventory and working capital efficiency, which constrain cash generation. Improving these areas is key to raising the company’s relative valuation within the industry.
Key points include: First, maintenance of a high-profit profile evidenced by Operating Margin 9.8% (+0.2pt) and ROE 15.2%. Stable gross margin 59.1% and a slight reduction in SG&A ratio (49.3%, -0.2pt) enabled operating leverage and profit growth; further margin improvement is possible through existing-store efficiency and maturation of new stores. Second, a marked deterioration in Inventory Days to 167 days (YoY +30) and CCC to 175 days (YoY +41). While partly structural due to growth investment and SKU expansion, levels far above the industry median (66 days) indicate deteriorating capital efficiency and contribute to an inferior Cash Conversion Rate of 0.58x (industry median 1.57x). Inventory normalization is key to improving cash generation in subsequent periods. Third, high short-term interest-bearing debt of ¥53.5B (42.5% of total liabilities) and dependence on borrowings. Although cash and deposits ¥50.1B are ample, the cash-to-short-term debt ratio is 0.94x, below 1x; if working capital compression does not progress, refinancing risk may materialize. Fourth, an increase in impairment losses to ¥2.7B (prior year ¥1.6B) reflects ongoing store portfolio optimization and is viewed as contributing to medium- to long-term store productivity improvement. Achieving the FY2027 forecast (Revenue +11.7%, Operating Income +6.0%) depends on improved inventory turnover and normalized cash generation.
This report is a financial analysis document automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statement data. Investment decisions are your responsibility; please consult a professional advisor as necessary.
---End of Report---