BEAUTY GARAGE Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥18.41B
• Operating Income: ¥539M
• Net Income: ¥456M
• EPS: ¥28.61

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

Beauty Garage (3180) reported FY2026 Q2 consolidated results with solid top-line growth but margin compression leading to lower earnings. Revenue rose 13.7% YoY to 184.07, while gross profit reached 40.58, implying a gross margin of 22.0%. SG&A expanded to 34.10, lifting the SG&A ratio to 18.5% and pressuring operating profitability. Operating income declined 16.7% YoY to 5.39, and ordinary income fell 16.6% to 5.44, highlighting negative operating leverage in the period. Net income decreased 18.8% to 3.58, with a net margin of 1.9% and an effective tax rate of 30.2%. On a DuPont basis, ROE was 4.4%, decomposed into a 1.9% net margin, 1.077x asset turnover, and 2.09x financial leverage. Liquidity remains strong with a current ratio of 204% and quick ratio of 152%; working capital stood at 66.86. The balance sheet is conservative: total equity of 81.77 implies an equity ratio around 47.9% (calculated) and a net cash position when comparing cash of 44.49 to interest-bearing loans of 14.65. Operating cash flow was healthy at 5.82, 1.63x net income, indicating reasonable earnings quality. Based on disclosed capex of 0.41, free cash flow is estimated at approximately 5.41 (OCF less capex), though full investing cash flows were not reported. Interest burden is minimal with interest expense of 0.05 and an interest coverage ratio above 100x. Efficiency indicators based on period-end balances suggest receivable days of about 36, inventory days about 51, and payable days about 39, resulting in an estimated cash conversion cycle of roughly 48 days. Dividend metrics are partially unreported; the calculated payout ratio is 53.4%, but cash coverage cannot be confirmed without total dividends paid. Overall, the company delivered robust growth in sales volumes but faced cost pressures and higher operating expenses, resulting in diluted margins and lower profit. The cash and liquidity profile buffer near-term risks, while the decline in operating profit underscores sensitivity to gross margin and SG&A control. Data limitations exist for several line items (e.g., DPS, full investing CF, detailed SG&A breakdown), but core income statement, balance sheet, and OCF figures enable a grounded assessment. Near-term focus should be on restoring operating margin, managing inventory turns, and sustaining cash generation to support shareholder returns.

Profitability Analysis

ROE decomposition: ROE 4.4% = Net margin 1.9% x Asset turnover 1.077 x Financial leverage 2.09x (DuPont). margin_quality: - Gross margin: 22.0% (40.58/184.07). Suggests some pressure given operating profit fell despite double-digit revenue growth.

• Operating margin: 2.9% (5.39/184.07). Down YoY in absolute profit terms (-16.7% YoY), indicating negative operating leverage.
• Ordinary margin: 3.0% (5.44/184.07). Limited contribution from non-operating items (net +0.04).
• Net margin: 1.9% (3.58/184.07) with a 30.2% effective tax rate. operating_leverage: Revenue +13.7% YoY contrasted with operating income -16.7% YoY, implying fixed cost absorption and/or gross margin compression outweighed scale benefits. SG&A ratio at 18.5% appears elevated relative to the gross margin, compressing operating spread to approximately 3.5pp (22.0% - 18.5%). EBITDA of 6.34 implies an EBITDA margin of 3.4%, only modestly above operating margin, indicating limited D&A burden (0.95) and that profitability pressure is primarily above the depreciation line.

Growth Assessment

revenue_sustainability: Top-line growth of 13.7% YoY to 184.07 is strong for a mid-sized B2B distributor/operator in beauty-related supplies and equipment. Sustainability will depend on volume retention, price/mix resilience, and customer acquisition in salons. No segment breakdown was disclosed to assess contribution by channel or product. profit_quality: Despite revenue growth, profit contracted at all levels (operating, ordinary, net), signaling quality issues tied to cost inflation, sales mix, or promotional intensity. The minimal non-operating impact suggests core operations drove the decline. Interest burden is negligible, so financing effects did not mask underlying trends. outlook: Key to regaining earnings momentum will be stabilizing gross margin (procurement, pricing) and scaling SG&A efficiently. If revenue growth persists while cost discipline improves, operating leverage can recover. However, absent detailed guidance, the near-term outlook is cautious on margin trajectory given the current spread between gross and SG&A.

Financial Health

liquidity: - Current ratio: 204.3% (130.93/64.08). Quick ratio: 151.7% (calculated basis provided). Working capital: 66.86. Cash and deposits of 44.49 comfortably exceed short-term loans (0.25). solvency: - Total liabilities: 83.92; Total equity: 81.77. Calculated equity ratio ~47.9% (81.77/170.89). Debt service risk is low given interest expense of 0.05 and coverage >100x. capital_structure: - Interest-bearing debt reported: Short-term 0.25 and long-term 14.40 (total 14.65). Net cash position estimated at ~29.8 (cash 44.49 minus interest-bearing debt 14.65). Debt-to-equity (as reported in metrics, likely TL/TE) is 1.03x; on an interest-bearing debt to equity basis it is ~0.18x.

Cash Flow Quality

earnings_quality: OCF of 5.82 vs net income of 3.58 yields OCF/NI of 1.63x, indicating decent cash conversion and limited accrual risk in the period. FCF_analysis: Capex was 0.41 (cash outflow), allowing an estimated Free Cash Flow of ~5.41 (OCF 5.82 minus capex 0.41). Full investing CF was not reported, so FCF here excludes non-capex investing flows (e.g., acquisitions, security investments). working_capital: Period-end balances suggest AR of 36.16 (~36 days of sales), inventories of 33.76 (~51 days of COGS), and AP of 25.91 (~39 days of COGS) over a half-year period, approximating a cash conversion cycle of ~48 days. Inventory remains the largest working capital component; maintaining turns will be important to preserve OCF.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 53.4% (basis not fully disclosed; DPS unreported). At face value, this indicates a moderate distribution relative to earnings. FCF_coverage: With estimated FCF of ~5.41 and no disclosed total dividends paid, cash coverage cannot be precisely assessed. However, OCF/NI >1.6x suggests room for distributions if capital intensity remains low. policy_outlook: Dividend policy signals are not available due to unreported DPS and total dividends. Sustainability will hinge on restoring operating margin while maintaining positive working capital dynamics.

Risk Assessment

Business Risks:

• Gross margin pressure from procurement cost inflation and product mix shifts.
• Negative operating leverage if SG&A growth outpaces sales expansion.
• Demand variability tied to salon opening/closing cycles and discretionary spending.
• Inventory obsolescence risk for equipment and consumables if demand slows.
• Supply chain and logistics cost volatility affecting delivered margins.

Financial Risks:

• Margin thinness heightens earnings sensitivity to small cost changes.
• Foreign exchange exposure on imported merchandise (not disclosed but typical for category).
• Working capital build consuming OCF if inventory days extend.
• Potential increase in effective tax rate further compressing net margin.

Key Concerns:

• Operating income fell 16.7% YoY despite 13.7% revenue growth.
• SG&A ratio at 18.5% leaves a narrow operating spread vs 22.0% gross margin.
• Net margin at 1.9% limits retained earnings growth and ROE (4.4%).

Investment Implications

Key Takeaways:

• Healthy top-line growth (+13.7% YoY) but notable margin compression (OP -16.7% YoY).
• Strong liquidity and net cash balance (~29.8) mitigate balance sheet risk.
• OCF/NI of 1.63x indicates acceptable earnings quality; estimated FCF of ~5.41.
• ROE of 4.4% reflects low net margin rather than excessive leverage.
• Restoring gross margin and controlling SG&A are pivotal for earnings recovery.

Metrics to Watch:

• Gross margin trend and procurement costs.
• SG&A ratio and operating margin (targeting >3%+ stability).
• Inventory turnover and cash conversion cycle.
• OCF/NI and FCF after capex.
• Net cash position and any changes in interest-bearing debt.
• EPS progression and effective tax rate.

Relative Positioning: Within specialty B2B beauty supply/distribution, Beauty Garage exhibits stronger balance sheet resilience (net cash, >200% current ratio) but operates with thin margins and currently negative operating leverage versus growth, positioning it as financially sound yet margin-sensitive.

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