DREAM VISION CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.81B
• Operating Income: ¥-147M
• Net Income: ¥-181M
• EPS: ¥-9.87

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

FY2026 Q2 was weak, with a return to operating loss and negative bottom line, despite positive reported operating cash flow. Revenue fell to 18.07 (−18.0% YoY), and operating income deteriorated to −1.47, driven by SG&A exceeding gross profit. Gross profit was 8.31, implying a gross margin of 46.0%, but SG&A was 9.79 (54.2% of sales), resulting in an operating margin of −8.1%. Net income was −1.81, and total comprehensive income was −1.89, confirming broad-based losses. ROE calculated at −78.3% reflects a −10.0% net margin, modest asset turnover of 0.773x, and very high financial leverage of 10.12x. Equity is thin at 2.31 with an equity ratio of 9.9%, while retained earnings are deeply negative at −26.96, highlighting accumulated deficits. Operating cash flow was positive at 1.39, but this contrasts with the net loss (OCF/NI −0.77x), indicating quality concerns and likely heavy working-capital release. Investing cash flow was also positive at 1.33, likely from asset disposals, inflating headline FCF to 2.71 and underscoring non-recurring support to cash generation. Revenue contraction of 18% suggests demand softness and/or channel challenges; inventory at 9.42 (52% of sales for the half) looks heavy relative to accounts payable of 2.90, raising obsolescence and markdown risk. Interest-bearing debt detail is unreported, but the reported D/E of 9.12x signals elevated financial risk and limited balance-sheet buffer to absorb shocks. Without YoY margin disclosure, bps comparison is unavailable, but the SG&A ratio at 54.2% indicates deleverage versus sales contraction. Effective tax rate was 1.3%, consistent with loss-making status and minimal tax burden. With ROIC at −62.8%, the business is not covering its cost of capital, and urgent measures are needed to reduce fixed costs and normalize inventory. Forward-looking, the company must improve sales density and gross margin while rightsizing SG&A; liquidity planning is critical given high leverage and thin equity.

Profitability Analysis

ROE decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (−10.0%) × 0.773 × 10.12 ≈ −78.3%. The largest negative driver is net profit margin (−10.0%), which turned the overall ROE deeply negative, and the high financial leverage magnified the loss. Operating performance shows gross margin at 46.0% but SG&A at 54.2% of sales, pushing operating margin to −8.1%, which is the core reason for the negative net margin. The likely business reasons are revenue decline (−18% YoY) outpacing cost reductions, fixed-cost rigidity in SG&A, and potential markdown pressure tied to elevated inventories. Sustainability: the negative margin is unlikely to be sustainable long term; however, without cost actions or revenue stabilization, near-term profitability remains at risk. Concerning trends: SG&A intensity (54.2% of sales) far exceeds gross margin, indicating negative operating leverage; revenue decline suggests that overhead is not scaling down in line with sales.

Growth Assessment

Top-line contracted 18.0% YoY to 18.07, indicating demand softness and/or competitive pressure in the core apparel/e-commerce channels. Gross margin of 46.0% is not weak in isolation, but the inability to scale SG&A led to operating losses, pointing to inadequate sales throughput per fixed cost base. EBIT of −1.47 and EBITDA of −1.14 highlight deteriorating profit quality. With ROIC at −62.8%, current investments are not earning their cost of capital; growth should pivot to higher-ROIC initiatives and working-capital release rather than expansionary capex (capex was modest at 0.11). Outlook hinges on inventory normalization, customer acquisition efficiency, and fixed-cost reductions; absent these, growth is likely to be low quality and loss-making.

Financial Health

Equity is 2.31 on assets of 23.38 (equity ratio 9.9%), signaling a thin capital base. The reported Debt-to-Equity ratio is 9.12x, well above the 2.0x warning threshold, indicating high leverage and solvency risk. Current ratio cannot be calculated due to unreported current liabilities; therefore, short-term liquidity cannot be conclusively assessed. Maturity mismatch risk: accounts payable (2.90) and inventories (9.42) suggest reliance on short-term trade finance; if short-term borrowings are material (unreported), rollover risk increases. Cash and equivalents were 5.68, offering some immediate liquidity, but equity thickness is limited for shock absorption. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF was +1.39 versus net income of −1.81, yielding an OCF/NI ratio of −0.77x (a quality flag per benchmark). The positive OCF likely reflects working-capital inflows (e.g., inventory reduction or payables increase) rather than core profitability. Investing cash flow was +1.33, implying asset sales or investment redemptions; this boosted headline FCF to 2.71, but that level is not necessarily repeatable. Capex was contained at 0.11, which helps near-term cash, but sustained underinvestment could constrain future growth or efficiency gains. Signs of working-capital stress/manipulation are not determinable definitively, but the combination of large inventories (9.42) and positive OCF during a loss period suggests liquidation or extended payables; durability is uncertain.

Dividend Sustainability

No dividends were reported for the period. With net loss (−1.81), negative retained earnings (−26.96), and high leverage (D/E 9.12x), capacity for cash returns appears very limited. Even though FCF printed positive (2.71), it was supported by positive investing cash flow, likely non-recurring. Policy-wise, preservation of liquidity and equity repair would logically take precedence over distributions until profitability and ROIC normalize.

Risk Assessment

Business Risks:

• Demand weakness in core apparel/e-commerce channels (revenue −18% YoY).
• Inventory obsolescence and markdown risk with inventories at 9.42 versus sales of 18.07.
• Competitive intensity in fast-fashion/e-commerce driving customer acquisition costs and pricing pressure.
• Execution risk in SG&A cost containment given high fixed-cost base (SG&A 54.2% of sales).

Financial Risks:

• High leverage (D/E 9.12x) and thin equity buffer (equity ratio 9.9%).
• Potential refinancing/rollover risk if short-term borrowings are significant (details unreported).
• Earnings quality concerns: OCF/NI −0.77x and reliance on asset disposals to fund cash flow.
• Risk of equity dilution if capital raising is needed to restore solvency.

Key Concerns:

• Sustained negative ROIC (−62.8%) implies value destruction.
• Operating margin at −8.1% with SG&A exceeding gross profit.
• Data limitations (many items unreported) obscure true liquidity and debt service capacity.

Investment Implications

Key Takeaways:

• Profitability deterioration with operating margin −8.1% on sales decline of 18%.
• High leverage and thin equity elevate solvency and refinancing risk.
• Positive FCF is flattered by asset sales; underlying cash earnings remain weak.
• Inventory level is high relative to sales, risking further margin pressure.
• Urgent need for SG&A right-sizing and gross margin protection to restore ROIC.

Metrics to Watch:

• Monthly sales trend and gross margin versus markdowns.
• SG&A ratio trajectory and fixed-cost reduction progress.
• Inventory days and inventory-to-sales ratio; write-downs.
• OCF excluding working-capital swings; sustainability of cash generation.
• Equity ratio and D/E; any capital policy updates or refinancing events.

Relative Positioning: Versus domestic small-cap apparel/e-commerce peers, the company currently sits in the weaker quartile on profitability (negative EBIT/EBITDA), carries above-average leverage with a very low equity ratio, and exhibits heavier inventory relative to sales; near-term positioning is defensive and contingent on cost-down and inventory normalization.

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