| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1212.6B | ¥1116.7B | +8.6% |
| Operating Income / Operating Profit | ¥89.1B | ¥76.1B | +17.0% |
| Profit Before Tax | ¥78.7B | ¥67.9B | +15.8% |
| Net Income | ¥55.2B | ¥43.5B | +27.0% |
| ROE | 2.9% | 2.3% | - |
FY2026 Q1 achieved revenue of ¥1,212.6B (YoY +¥96.0B +8.6%), Operating Income of ¥89.1B (YoY +¥13.0B +17.0%), Ordinary Income of ¥88.7B (YoY +¥11.8B +15.4%), and quarterly Net Income attributable to owners of the parent of ¥55.2B (YoY +¥11.7B +27.0%), delivering year-over-year revenue and profit growth. Operating margin improved to 7.3% (up +0.5pt from 6.8% a year earlier), and Net margin improved to 4.6% (up +0.7pt from 3.9%), indicating improved profitability. Progress toward the full-year plan stands at 24.7% for Revenue, 26.6% for Operating Income, and 28.3% for Net Income, reflecting standard progress.
[Revenue] Revenue was ¥1,212.6B (YoY +8.6%), achieving growth. Segment disclosures are omitted, but it is presumed that in the single Restaurant segment, recovery in customer visits at existing stores and the penetration of price revisions were the main drivers. Gross margin remained high at 66.4% (down -0.3pt from 66.7% a year earlier), while Cost of Sales was ¥407.1B (+9.5%), slightly outpacing revenue growth. Despite food and energy price pressures, price pass-through and menu mix optimization minimized the decline in gross margin.
[Profitability] SG&A was ¥714.7B (+7.9%), an increase below the rate of revenue growth, and the SG&A ratio improved to 58.9% (down -0.4pt from 59.3%), demonstrating operating leverage. Efficiency gains in personnel and store operations likely contributed. As a result, Operating Income reached ¥89.1B (+17.0%), a double-digit increase. Non-operating items included higher interest expense of ¥10.0B (prior year ¥7.8B), which was offset by a slight rise in interest income and containment of other expenses, resulting in Ordinary Income of ¥88.7B (+15.4%). Income taxes were ¥23.5B (effective tax rate 29.8%, improved from 36.0% prior year), and Net Income was ¥55.2B (+27.0%). In conclusion, revenue and profit growth were achieved, and cost efficiency and reduced tax burden accelerated profit growth.
[Profitability] Operating margin improved to 7.3% (prior 6.8%), Net margin to 4.6% (prior 3.9%), and ROE recovered to 2.9% though remaining low. Gross margin of 66.4% stayed at a high level, and improvement in SG&A ratio to 58.9% was the main driver of margin expansion. [Cash Quality] Operating Cash Flow / Net Income ratio is 2.9x and the accrual ratio is -2.0%, indicating high earnings quality. Operating Cash Flow of ¥160.2B is about three times Net Income despite including income tax payments of ¥51.9B and lease payments of ¥89.9B, demonstrating strong cash generation. [Investment Efficiency] Simplified ROIC is approximately 3.3%, which is low, and goodwill of ¥1,627.5B represents 85.6% of Net Assets of ¥1,900.7B, an asset structure that pressures capital efficiency. DSO (days sales outstanding) is approximately 69 days and inventory days approximately 67 days, indicating room to improve working capital turnover. [Financial Soundness] Equity Ratio is 36.5% (prior 36.2%) and stable, but current ratio is about 0.69 (Current Assets ¥690.7B ÷ Current Liabilities ¥1,004.8B), below 1.0, warranting attention to short-term liquidity. Interest-bearing debt (bonds and borrowings) is ¥1,292.8B, and other financial liabilities including lease liabilities are ¥1,255.3B, so net debt burden is substantial; however, Cash and Deposits of ¥357.7B are held and Interest Coverage (EBIT ÷ Interest Expense) is about 8.9x, a healthy level.
Operating Cash Flow was ¥160.2B (YoY +25.3%), supported by Profit Before Tax of ¥78.7B plus non-cash charges including Depreciation & Amortization of ¥128.9B, and adjustments for changes in working capital (Accounts Receivable increase +¥7.1B, Inventory increase +¥3.6B, Trade Payables decrease -¥2.4B), resulting in cash generated from operations of ¥219.5B. From this, income tax payments of ¥51.9B, interest payments of ¥7.6B, and lease payments of ¥89.9B were deducted to arrive at final Operating Cash Flow of ¥160.2B. Investing Cash Flow was -¥76.9B, driven by Capital Expenditure of ¥56.8B, Intangible Asset acquisitions of ¥7.2B, and time deposit placements of ¥11.5B. In the prior year, there was a ¥87.5B acquisition of subsidiary shares due to a change in consolidation scope; absence of such this period materially reduced investing outflows. Free Cash Flow was positive ¥83.3B (Operating Cash Flow ¥160.2B − CapEx & Intangible spending ¥64.0B). Financing Cash Flow was -¥69.4B: proceeds from long-term borrowings ¥70.0B were outweighed by long-term borrowings repayments ¥13.5B, dividend payments ¥31.2B, lease liability repayments ¥89.9B, and share buybacks ¥4.0B. Cash and Cash Equivalents increased from ¥343.3B at the beginning of the period to ¥357.7B after FX effects of ¥0.5B, a ¥14.4B increase. Although working capital slightly deteriorated, strong Operating Cash Flow absorbed this, funded dividends and buybacks, and preserved Free Cash Flow, indicating a healthy funding structure.
Overall quality of earnings is high. Operating Cash Flow of ¥160.2B is 1.8x Operating Income of ¥89.1B, and the accrual ratio ((Net Income − Operating Cash Flow) ÷ Total Assets) is -2.0%, indicating earnings are backed by cash. Non-operating income is minimal (interest income ¥0.2B, 0.02% of Revenue), and other operating expenses are limited at ¥8.1B (0.7% of Revenue), so core operations account for most profits. The gap between Ordinary Income ¥88.7B and Net Income ¥55.2B is mainly due to income taxes of ¥23.5B; no one-off special gains/losses were identified, so earnings sustainability is high. Comprehensive Income of ¥60.9B exceeds Net Income by ¥5.7B, largely due to Other Comprehensive Income items such as Cash Flow Hedges ¥3.0B and foreign operations translation differences ¥2.8B; these are valuation-related but limited in amount. The increase in non-operating interest expense to ¥10.0B (prior ¥7.8B) reflects lease accounting and higher borrowing costs, but has been absorbed by Operating Income growth and does not materially impair earnings quality.
Full-year guidance is unchanged: Revenue ¥4,900.0B (YoY +11.8%), Operating Income ¥335.0B (YoY +11.8%), Net Income ¥195.0B (YoY +16.4%), EPS forecast ¥85.71, Dividend forecast ¥10.00. Progress at the end of Q1 is Revenue 24.7% (¥1,212.6B ÷ ¥4,900.0B), Operating Income 26.6% (¥89.1B ÷ ¥335.0B), Net Income 28.3% (¥55.2B ÷ ¥195.0B). A 25% progress rate in Q1 is typically standard; Revenue is roughly on plan, while Operating Income and Net Income are slightly ahead of schedule. The Net Income advance is attributed to an improved effective tax rate (29.8% vs prior 36.0%) and cost efficiency. No quarterly forecast revisions were made, and management appears reasonably confident in achieving the full-year plan. However, headwinds such as rising labor costs (minimum wage revisions), volatility in food prices, and the timing of store opening/refurbishment investments could normalize progress in the second half, so continued quarterly monitoring is necessary.
Dividend payments this period totaled ¥31.2B (¥8 per share, unchanged from the prior year period), and share buybacks amounted to ¥4.0B, resulting in total returns of ¥35.2B. Dividend payout ratio against current period Net Income of ¥55.2B is approximately 56.5%, and Total Return Ratio is approximately 63.7%. Free Cash Flow of ¥83.3B comfortably exceeds total returns of ¥35.2B, supporting the sustainability of dividends and buybacks. The full-year dividend forecast is ¥10.00 (annual), assumed as interim ¥5.00 and year-end ¥5.00. The implied payout ratio against full-year Net Income forecast of ¥195.0B is approximately 11.7% (annual dividend total shares × ¥10 ≒ ¥22.8B ÷ ¥195.0B), which appears low on a calculation basis but reflects the per-share annual dividend of ¥10. Outstanding treasury stock at period-end is 108k shares (acquisition amount ¥4.0B), indicating a capital policy aimed at enhancing shareholder value. Compared with CapEx ¥56.8B and Depreciation ¥128.9B, the investment/Depreciation ratio is 0.44x, conservative and focused on existing store refurbishments; near-term shareholder return capacity remains ample. In the medium term, ROIC improvement and balance between growth investments will determine ongoing dividend capacity, so enhancing capital efficiency is a prerequisite for sustainable shareholder returns.
Goodwill impairment risk: Goodwill of ¥1,627.5B represents 85.6% of Net Assets of ¥1,900.7B, posing a risk that impairment tests could materially erode equity. Large goodwill from past M&A could be impaired by worsening business conditions or downside performance. If impairment losses occur, Net Assets could decline significantly and Equity Ratio would fall, necessitating continuous profitability and periodic goodwill reassessment.
Short-term liquidity risk: Current ratio of 0.69 (Current Assets ¥690.7B ÷ Current Liabilities ¥1,004.8B) is below 1.0, indicating relatively weak short-term payment capacity. Although Cash and Deposits of ¥357.7B are held, seasonal tax payments, lease payments (approximately ¥360B annually), and working capital fluctuations could tighten short-term cash flow. If DSO of 69 days and inventory days of 67 do not improve, working capital increases could strain cash.
Labor cost increase risk: A large portion of SG&A (¥714.7B) is presumed to be personnel costs, and increases in minimum wage or broader social insurance coverage expansion could raise SG&A ratio. Although SG&A ratio improved to 58.9% this period, stronger wage pressure from FY2026 onward could reverse the Operating Income margin improvement trend. In the labor-intensive restaurant industry, simultaneous labor shortages and wage increases may outpace price pass-through and operational improvements, risking margin compression; monitoring is required.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.3% | – | – |
| Net Margin | 4.6% | – | – |
Median industry data are limited, making relative assessment difficult, but Operating Margin 7.3% and Net Margin 4.6% are within standard ranges for the restaurant business.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.6% | – | – |
Revenue growth of 8.6% is robust compared with peers, driven by price revisions and recovery in customer visits.
※ Source: Company aggregation
Improvements in Operating Margin and cash generation continue, and progress toward the full-year plan is steady. Operating Margin 7.3% (+0.5pt) and Net Margin 4.6% (+0.7pt) show enhanced profitability, and Operating Cash Flow / Net Income ratio of 2.9x indicates strong cash conversion. Improvement in SG&A ratio (58.9%, -0.4pt) demonstrates operating leverage; if cost control is maintained in the second half, the likelihood of achieving full-year Operating Income ¥335.0B is high. Free Cash Flow ¥83.3B covers dividends and share buybacks (total ¥35.2B), supporting the sustainability of shareholder returns.
High reliance on goodwill (85.6% of Net Assets) and low ROIC (~3.3%) are medium-term structural issues; attention is needed regarding equity quality and capital efficiency. Large goodwill from past M&A could trigger impairment depending on test results, damaging equity. Short-term liquidity (current ratio 0.69) and working capital efficiency (DSO 69 days, inventory days 67) also have room for improvement; managing cash flow and accelerating working capital turnover are keys to sustainable growth. If wage pressures intensify, maintaining profitability will require balancing price pass-through and operational efficiencies, so monitoring existing-store productivity improvements and replacement of unprofitable stores is advisable.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm based on public financial statement data. Investment decisions are your own responsibility; consult a professional if necessary before making investment decisions.