| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1354.5B | ¥1335.9B | +1.4% |
| Operating Income / Operating Profit | ¥36.0B | ¥35.0B | +2.8% |
| Ordinary Income | ¥39.0B | ¥38.1B | +2.4% |
| Net Income / Net Profit | ¥14.9B | ¥10.8B | +38.2% |
| ROE | 6.1% | 4.6% | - |
FY2026 ended March recorded Revenue ¥1,354.5B (YoY +¥18.6B +1.4%), Operating Income ¥36.0B (YoY +¥1.0B +2.8%), Ordinary Income ¥39.0B (YoY +¥0.9B +2.4%), Net Income ¥14.9B (YoY +¥4.1B +38.2%), achieving both revenue and profit growth. Operating margin improved modestly to 2.7% (prior year 2.6%), and Net Income rose substantially due to a reduction in extraordinary losses. By segment, Construction performed strongly with Revenue ¥499.3B (+11.5%) and Operating Income ¥22.1B (+22.7%), Retail recorded Revenue ¥772.8B (-2.8%) and Operating Income ¥15.6B (-11.2%) resulting in revenue and profit declines, and Trading was weak at Revenue ¥65.1B (-16.9%) and Operating Income ¥6.7B (-22.3%). Progress against the full year plan was below target: Revenue 96.8%, Operating Income 94.7%, Ordinary Income 97.6%.
[Revenue] Revenue was ¥1,354.5B (YoY +1.4%), a slight increase. By segment, Retail was the core but contracted to ¥772.8B (composition 57.0%, YoY -2.8%), Construction grew to ¥499.3B (composition 36.9%, YoY +11.5%) driving consolidated revenue growth, Trading declined to ¥65.1B (composition 4.8%, YoY -16.9%), and Other businesses expanded modestly to ¥21.9B (composition 1.6%, YoY +13.8%). The Retail decline was mainly due to intensifying competition and consumer cost-consciousness; Construction benefited from increased orders for wooden construction and roof/exterior renovation, while Trading contracted due to reduced handling of pharmaceutical and chemical raw materials. External environment: Retail continues to face pricing competition pressure; Construction benefited from selective project execution amid labor shortages.
[Profitability] Cost of goods sold was ¥1,074.5B, yielding a cost ratio of 79.3% (prior year 79.0%), up 33bp, and Gross Profit was ¥280.1B with a gross margin of 20.7% (prior year 21.0%), down. SG&A was ¥244.1B with an SG&A ratio of 18.0% (prior year 18.4%), improving by 40bp due to expense management, enabling Operating Income of ¥36.0B (Operating margin 2.7%, prior year 2.6%). Non-operating items included interest income ¥0.4B and dividend income ¥1.0B, offset by interest expense ¥1.9B and foreign exchange losses ¥0.5B, resulting in net non-operating income of +¥3.1B and Ordinary Income of ¥39.0B (Ordinary income margin 2.9%). Extraordinary items comprised Extraordinary Gains ¥2.7B (gain on sale of investment securities ¥2.2B, gain on sale of fixed assets ¥0.5B) against Extraordinary Losses ¥10.4B (impairment losses ¥2.0B, loss on retirement/disposal of fixed assets ¥0.9B, etc.), netting to -¥7.7B. Profit before tax was ¥31.3B (YoY -10.6%), however Corporate Taxes and similar were reduced to ¥9.2B (effective tax rate 29.4%, prior year 40.7%), resulting in Net Income ¥14.9B (Net margin 1.1%), up +38.2% YoY. Segment profits show Construction’s higher profitability drove consolidated profit growth, while margin deterioration in Retail was a drag; overall, revenue and profit increased but improvement in operating margin was limited.
Retail recorded Revenue ¥772.8B (YoY -2.8%) and Operating Income ¥15.6B (YoY -11.2%), with Operating margin deteriorating to 2.0% (prior year 2.2%). The company operates formats including supercenters, home centers, food supermarkets, and drugstores; however, margin compression from pricing competition and rising costs pressured gross margin and SG&A cuts were insufficient to fully offset. Construction posted Revenue ¥499.3B (YoY +11.5%) and Operating Income ¥22.1B (YoY +22.7%), improving Operating margin to 4.4% (prior year 4.0%). Higher-margin projects increased, including wooden construction, steel structures, roof/exterior renovations, and automated multi-level parking, successfully raising profitability. Trading recorded Revenue ¥65.1B (YoY -16.9%) and Operating Income ¥6.7B (YoY -22.3%), Operating margin remained high at 10.2% (prior year 10.9%) but revenue and profit declined due to fluctuations in customers and market conditions for pharmaceutical and chemical raw materials. Other businesses (real estate, etc.) had Revenue ¥21.9B (YoY +13.8%) and Operating Income ¥1.8B (YoY +8.0%) with Operating margin 8.0% (prior year 8.5%), stable. Consolidated profit was driven mainly by Construction’s contribution, offsetting Retail’s decline; however, due to Retail’s high composition ratio, the uplift in consolidated margin was limited.
[Profitability] Operating margin was 2.7%, improving 0.1pt YoY; gross margin 20.7% (YoY -0.3pt) decline was offset by SG&A ratio reduction to 18.0% (YoY -0.4pt). ROE was 6.1%, roughly steady with prior year; ROA was 3.9% (on Ordinary Income basis), unchanged. EBITDA was ¥53.2B (Operating Income plus goodwill amortization ¥2.5B and depreciation ¥17.2B) yielding an EBITDA margin of 3.9%, and asset efficiency remained high with total asset turnover of 1.63x. [Cash Quality] Operating Cash Flow (OCF) was ¥9.0B versus Net Income ¥14.9B, giving OCF/Net Income of 0.60x; OCF to EBITDA ratio was 0.17x, indicating weak cash conversion. Working capital drivers included an increase in trade receivables (△¥14.1B) and a decrease in trade payables (△¥11.6B) as cash outflows, while inventory decline (+¥9.8B) was the only positive contributor. Corporate tax payments (△¥19.9B) also depressed OCF. [Investment Efficiency] Investing Cash Flow was △¥12.5B with acquisition of tangible and intangible assets △¥13.7B; relative to Depreciation ¥17.2B, investment was restrained at 0.79x. Free Cash Flow (FCF) was △¥3.5B, indicating limited internal cash generation. [Financial Health] Equity Ratio was 29.6%, slightly up from 29.3% prior year; D/E ratio remained high at 2.37x. Debt/EBITDA was 5.5x, indicating weak debt repayment capacity, while Interest Coverage (EBIT / Interest Expense) was 19.5x, suggesting adequate interest service capacity. Current ratio was 126.7% and quick ratio 83.8%, indicating acceptable short-term liquidity, but with Cash & Deposits ¥53.7B versus Short-term Borrowings ¥136.9B, refinancing dependence is high.
OCF was ¥9.0B (YoY +131.2%), a substantial improvement largely due to a low base as the prior year was △¥28.8B. Operating cash subtotal (profit before tax + non-cash expenses) was ¥29.4B, comprising depreciation ¥17.2B, goodwill amortization ¥2.5B, impairment losses ¥2.0B added back, and deduction of gain on sale of investment securities △¥2.2B. Working capital changes saw increases in trade receivables △¥14.1B and decreases in trade payables △¥11.6B as negative contributions, while inventory decreases +¥9.8B were positive; however, corporate tax payments △¥19.9B substantially constrained OCF. Investing Cash Flow was △¥12.5B with acquisition of tangible/intangible assets △¥13.7B, partially offset by sale proceeds ¥2.6B and loan repayments/collections ¥0.5B. Financing Cash Flow was +¥13.1B driven by net increase in short-term borrowings +¥40.8B (YoY +¥32.1B increase), long-term borrowings raised +¥31.8B, long-term borrowings repayments △¥43.6B, share buybacks △¥9.9B, and dividend payments △¥5.6B. FCF was △¥3.5B, and total shareholder returns ¥15.5B (dividends + share buybacks) were not covered by internal funds, increasing reliance on short-term borrowings.
Ordinary Income was ¥39.0B while Profit before tax was ¥31.3B, pressured by Extraordinary Losses ¥10.4B (impairment ¥2.0B; loss on disposal/retirement of fixed assets ¥0.9B, etc.). Extraordinary Gains ¥2.7B (gain on sale of investment securities ¥2.2B; gain on sale of fixed assets ¥0.5B; gain from negative goodwill ¥0.5B) were recorded, but net extraordinary items were -¥7.7B, indicating temporary factors weighed on results. Non-operating income ¥6.9B (dividend income ¥1.0B; interest income ¥0.4B; subsidies ¥0.8B, etc.) provides stable recurring income, while non-operating expenses ¥3.8B (interest expense ¥1.9B; foreign exchange losses ¥0.5B, etc.) limited net non-operating income to +¥3.1B. Comprehensive income was ¥24.6B (Net Income ¥14.9B plus other comprehensive income +¥9.7B), with other comprehensive income ¥2.5B including valuation differences on securities +¥2.1B and actuarial gains/losses related adjustments +¥0.4B, and carryforward adjustments from prior period contributing. OCF to Net Income ratio of 0.60x reflects insufficient cash conversion driven by working capital cash outflows (receivables +¥14.1B; payables △¥11.6B) and tax payments ¥19.9B, indicating earnings quality is stable on an Ordinary Income basis but exposed to volatility from extraordinary items and challenges in working capital management.
Full year plan: Revenue ¥1,400.0B (YoY +3.4%), Operating Income ¥38.0B (YoY +5.6%), Ordinary Income ¥40.0B (YoY +2.5%), Net Income ¥23.0B (EPS 123.07 yen). Actuals were Revenue ¥1,354.5B (Achievement 96.8%), Operating Income ¥36.0B (Achievement 94.7%), Ordinary Income ¥39.0B (Achievement 97.5%), Net Income ¥14.9B (EPS 110.57 yen, Achievement 92.6%), missing targets across all items. Revenue shortfall ¥45.5B was driven by declines in Retail and Trading, Operating Income shortfall ¥2.0B due to Retail margin deterioration, and Net Income shortfall ¥8.1B also affected by extraordinary losses. Year-end dividend guidance is 0 yen (actual was 30 yen), suggesting a possible revision to the plan. Low progress rates primarily resulted from intensifying price competition and gross margin erosion in Retail and worsening market conditions in Trading, which Construction’s strong performance could not fully offset. Achieving the full year plan will require Retail turnaround and Trading recovery; given current conditions, conservative assumptions are prudent.
Year-end dividend was 30 yen, with a payout ratio of 27.7% (dividends total ¥5.61B against Net Income ¥14.9B), at an appropriate level. The prior year payout ratio was also 27.7%, indicating policy continuity. Additionally, share buybacks of ¥9.9B were implemented, bringing total shareholder returns to ¥15.5B and a Total Return Ratio of 104%. Given FCF of △¥3.5B, shareholder returns exceeded internal funds and were financed via short-term borrowings (short-term borrowings net increase +¥40.8B). The total of dividends and buybacks ¥15.5B materially exceeded OCF ¥9.0B, so recovery of OCF is a prerequisite for sustained dividends. With Cash & Deposits ¥53.7B and Current ratio 126.7%, short-term payment capacity is secured, but sustained returns require improvements in working capital efficiency and a turnaround to positive FCF.
Risk of deteriorating profitability in Retail: Retail accounts for 57.0% of revenue composition and Operating margin fell to 2.0% (prior year 2.2%), with ongoing pricing competition and rising costs. Intensified consumer cost-consciousness, simultaneous price pressures, and rising labor/logistics costs may further depress gross and operating margins, posing a significant risk to consolidated performance.
Financial leverage and refinancing risk: D/E ratio 2.37x and Debt/EBITDA 5.5x indicate high leverage, with Short-term Borrowings ¥136.9B (46.6% of total liabilities) versus Cash & Deposits ¥53.7B demonstrating high refinancing dependence. In a rising interest rate environment or tightened financial conditions, refinancing costs could increase and interest expense (currently ¥1.9B) could rise, pressuring Ordinary Income.
Insufficient cash generation: OCF ¥9.0B is 0.17x of EBITDA ¥53.2B and 0.60x of Net Income ¥14.9B, indicating weak cash conversion and issues in working capital management (receivables +¥14.1B; payables △¥11.6B). With FCF △¥3.5B and limited internal cash generation, shareholder returns, investments, and debt repayments are dependent on external funding, raising concerns about reduced financial flexibility and potential credit risk.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.7% | 4.6% (1.7%–8.2%) | -1.9pt |
| Net Margin | 1.1% | 3.3% (0.9%–5.8%) | -2.2pt |
Both Operating and Net margins are below the industry median, placing profitability in the lower tier within the sector. While the company secures scale as a Retail–Construction diversified model, margin improvement is key to enhancing industry standing.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 1.4% | 4.3% (2.2%–13.0%) | -2.9pt |
Revenue growth is below the industry median, indicating weaker growth. Contraction in the Retail segment constrains overall growth, and a reconfigured growth strategy leveraging Construction’s strength is required.
※ Source: Company compilation
Improvement in Construction profitability has been the primary driver of consolidated profit growth, with Operating Income ¥22.1B (YoY +22.7%) and Operating margin 4.4% demonstrating higher profitability. Selective project acceptance and value-added positioning in wooden construction, roof/exterior renovation, and automated multi-level parking have been effective; maintaining and expanding this order portfolio is key to sustained profit growth. Retail remains the largest segment at 57.0% of revenue but has low Operating margin of 2.0%; improving gross margin, cutting expenses, and optimizing formats are necessary to correct inter-segment profit disparities and lift consolidated margins.
OCF ¥9.0B versus Net Income ¥14.9B yields a cash conversion rate of 0.60x, highlighting working capital management (receivables +¥14.1B; payables △¥11.6B) as a key challenge. With FCF △¥3.5B and shareholder returns ¥15.5B (dividends + buybacks) not funded by internal cash, reliance on short-term borrowings increases leverage (D/E 2.37x; Debt/EBITDA 5.5x). Normalizing working capital and returning FCF to positive territory are prerequisites for dividend sustainability and restoring financial flexibility.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.