General Oyster,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.15B
• Operating Income: ¥-87M
• Net Income: ¥-71M
• Earnings per Unit (EPU): ¥-14.68

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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

Verdict: FY2026 Q2 was weak, with a continued operating loss despite double-digit top-line growth, indicating insufficient operating leverage and cash burn risk. Revenue rose 15.1% YoY to 21.52, while gross profit reached 11.65, yielding a strong gross margin of 54.1% that was more than offset by SG&A of 12.53. Operating income was -0.87 (operating margin approximately -4.0%), and ordinary income of -0.89 plus minor non-operating items led to net income of -0.71 (net margin -3.3%). Depreciation was 0.44 and EBITDA was -0.43, underscoring weak underlying earnings power. Balance sheet liquidity is ample with cash and deposits of 8.94 and a current ratio of 247%, and cash alone covers current liabilities of 6.40. Total assets stood at 28.81 with total equity of 14.63, implying financial leverage of 1.97x and a calculated ROE of -4.8%. Interest expense was modest at 0.03, but interest coverage is deeply negative (-34.1x) due to negative EBIT/EBITDA. Operating cash flow was -2.57, a larger loss than net income, signaling cash burn and weaker cash conversion in the period. The OCF/NI ratio of 3.62x is not meaningful because both figures are negative; qualitatively, cash generation deteriorated more than accrual earnings. Margin comparison in basis points cannot be computed reliably due to a lack of disclosed prior-period margin baselines; currently, gross margin is 54.1% and operating margin is approximately -404 bps. Working capital appears conservative (AR 2.22; inventories not disclosed), and there is no sign of a near-term liquidity crunch, but continued OCF deficits would erode the cash buffer. Leverage (D/E 0.97x) is moderate, but negative ROIC (-9.1%) flags poor capital efficiency. Forward-looking, management must drive store productivity, procurement efficiency, and SG&A discipline to return to break-even, with seasonality (oyster demand typically stronger in winter) offering a potential H2 boost if executed well. Key watchpoints include SG&A ratio normalizing below gross profit, stabilization of OCF, and improvement in interest coverage toward positive territory. Overall, the quarter shows revenue momentum but inadequate cost absorption, with sufficient liquidity to execute a turnaround but rising urgency to improve unit economics.

Profitability Analysis

ROE decomposes to Net Profit Margin (-3.3%) × Asset Turnover (0.747) × Financial Leverage (1.97x) = -4.8%. The dominant driver of the negative ROE is the negative net margin, given asset turnover is mid-range and leverage is not excessive. The negative net margin stems from SG&A (12.53) exceeding gross profit (11.65), producing an operating loss of -0.87 despite a solid 54.1% gross margin. Business factors likely include insufficient same-store sales and scale to absorb fixed labor, rent, and headquarters costs, as well as off-seasonality for oysters in Q2. Without prior-period component data, we infer the margin component is the key detractor, not asset turnover or leverage. Sustainability: the gross margin level suggests pricing/procurement are not the core issue; recovery hinges on SG&A control and revenue scale—seasonal uplift could narrow losses, but structural SG&A must be right-sized to ensure sustainability. Concerning trends: the SG&A-to-sales ratio is high at 58.2%, exceeding gross profit and resulting in negative operating margin; EBITDA is negative (-2.0% margin), indicating limited operating leverage at current scale.

Growth Assessment

Revenue grew 15.1% YoY to 21.52, showing demand recovery or footprint expansion, but growth did not translate into profitability. Gross profit of 11.65 reflects healthy unit-level margin potential, but SG&A growth outpaced gross profit in absolute yen terms (SG&A 12.53 > GP 11.65), negating operating leverage. Non-operating items were immaterial (net -0.02), so the loss is operationally driven. With oysters typically peaking in winter months, H2 seasonality may aid sequential improvement if cost controls and menu mix optimization are executed. Near term, the path to profit requires lowering the SG&A ratio (e.g., labor scheduling, rent negotiations, HQ overhead) and improving throughput per store. Absent disclosed segment/store metrics, sustainability of the 15% growth rate is uncertain; quality will be judged on conversion to positive OCF in H2.

Financial Health

Liquidity is strong: current ratio 247.4% and quick ratio 247.4% (inventories not disclosed), with cash and deposits of 8.94 exceeding current liabilities of 6.40. No warning on current ratio (<1.0) and D/E is 0.97x, within a conservative band (<1.5). Long-term loans total 2.50 within noncurrent liabilities of 7.78, suggesting a manageable debt stack; however, details on lease liabilities and other provisions are not disclosed. Maturity mismatch risk is low in the near term given cash coverage of current liabilities; short-term loans are unreported. Interest coverage is deeply negative due to operating losses, a medium-term solvency concern if losses persist. No off-balance sheet obligations are disclosed in the data provided.

Cash Flow Quality

Operating cash flow was -2.57 versus net income of -0.71, indicating worse cash performance than accrual earnings, likely due to working capital outflows or non-cash income/expense mix. The reported OCF/NI of 3.62x is not decision-useful because both numerator and denominator are negative; the qualitative signal is cash burn. Investing CF was unreported, preventing Free Cash Flow calculation, and capex details are unavailable. Financing CF of 0.85 indicates external funding support during the period (debt/equity/other), partly offsetting OCF deficits. Sustainability: dividends are unreported, but with negative OCF and EBITDA, internal funding of growth or payouts is weak; restoration of positive OCF is essential. Working capital manipulation signs cannot be assessed fully due to missing inventories and payables detail; AR of 2.22 against H1 revenue appears reasonable.

Dividend Sustainability

DPS and total dividends are unreported, and the calculated payout ratio (-70.9%) is not reliable given losses and missing dividend data. With EBITDA negative (-0.43) and OCF negative (-2.57), any cash dividends would not be covered by organic cash generation. Near-term policy prudence would imply conserving cash until profitability and positive FCF return; however, explicit guidance is absent. FCF coverage cannot be assessed due to missing investing CF and capex.

Risk Assessment

Business Risks:

• High SG&A burden (58.2% of sales) eroding operating margin despite 54.1% gross margin.
• Seasonality of oyster demand with potential off-season softness in Q2 impacting fixed-cost absorption.
• Food safety and supply risks specific to shellfish (red tide, contamination, harvest restrictions).
• Input cost volatility (seafood procurement, logistics, energy) pressuring gross-to-operating conversion.
• Labor availability and wage inflation impacting restaurant operations and SG&A.
• Store traffic sensitivity to macro conditions and consumer discretionary spending.

Financial Risks:

• Negative EBITDA and OCF leading to cash burn despite adequate starting liquidity.
• Interest coverage deeply negative (-34.1x), raising medium-term refinancing/covenant risk if losses persist.
• ROIC of -9.1% indicates value destruction if capital deployment continues without returns.
• Dependence on financing CF (0.85) to bridge OCF deficits; sustainability uncertain.
• Potential undisclosed lease liabilities or long-term commitments within noncurrent liabilities.

Key Concerns:

• Operating margin at approximately -4.0% with SG&A exceeding gross profit.
• Cash burn of -2.57 in OCF versus cash and deposits of 8.94 (runway limited if deficits persist).
• Lack of visibility on capex and store-level metrics impedes assessment of turnaround pace.
• No disclosed dividend policy amid losses; potential investor return uncertainty.

Investment Implications

Key Takeaways:

• Top-line growth (+15.1% YoY) has not translated into profit; operating loss -0.87 persists.
• Gross margin healthy at 54.1%, but SG&A intensity (58.2% of sales) is the core drag.
• Liquidity is currently comfortable (cash 8.94; current ratio 247%), providing time to execute fixes.
• Capital efficiency weak (ROE -4.8%, ROIC -9.1%); improvement hinges on SG&A control and revenue scale.
• Cash generation is negative (OCF -2.57), increasing urgency to restore positive EBITDA/OCF.

Metrics to Watch:

• SG&A-to-sales ratio and operating margin returning to breakeven/positive.
• Same-store sales growth and store productivity KPIs (not disclosed here).
• Operating cash flow and working capital movements (AR, inventories, payables).
• Interest coverage trending toward positive and debt tenor profile disclosure.
• ROIC and asset turnover improvements as footprint and mix optimize.
• Cash balance trajectory and any additional financing needs.

Relative Positioning: Within Japan’s restaurant sector, the company shows solid gross margin potential but lags peers on operating leverage and cash conversion; balance sheet liquidity is better than many micro-cap F&B peers, yet profitability and ROIC are notably below sector norms.

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