KANMONKAI (3372) FY2026 Q3 Earnings Report

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Executive Summary

Cumulative results for the first three quarters reflected higher revenue but lower earnings, with deteriorating profitability being the key issue. Revenue increased slightly to ¥38.0B (¥37.2B in the same period last year, YoY +2.1%), while Operating Income fell from a profit of ¥1.7B in the same period last year to a loss of ¥0.1B. Ordinary Income was a loss of ¥0.2B, and Net Income attributable to shareholders of the parent was also a loss of ¥0.2B, reversing from the ¥0.9B profit recorded in the same period last year. The simultaneous decline in the gross profit margin (63.9%, down 3.0pt year on year) and increase in the SG&A expense ratio (64.0%, up 1.7pt year on year) prevented the increase in revenue from translating into higher earnings.

Factors Affecting Performance

【Revenue】Revenue was ¥38.0B, representing an increase of +2.1% year on year. As the Company operates a single store operations business, revenue growth depends on factors such as customer traffic and average spending per customer at existing stores; however, segment information is not disclosed. The increase in revenue was limited to ¥0.8B, insufficient to absorb the ¥0.6B decline in gross profit.

【Profit and Loss】Gross profit declined to ¥24.2B (gross profit margin: 63.9%, down 3.0pt year on year), while SG&A expenses increased to ¥24.3B (SG&A expense ratio: 64.0%, up 1.7pt year on year). The simultaneous deterioration in both factors caused Operating Income to reverse from the ¥1.7B profit recorded in the same period last year to a loss of ¥0.1B. Ordinary Income was a loss of ¥0.2B, after the additional burden of non-operating expenses, including interest expense of ¥0.1B. After also recording extraordinary losses of ¥0.1B, including losses on the disposal of fixed assets, Net Income was a loss of ¥0.2B. The performance reflected higher revenue but lower earnings, with deterioration in the cost structure, rather than the revenue increase, determining results.

Segment Analysis

The Group operates a single segment, the store operations business, and does not disclose Operating Income or loss by segment.

Key Financial Indicators

【Profitability】The Operating Income margin was -0.2% (4.6% in the same period last year), while the Net Income margin was -0.5% (2.4% in the same period last year), with both turning from positive to negative. The gross profit margin declined to 63.9% (66.9% in the same period last year).【Cash Flow Quality】Cash and deposits were ¥7.0B, a decrease of ¥7.1B year on year, while accounts receivable were ¥7.5B (up ¥4.9B year on year) and inventories were ¥7.5B (up ¥2.0B year on year); both increased at rates exceeding revenue growth.【Investment Efficiency】Annualized ROE was -1.8%, and total asset turnover was approximately 1.5x, with the loss fully constraining capital efficiency.【Financial Soundness】The Equity Ratio was 37.8% (38.9% in the same period last year), the current ratio was approximately 130%, and interest-bearing debt was approximately ¥10.9B, primarily consisting of ¥8.0B in short-term borrowings. The debt structure is becoming increasingly short term.

Cash Flow Analysis

Although the Company does not disclose a statement of cash flows, changes in the balance sheet provide insight into fund movements. Cash and deposits declined by ¥7.1B, from ¥14.0B in the same period last year to ¥7.0B, indicating that funds shifted into assets requiring collection or conversion into cash, namely accounts receivable (+¥4.9B) and inventories (+¥2.0B). Accounts payable increased by ¥2.3B and partially supported working capital. However, while long-term borrowings decreased by ¥1.1B, short-term borrowings remained at ¥8.0B, indicating that the financing structure is becoming increasingly short term. Given that Operating Income was negative, the Company’s cash-generation capacity during the period appears to have been pressured by the increase in working capital.

Earnings Quality

While Operating Income was a loss of ¥0.1B, non-operating expenses amounted to ¥0.2B, primarily consisting of ¥0.1B in interest expense, expanding the Ordinary Loss to ¥0.2B. Extraordinary losses consisted of ¥0.1B in losses on the sale and disposal of fixed assets, which further reduced final earnings as a temporary factor. Non-operating income was small at ¥0.1B, and the Company does not have a structure in which non-core income offsets its operating loss. In addition, accounts receivable and inventories increased at rates substantially exceeding revenue growth, indicating an expansion in accruals whereby funds remain tied up on the asset side ahead of accounting profit recognition. This suggests that actual cash-generation capacity may be weaker than indicated by reported earnings.

Earnings Forecast and Guidance

The full-year Company forecasts (Revenue: ¥53.6B, Operating Income: ¥2.6B, Ordinary Income: ¥2.3B) remain unchanged, with neither the earnings forecast nor the dividend forecast revised. The Q3 cumulative revenue progress rate was approximately 70.8%, below the standard progress rate of 75%. Operating Income, Ordinary Income, and Net Income were all negative on a Q3 cumulative basis, meaning that a substantial increase in earnings in Q4 will be required to achieve the full-year forecasts.

Shareholder Returns

The dividend for Q2 was ¥0 per share, and the full-year dividend forecast also remains at ¥0, continuing the no-dividend policy. In addition to Net Income being negative, the Company’s inability to cover interest expense through Operating Income is consistent with a capital allocation policy that prioritizes the retention of funds internally. The Payout Ratio is not applicable because no dividend is being paid.

Risk Factors

1. Structural deterioration in profitability: The gross profit margin of 63.9% (down 3.0pt year on year) and SG&A expense ratio of 64.0% (up 1.7pt year on year) deteriorated simultaneously, resulting in an Operating Income margin of -0.2%. If increases in costs such as food materials, labor, and rent cannot be absorbed through higher prices or customer traffic, this structure may persist.

2. Expansion of working capital and liquidity: Accounts receivable increased +187.9% year on year and inventories increased +35.7%, both substantially exceeding the revenue growth rate of +2.1%, while cash and deposits decreased by -50.4%. If inventory valuation losses or delays in collection occur, they could place additional pressure on gross profit and liquidity.

3. Short-term financing structure: Interest-bearing debt is becoming increasingly short term, centered on ¥8.0B in short-term borrowings. If the situation in which Operating Income cannot cover interest expense continues, the Company’s financing conditions, including refinancing terms, may be affected.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (retail)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin are substantially below the industry median, placing its profitability toward the lower end of the industry.

Growth and Capital Efficiency

The Company’s revenue growth rate is also slightly below the industry median, indicating a relatively moderate pace of revenue growth within the industry.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The fact that Operating Income turned negative despite higher revenue, due to the simultaneous deterioration in the gross profit margin and SG&A expense ratio, is noteworthy as a change in the cost structure. Achieving the full-year forecast presupposes a substantial improvement in profitability in Q4.

2. Accounts receivable and inventories increased at rates substantially exceeding revenue growth, while cash and deposits halved. The impact of increased working capital on funding liquidity will require continued monitoring.

3. The continuation of the no-dividend policy is consistent with a capital allocation policy that prioritizes the preservation of funds during a loss-making period.

Theoretical Share Price (Reference Value)

Sensitivity: ¥100–¥106 at a ±1% change in the cost of equity, and ¥103–¥104 at a ±0.1 change in ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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