| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥104302.7B | ¥119727.6B | -12.9% |
| Operating Income / Operating Profit | ¥4229.9B | ¥4209.9B | +0.5% |
| Ordinary Income | ¥3774.1B | ¥3745.9B | +0.8% |
| Net Income / Net Profit | ¥1193.5B | ¥1095.6B | +8.9% |
| ROE | 3.3% | 2.6% | - |
For the fiscal year ended February 2026, Revenue/Net Sales were ¥10兆4,303B (YoY ▲1兆5,425B ▲12.9%), Operating Income was ¥4,230B (YoY +20B +0.5%), Ordinary Income was ¥3,774B (YoY +28B +0.8%), and Net Income attributable to owners of the parent was ¥2,928B (YoY +1,196B +69.2%). Revenue declined by double digits, but operating performance was broadly defended, and final profit ended with a large increase. The revenue decline was mainly attributable to deconsolidation of York HD and Seven Bank contributing ▲8,133B, and core businesses performed steadily in substance. Operating margin remained at 4.1%, similar to the prior year, while net margin improved significantly to 2.8%. The main driver of the final profit increase was special gains of ¥1,429B (gain on sale of fixed assets ¥946B, gain from changes in interests in businesses ¥269B, etc.) and the reversal of the prior year’s large special losses (¥2,209B). One-off items accounted for approximately 48% of net income. Growth at the ordinary income level was limited, but Operating Cash Flow (OCF) was ¥6,667B, maintaining cash-generation capacity at 2.3x net income, and Free Cash Flow (FCF) was ¥1,894B, sufficient for dividend payments. Share buybacks of ¥6,000B reduced cash and deposits by ▲68%, and net assets contracted to ¥3,648.2B, but financial soundness remains solid. Results exceeded full-year plan at 110.4% for revenue, 104.4% for operating income, and 108.4% for net income.
Revenue: Operating revenue ¥10兆4,303B (▲12.9%). The main drivers of the revenue decline are explainable by deconsolidation of York HD ▲7,426B and Seven Bank ▲642B, totaling ▲8,068B. On a like-for-like basis the decline was ▲7,357B, but domestic CVS recorded a slight increase of +1.1%, and overseas CVS was ▲6.7% though excluding store closures the like-for-like contribution was +42 million USD. Same-store sales: domestic CVS +1.2% for the year, accelerating to +2.0% in 4Q; overseas CVS was ▲0.4% for the year but reversed to +1.4% in 4Q, indicating a trough. Gross margin was 15.3% (prior year 15.5%), down ▲0.2ppt reflecting product mix shifts and price competition pressure.
Profitability: Operating Income ¥4,230B (+0.5%) reflected near offsetting segment movements: domestic CVS ▲110B, overseas CVS +59B, superstore +70B, financial ▲110B. Operating margin was 4.1%, similar to prior year, and SG&A ratio was 26.0% (SG&A ¥2,707.0B), broadly flat. Post-operating improvements were interest expense down ▲110B (from 408B → 298B) and special gains +285B (from 1,157B → 1,429B), resulting in Ordinary Income +28B and Net Income attributable to owners of the parent +1,196B. Effective tax rate 0.67 is standard. Decomposing net income increase: operating income +20B, non-operating income/expense improvement +8B, special items improvement +1,315B (special gains +272B, special losses ▲1,352B), with special items the main contributor. Gain on sale of fixed assets ¥946B and SST business equity change gain ¥269B are non-recurring and limited in sustainability. Impairment losses decreased sharply from ¥1,440B to ¥328B year-over-year, reflecting progress in structural reforms.
Conclusion: The results are a revenue-decline / profit-increase pattern: operating stage defended at roughly flat, while one-off items drove substantial final profit growth. Improvement in recurring profitability was limited; sustainable growth beyond FY2026 requires domestic CVS same-store recovery and margin expansion in overseas CVS.
The core business is the Domestic Convenience Store business, with Operating Income of ¥2,225B, the largest in the group.
Domestic Convenience Store Business: Revenue ¥9,122B (+1.1%), Operating Income ¥2,225B (▲4.7%), Operating Margin 24.4%. Same-store sales +1.2% for the year, accelerating to +2.0% in 4Q; average daily sales of freshly prepared products +8.3% and strong. Franchisee monthly profits recovered to 99.3% YoY in the second half. Profit decline driven by higher SG&A and franchisee support costs; operating margin decreased ▲1.4ppt from prior year 25.8%.
Overseas Convenience Store Business: Revenue ¥8兆5,562B (▲6.7%), Operating Income ¥2,222B (+2.8%), Operating Margin 2.6%. Revenue decline driven by store closures and lower gasoline prices, but excluding closures like-for-like operating income increased by USD 42 million YoY. Same-store sales ▲0.4% for the year but reversed to +1.4% in 4Q, and product gross profit amount remained firm. The 2.6% margin is far lower than domestic CVS 24.4% and structural improvement is a medium-term challenge.
Superstore Business: Revenue ¥6,876B (▲51.9%), Operating Income ¥175B (+68.2%), Operating Margin 2.5%. Revenue decline due to York HD deconsolidation impact; remaining business performed steadily with margin improvement.
Financial-Related Business: Revenue ¥1,218B (▲34.4%), Operating Income ¥210B (▲34.5%), Operating Margin 17.2%. Large revenue and profit declines due to Seven Bank deconsolidation, although margin remains high.
Profit margin dispersion across segments is notable: domestic CVS 24.4% (outstanding), financial 17.2%, overseas CVS 2.6%, superstore 2.5%. Consolidated Operating Income is roughly balanced between domestic CVS and overseas CVS at about ¥2,200B each, with high-margin domestic CVS underpinning earnings quality. Overseas CVS is the largest by sales composition (83.2%) but low-margin and volume-dependent. Segment profit changes: domestic CVS slight decline from store/product strategies, overseas CVS improved by closure mitigation and product gross profit improvements, superstore saw large increase from business reorganization gains, financial was down due to deconsolidation.
Profitability: ROE 8.0% (prior year 4.5%, 3-year average 6.1%) significantly improved, mainly due to one-off contributions to net margin. Operating margin 4.1% (prior year 4.0%) essentially flat; net margin 2.8% (prior year 0.9%) improved due to sale gains, etc. Revenue-to-Ordinary-Income ratio 3.6% (prior year 3.1%) slightly up. DuPont decomposition: ROE 8.0% = Net Margin 2.8% × Asset Turnover 1.14 × Financial Leverage 2.51x; year-over-year improvement driven mainly by net margin. ROIC 8.0% (prior year 5.4%) also rose but includes one-off contributions.
Cash quality: OCF/Net Income 2.28x, well above 1.0x, indicating strong cash backing of profits. FCF ¥1,894B covers dividends ¥1,136B by 1.67x. FCF/CapEx 0.57x (<1.0x) indicating a continued investment phase. OCF/EBITDA 0.83x is somewhat weak, suggesting room to further cash-convert working capital.
Investment efficiency: CapEx/Depreciation 0.87x (<1.0x), indicating maintenance-level investment. CapEx ¥3,336B, down ▲22.6% from prior year ¥4,309B, indicating restrained investment. Inventory turnover days 77.9 days (prior year 95.4 days) improved, inventory efficiency improved. Receivables turnover days 104.5 days (prior year 134.6 days) shortened, working capital efficiency improving.
Financial soundness: Equity Ratio 39.9% (prior year 37.1%), Current Ratio 78.5% (prior year 85.1%) low and in a caution zone but offset by retail characteristics and OCF generation. Debt/Equity 61.1% (prior year 63.8%) slightly down, Net Debt/EBITDA 0.39x near net-debt-free and top-tier. Interest coverage 14.2x (EBITDA/interest paid 27.0x) strong, resilient to rate rises. Cash and deposits ¥4,386B decreased ▲68% YoY, but OCF generation can cover needs.
Operating Cash Flow: ¥6,667B (down ▲23.9% from prior year ¥8,765B), 2.28x net income, indicating good cash backing of profits. Decline mainly due to business scale reduction from deconsolidation and higher corporate tax payments ¥886B (prior ¥516B). Subtotal (before working capital changes) ¥7,884B, and working capital changes were a source of +¥226B, with inventory reduction +¥120B and accounts payable increase +¥60B contributing. OCF/EBITDA 0.83x is somewhat weak; non-cash charges (depreciation ¥3,820B, goodwill amortization ¥1,379B) mean limited cash conversion.
Investing Cash Flow: ▲¥4,773B, with CapEx ▲¥3,336B, intangible asset investment ▲¥707B, proceeds from sale of subsidiaries +¥5,384B, M&A outflows ▲¥1,667B, and proceeds from sale of fixed assets +¥1,436B as major items. Proceeds from sale of subsidiaries were one-time related to York HD and Seven Bank. CapEx/Depreciation 0.87x at a maintenance level; growth investment subdued.
Financing Cash Flow: ▲¥11,099B, driven by share buybacks ▲¥6,000B, bond redemptions ▲¥2,100B, long-term borrowings repayment ▲¥2,717B, and dividend payments ▲¥1,136B. Share buybacks are one-off and expected to normalize post-FY2026.
FCF: ¥1,894B, dividend coverage 1.67x, ample. FCF/CapEx 0.57x (<1.0x) indicates limited investment capacity; excluding one-time asset sale proceeds, real FCF is even lower.
Cash generation assessment: Standard. OCF generation is strong but the underlying substance excluding deconsolidation and one-off items requires monitoring. Working capital efficiency trend is improving, offering room to enhance cash conversion.
Against Ordinary Income ¥3,774B, Net Income ¥2,928B shows a gap of ▲22.4%, mainly due to corporate taxes ¥1,355B and net special items ¥572B. Special gains ¥1,429B (gain on sale of fixed assets ¥946B, gain from changes in interests ¥269B, gain on sale of investment securities ¥55B, etc.) are clearly one-off and represent about 48.8% of net income. Special losses ¥858B (impairment losses ¥328B, store closure losses ¥225B, etc.) decreased sharply from ¥2,209B, reflecting progress in structural reforms. The divergence between Ordinary Income and Net Income is mainly due to one-off items and sustainability is limited.
Non-operating items: non-operating income ¥188B (interest income ¥111B, etc.) and non-operating expenses ¥644B (interest expense ¥298B, etc.), net ▲¥456B. A slight improvement of +¥8B from prior year net ▲¥464B, still minor relative to sales at 0.4%. Interest income ¥111B rose slightly from ¥104B, while interest expense ¥298B declined ▲¥110B from ¥408B, which is positively qualitative for interest burden.
OCF ¥6,667B vs Net Income ¥2,928B gives OCF/Net Income 2.28x, well above 1.0x. Accrual ratio (Net Income – OCF)/Sales is ▲4.1% low, indicating solid cash backing of accounting profit. However, OCF/EBITDA 0.83x is somewhat weak and non-cash charges (depreciation, goodwill amortization) are substantial relative to cash conversion, so further improvement in inventory/receivables/payables cycles is possible.
Operating Income ¥4,230B with non-operating income as 1.8% of sales is minor, indicating low dependence on non-core income. Conversely, special gains ¥1,429B are 13.7% of sales and dependence on one-off items is high. For sustainable earnings assessment, view results on an ordinary (recurring) basis, with Ordinary Income ¥3,774B representing core earning power. The FY2026 plan for Net Income attributable to owners of the parent ¥2,700B (▲228B) is interpreted as a normalized level excluding prior-year one-off gains.
FY2025 full-year results beat plan. Revenue ¥10兆4,303B exceeded plan ¥9兆4,480B by +¥9,823B (+10.4%); Operating Income ¥4,230B exceeded plan ¥4,050B by +¥180B (+4.4%); Net Income attributable to owners of the parent ¥2,928B exceeded plan ¥2,700B by +¥228B (+8.4%). Upside drivers included one-off gains such as gain on sale of fixed assets, accelerated same-store recovery in domestic CVS, and interest burden falling more than assumed.
FY2026 plan: Revenue ¥9兆4,480B (YoY ▲9.4%), Operating Income ¥4,050B (▲4.3%), Net Income attributable to owners of the parent ¥2,700B (▲7.8%) — a revenue and profit decline plan. However, excluding prior-year deconsolidation impact ▲¥8,068B and the one-off gain ¥1,429B, on a like-for-like basis revenue is near flat and operating income shows a +5.3% growth trend. Although standard progress rates (sales 50%, operating income 50%, net income 50%) were not disclosed, PDF materials plan Group CVS product sales ¥10.03兆 (+2.7%), domestic CVS same-store +2.5%, overseas CVS same-store +2.0%, anticipating real recovery.
Dividend plan: ¥60/share for FY2026 (vs ¥50/share in FY2025 +¥10), continuing the progressive dividend policy. Payout ratio planned 51.1% vs forecast EPS ¥117.42, a reasonable level, with FCF coverage ample.
Medium-term plan (to FY2030) targets consolidated EBITDA CAGR ~7.0%, SEJ product daily sales CAGR 2.5–3.0%, SEI product daily sales CAGR 3.0–5.0%. SEI (7‑Eleven, Inc.) IPO was initially targeted as early as FY2026 but postponed to FY2027 due to uncertain market conditions; the policy to repurchase shares totaling ¥2.0兆 remains unchanged, and shareholder return policy unchanged.
Dividends for FY2025 were ¥50/share (interim ¥25, year-end ¥25), payout ratio 60.0% (based on basic EPS ¥118.81). Dividend per share increased ¥30 YoY but FY2025 Net Income was inflated by special gains ¥1,429B; even with payout ratio 60% total dividends ¥1,136B are covered by FCF ¥1,894B (≈60%), a comfortable level. FY2026 dividend plan ¥60/share implies payout ratio 51.1% against forecast EPS ¥117.42, a sustainable level. Progressive dividend policy continues, aiming for stable dividends.
Share buybacks: ¥6,000B executed in FY2025, increasing treasury stock outflow by ▲¥6,155B. Combined with dividends ¥1,136B total return amounted to ¥7,136B, and total return ratio was 243.8% of Net Income ¥2,928B, very high. Share buybacks are one-off and part of the cumulative ¥2.0兆 repurchase policy through FY2030 (¥6,000B already executed, remaining ¥1.4兆). Returns exceeding FCF were funded by asset sale proceeds (sale of subsidiaries +¥5,384B, etc.) and drawdown of cash on hand.
Total return ratio 243.8% is clearly one-off; from FY2026 onwards returns are expected to normalize centered on dividends. Dividend total/FCF ratio 1.67x is sustainable and dividend burden relative to OCF ¥6,667B is light at 17%. Excluding buybacks, dividend-only payout at 60% is sustainable on cash flow grounds.
Shareholder-return policy through FY2030 is continued combination of cumulative ¥2.0兆 share repurchases (¥6,000B executed in FY2025, remaining ¥1.4兆) and progressive dividends. Capital efficiency rose to ROE 8.0% after buybacks, though part of the uplift is leverage from reduced equity; core earning improvements are limited.
Short-term (FY2026)
Long-term (FY2027 and beyond)
Industry Position (reference — company estimate)
Profitability: ROE 8.0% (industry median 5.9%, IQR 2.6–12.0%) above industry median, although one-off contributions inflate the figure and normalized ROE is estimated at industry median. Operating margin 4.1% (industry median 4.6%, IQR 1.7–8.2%) near industry median, in line with retail average. Net margin 2.8% (industry median 3.3%, IQR 0.9–5.8%) around industry median but boosted by one-off gains; underlying position is at the lower bound of industry median.
Efficiency: Asset turnover 1.14 (industry median 1.17, IQR 0.85–1.55) is around industry median. Inventory turnover days 77.9 days (industry median 65.7 days, IQR 17.4–111.4 days) is median; for CVS format inventory efficiency is good but the remaining superstore business pushes the average up. Receivables turnover days 104.5 days (industry median 21.1 days, IQR 13.9–37.4 days) is much longer than industry median due to financial business and franchisee settlement site characteristics.
Solvency: Equity Ratio 39.9% (industry median 50.2%, IQR 40.1–63.6%) at the lower bound of industry median and improvement room exists. Current Ratio 78.5% (industry median 184%, IQR 126–254%) is low and a clear cautionary point, but retail characteristics and OCF generation provide offset. Net Debt/EBITDA 0.39x (industry median ▲0.59x, IQR ▲2.61–1.32x) is near net-debt-free and top-tier, indicating strong financial capacity.
Cash generation: Cash conversion rate (OCF/Sales) 6.4% is an outlier vs industry median 157% and not comparable. CapEx/Depreciation 0.87x (industry median 1.16, IQR 0.75–1.92) is below industry median, indicating maintenance-level investment. FCF yield 2.0% (industry median 2.0%, IQR ▲4.0–6.0%) is median.
Growth: Revenue growth ▲12.9% (industry median +4.3%, IQR +2.2–+13.0%) is below industry, but excluding deconsolidation effects like-for-like is flat to slightly down, placing it from industry lower to median. EPS growth +78.3% (industry median +6.0%, IQR ▲27.0–+46.0%) is top-tier but driven by one-off gains and sustainability is limited.
Summary: The company occupies a median position within the industry for profitability and soundness. Low current ratio is a caution, but strong CVS OCF generation and near net-debt-free balance sheet mitigate concerns. Recurring earnings excluding one-off items are at the lower bound of industry median, and margin improvement in overseas CVS is essential for sustainable growth.
Industry: Retail (47 companies), comparison base: FY2025 results, source: company aggregation of public financial statements
High dependence on overseas CVS (sales composition 83.2%): Concentrated geographic, FX, and regulatory risks; exposure high to US economic slowdown or exchange-rate moves. Overseas CVS operating margin 2.6% is far below domestic CVS 24.4%; failure to improve will depress consolidated profitability. Assumed FX rate 150 JPY/USD; 1 JPY appreciation would reduce operating income by approximately ¥3.2B (sensitivity to be confirmed).
Goodwill risk (goodwill balance ¥2.11兆, 57.8% of equity): Limited impairment tolerance; deterioration in overseas CVS profitability or failure to meet M&A assumptions could trigger impairments. Prior year impairment loss ¥1,440B was recorded; recurrence would directly erode equity and shareholder value. Under JGAAP, annual goodwill amortization ¥1,379B continues to compress profits, and the burden equal to 17.1% of EBITDA is a structural issue.
Liquidity risk (Current Ratio 78.5%): Current liabilities ¥1.90兆 vs current assets ¥1.49兆 leaving a ¥408.1B gap. OCF generation ¥6,667B can cover this, but rapid economic downturn or tightening credit conditions could strain short-term funding. Lease liabilities ¥1.56兆 functionally similar to interest-bearing debt and warrant attention to cash-flow flexibility when rents/interest reset. Cash and deposits ¥4,386B decreased ▲68% YoY, limiting emergency buffer.
Separate recurring earnings power and one-off items: Approximately 48.8% of Net Income ¥2,928B is special gains—recurring earning power should be assessed at Ordinary Income ¥3,774B. The FY2026 plan Net Income ¥2,700B is a normalized level post one-off gains and future sustainable growth depends on same-store recovery and margin improvement.
Maintaining high margin in domestic CVS and expanding margins in overseas CVS are critical: Domestic CVS operating margin 24.4% is exceptionally high; acceleration to same-store sales +2.0% suggests qualitative improvement in earnings. Overseas CVS at 2.6% margin is low; improvements via store refurbishments, private brand expansion, and value-chain redesign to reach the 3% range are key for medium-term growth. A 1ppt improvement in domestic CVS margin equals roughly ¥9.0B, while a 0.4ppt improvement in overseas CVS equals about ¥34.0B, so the latter contributes more materially.
Turning point in capital policy: Share buybacks ¥6,000B reduced Equity Ratio to 39.9% while ROE improved to 8.0%—part of the improvement is temporary. Post-SEI IPO, parent-subsidiary listing may increase capital policy flexibility and further capital-efficiency opportunities are expected. Continued progressive dividend policy indicates stable shareholder returns, with sustainability at a 51–60% payout range underpinned by OCF generation.
This report was automatically generated by AI integrating XBRL financial statement data and PDF earnings presentation materials to produce an earnings analysis document. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor if necessary.