Quick View
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥220.6B | ¥214.4B | +2.9% |
| Operating Income | ¥5.9B | ¥10.2B | −42.2% |
| Ordinary Income | ¥5.6B | ¥9.7B | −41.8% |
| Net Income | ¥2.3B | ¥4.2B | −45.6% |
| ROE | 0.7% | 1.3% | - |
Executive Summary
Although the Company secured revenue growth, earnings declined sharply due to an increase in the SG&A ratio and a steep rise in the effective tax rate. Revenue was ¥220.6B (+2.9% year on year), maintaining a growth trend for the third consecutive period, while Operating Income was ¥5.9B (-42.2%), Ordinary Income was ¥5.6B (-41.8%), and Net Income attributable to owners of the parent was ¥2.3B (-45.6%), all representing substantial declines. As the gross profit margin edged down to 72.7% (73.2% in the previous year), the SG&A ratio rose to 70.0% (68.5% in the previous year), causing the operating margin to deteriorate to 2.7% (4.8% in the previous year). In addition, the effective tax rate rose to 64.5% (52.6% in the previous year), further weighing on net income.
Factors Affecting Earnings
【Revenue】Revenue of ¥220.6B represented a year-on-year increase of +2.9%. By segment, Restaurant generated ¥147.2B (+1.5% year on year, 66.7% of total revenue), while Cafe generated ¥72.4B (+4.3% year on year, 32.8% of total revenue). Cafe, which posted the higher growth rate, drove the Company-wide increase.
【Profit and Loss】Operating Income was ¥5.9B (-42.2% year on year), primarily because the SG&A ratio rose to 70.0% (68.5% in the previous year, +1.5pt) while the gross profit margin edged down to 72.7% (73.2% in the previous year, -0.5pt). As a result, the operating margin declined by -2.1pt to 2.7% (4.8% in the previous year). Ordinary Income was ¥5.6B (-41.8% year on year), with the impact of non-operating income and expenses limited. Gain on the sale of property, plant and equipment of ¥1.5B (a temporary factor) exceeded extraordinary losses of ¥0.7B, increasing pretax income by +¥0.8B on a net basis. However, as the effective tax rate rose to 64.5% (52.6% in the previous year), Net Income was limited to ¥2.3B (-45.6% year on year), substantially below pretax income of ¥6.4B (-27.5% year on year). Revenue increased, but earnings declined.
Segment Analysis
Restaurant posted revenue of ¥147.2B (+1.5% year on year) and segment profit of ¥7.8B (-14.6% year on year), with a 5.3% margin, indicating that profitability declined despite higher revenue. Cafe recorded revenue of ¥72.4B (+4.3% year on year), the highest growth among the two segments, but segment profit declined by -27.5% year on year to ¥5.1B, with a margin of 7.1%; the decline in profit was greater than that of Restaurant. Both segments experienced revenue growth but profit declines, suggesting that rising store operating costs are exerting pressure on profitability. Against combined segment profit of ¥12.9B, Operating Income was ¥5.9B after deducting Company-wide expenses not allocated to the reportable segments (approximately ¥6.1B). The increase in Company-wide expenses was also a factor contributing to the decline in the operating margin.
Key Financial Indicators
【Profitability】Both the operating margin, at 2.7% (4.8% in the previous year), and the net profit margin, at 1.0% (1.9% in the previous year), declined. EPS was ¥10.60 (¥19.09 in the previous year, -44.5%). 【Cash Flow Quality】Trade receivables were ¥55.0B, down -14.7% from ¥64.5B in the previous year, indicating reduced collection-related pressure. However, cash and deposits were ¥126.2B, down -15.1% from ¥148.7B in the previous year; the movement in funds is discussed further in the following Cash Flow section. 【Investment Efficiency】ROE was 0.7% (on a quarterly basis), based on a DuPont decomposition of a 1.0% net profit margin × 0.329x total asset turnover × 2.15x financial leverage. As there were no significant changes in turnover or leverage, the decline in profitability was the primary cause of the deterioration in ROE. 【Financial Soundness】The equity ratio improved by +1.8pt to 46.5% from 44.7% in the previous year, while the current ratio remained at a sound level of 163.8% (current assets of ¥190.5B/current liabilities of ¥116.3B). Total assets were ¥670.9B (¥704.5B in the previous year, -4.8%), and net assets were ¥311.7B (¥314.9B in the previous year, -1.0%). Both contracted, but the equity ratio improved.
Cash Flow Analysis
As the Company does not disclose a cash flow statement, cash movements are analyzed based on changes in the balance sheet. Cash and deposits were ¥126.2B, down -15.1% (-¥22.5B) from ¥148.7B in the same period of the previous year. Long-term borrowings were ¥164.3B, down -5.9% from ¥174.5B in the previous year, suggesting that repayment of borrowings during the period was one factor behind the cash outflow. Income taxes payable were ¥4.1B, a substantial decline of -64.0% from ¥11.4B in the previous year, suggesting that payment of corporate income taxes for the previous fiscal period had placed pressure on cash. While total current assets contracted by -14.5% to ¥190.5B from ¥222.8B in the previous year, accounts payable declined by -11.0% to ¥31.2B from ¥35.1B, indicating that the reduction in trade payables also contributed to the cash outflow. Property, plant and equipment related to capital expenditures increased by +2.7% to ¥183.8B from ¥179.1B in the previous year, suggesting that store-related investment continues. Overall, cash on hand declined as repayment of borrowings, tax payments, and the reduction of trade payables coincided, while the equity ratio improved and the financial foundation remained stable.
Quality of Earnings
After adding gain on the sale of property, plant and equipment of ¥1.5B (extraordinary income) and deducting loss on disposal of property, plant and equipment and other items of ¥0.7B (extraordinary loss) from Ordinary Income of ¥5.6B, pretax income amounted to ¥6.4B. The gain on the sale of property, plant and equipment was a temporary factor, and Ordinary Income (¥5.6B, -41.8% year on year), which more closely reflects recurring earning power, better represents the underlying strength of the business. The largest qualitative concern is the effective tax rate, which rose by +11.9pt to 64.5% from 52.6% in the previous year, causing the decline in Net Income of -45.6% to substantially exceed the -27.5% decline in pretax income. Non-operating income was ¥0.8B, equivalent to only 0.4% of revenue, indicating a low degree of dependence on non-operating income for Ordinary Income. Comprehensive income was ¥2.4B, the same amount attributable to owners of the parent. The small difference from Net Income of ¥2.3B indicates that the impact of other comprehensive income items, such as valuation differences on available-for-sale securities and adjustments related to retirement benefits, was limited.
Earnings Forecast and Guidance
Progress against the full-year forecast was 23.7% for revenue (¥220.6B/¥930.0B), 11.1% for Operating Income (¥5.9B/¥53.0B), 11.0% for Ordinary Income (¥5.6B/¥51.0B), and 7.8% for Net Income (¥2.3B/¥29.0B), all remaining below the simple 25% progress benchmark. In particular, progress on profit-related indicators was substantially below revenue progress. If the increase in the SG&A ratio and deterioration in the effective tax rate observed in Q1 are not resolved, achieving the full-year plan will require cost controls and profitability improvements in the second half. No revisions were made to the earnings forecast or dividend forecast during the quarter.
Shareholder Returns
The full-year dividend forecast is ¥54.00, implying a payout ratio of approximately 39.9% based on the full-year EPS forecast of ¥135.28. Compared with the previous fiscal year’s annual dividend of ¥26.00, the plan would represent a substantial dividend increase if the forecast is achieved. No disclosure regarding share buybacks has been made, and shareholder returns can therefore only be evaluated on a payout-ratio basis. With quarterly Net Income progress at a low 7.8%, the effective payout ratio could rise if the full-year plan is not achieved, making it important to monitor earnings trends.
Risk Factors
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Operating leverage reversal: The SG&A ratio rose to 70.0% (68.5% in the previous year, +1.5pt), with fixed and semi-fixed costs increasing at a pace exceeding the +2.9% revenue growth rate. If this condition continues, revenue growth will be less likely to translate into earnings growth.
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Increase in the effective tax rate: The effective tax rate for the period was 64.5%, up +11.9pt from 52.6% in the previous year. This caused the decline in Net Income to widen to -45.6%, compared with a -27.5% decline in pretax income. The degree to which the tax burden normalizes will be key to the recovery of net income going forward.
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Sensitivity to impairment of goodwill and intangible assets: The Company carries goodwill of ¥147.2B (47.2% of net assets) and total intangible assets of ¥187.6B (28.0% of total assets). In the previous fiscal period, the Company also recorded impairment of property, plant and equipment of ¥0.7B in the Restaurant segment. If store profitability deteriorates, additional impairment charges may be recognized.
Industry Benchmark (For Reference; Compiled by the Company)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.7% | 3.3% (0.9%–7.7%) | −0.7pt |
| Net Profit Margin | 1.0% | 2.2% (0.3%–6.1%) | −1.2pt |
Both profitability indicators are below the industry median, and neither the operating margin nor the net profit margin reaches the average level for the retail industry.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (Year on Year) | 2.9% | 7.5% (0.4%–14.5%) | −4.6pt |
The revenue growth rate is below the industry median of 7.5% and is positioned near the lower end of the IQR.
※Source: Compiled by the Company
Key Takeaways from the Earnings Results
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Although the revenue growth trend continues, the operating margin declined to 2.7% (4.8% in the previous year) due to the increase in the SG&A ratio (+1.5pt), indicating a continuing deterioration in profitability.
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The rise in the effective tax rate to 64.5% (52.6% in the previous year) resulted in Net Income impairment of -45.6%, exceeding the decline in pretax income. The trend in the tax burden will therefore be a key focus in interpreting future earnings results.
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Progress toward the full-year plan was 23.7% for revenue, while profit-related indicators remained in the 7–11% range. The success or failure of cost controls in the second half will determine whether the full-year plan is achieved.
Theoretical Stock Price (Reference Value)
This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market stock price or a recommendation of any specific investment action.
| Scenario | Theoretical Stock Price |
|---|---|
| bear | ¥1,385 |
| base | ¥1,445 |
| bull | ¥1,477 |
| Calculation Assumption | Value |
|---|---|
| Book Value per Share (BPS) | ¥1,454 |
| Adjusted Forecast EPS | ¥139.0 |
| Cost of Equity r | 9.77% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 1.00%) |
| Residual Income Persistence Coefficient ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 39.9% |
| Forecast EPS Confidence Adjustment | ×1.028 (based on the industry’s historical guidance achievement rate) |
| Implied PBR / PER | 0.99x / 10.4x |
Sensitivity: ¥1,406–¥1,487 at ±1% for the cost of equity, and ¥1,445–¥1,445 at ±0.1 for ω.
Notes:
- Net Income is substantially compressed relative to Operating Income due to the tax burden, acquisition-related expenses, and non-controlling interests (Net Income ÷ Operating Income 55%). This value reflects that compression at face value; if the factors are temporary, the underlying earning power may be higher.
- As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
- Goodwill represents a high proportion of net assets, and the assumptions would change significantly if impairment were recognized.
- Net assets at the end of the quarter are used; there is a timing difference between these and the full-year forecast.
- As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.
(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This value is not a forecast or guarantee of the future stock price)
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 discretion and responsibility, after consulting a professional adviser as necessary.
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AI Financial Analysis
Executive Summary
FY2027 Q1 was a weak earnings start despite modest top-line growth, as cost inflation and higher fixed operating costs sharply compressed profitability. Revenue increased 2.9% YoY to ¥22.06bn. Operating income fell 42.2% YoY to ¥0.59bn, reducing the operating margin to 2.7% from 4.8% in the prior-year quarter, a 209bp contraction. Net income declined 45.6% YoY to ¥0.23bn, and EPS was ¥10.60. Gross profit rose 2.1% to ¥16.04bn, but the gross margin declined 54bp to 72.7%. SG&A expenses increased 5.2% to ¥15.45bn, materially outpacing revenue growth. Consequently, the SG&A-to-sales ratio increased by 151bp to 70.0%, which was the principal driver of the operating-margin decline. The restaurant segment remained the core business by segment profit, but its profit fell 14.6% YoY despite revenue growth. The café segment delivered the stronger revenue growth rate, but its segment profit fell 27.5% YoY, indicating that cost pressures were particularly acute. Unallocated corporate costs and food-material external-sales costs increased the reconciliation loss by ¥0.10bn YoY to ¥0.70bn, further reducing consolidated operating income. Ordinary income of ¥0.56bn was broadly aligned with operating income, as net non-operating expenses were limited. Profit before tax of ¥0.64bn benefited from a ¥0.15bn gain on asset sales, partly offset by ¥0.07bn of extraordinary losses. The 64.5% effective tax rate was unusually high and reduced the tax burden factor to 0.355, materially suppressing net-profit conversion. The company generated an annualized ROE of 2.9% and reported ROIC of 3.3%, both indicating insufficient returns on the current capital base. The full-year sales forecast implies a broadly normal Q1 revenue progress rate, but the operating-income progress rate of 11.1% is well below the 25% seasonal reference point. Delivering the full-year operating-income target will therefore require a substantial margin recovery through the remaining quarters.
Profitability Analysis
The annualized DuPont ROE of 2.9% is decomposed into a 1.0% net profit margin, 1.315x asset turnover, and 2.15x financial leverage. The weakest component is profitability rather than asset utilization: the 1.0% net margin is below the 2.7% EBIT margin because of interest costs and an elevated tax charge. EBIT margin declined to 2.7% from 4.8% a year earlier, while gross margin declined to 72.7% from 73.2%. Operating deleverage was pronounced because SG&A rose 5.2%, faster than the 2.9% increase in revenue. Restaurant segment revenue rose 1.5% YoY to ¥14.72bn, while segment profit declined 14.6% to ¥0.78bn; its segment margin declined to 5.3% from 6.3%. Café segment revenue increased 4.3% to ¥7.24bn, while segment profit declined 27.5% to ¥0.51bn; its segment margin declined to 7.1% from 10.2%. Although café retained a higher segment margin than restaurant, its margin contraction was greater. Consolidated profitability was further diluted by the ¥0.70bn reconciliation loss, versus ¥0.60bn in the prior-year quarter, reflecting ¥0.61bn of unallocated corporate costs and ¥0.09bn of food-material external-sales cost. The reported ROIC of 3.3% is below 5%, indicating that returns remain below a satisfactory level for the capital employed. As a JGAAP reporter, the company amortizes goodwill, which structurally depresses operating profit relative with IFRS peers; however, the scale of goodwill amortization is not separately quantified here. The key sustainability issue is whether higher labor, occupancy, procurement, and corporate cost levels can be absorbed through sales productivity and pricing rather than relying on revenue growth alone.
Growth Assessment
Q1 revenue growth of 2.9% was supported by both operating segments, with café growing faster than restaurant. Directly operated store sales increased to ¥21.48bn from ¥20.98bn, while royalty income rose to ¥0.73bn from ¥0.55bn. Restaurant revenue remains the principal earnings base, accounting for 67.0% of reported-segment revenue and 60.2% of reported-segment profit. Café represented 33.0% of reported-segment revenue and 39.8% of reported-segment profit, providing a meaningful second earnings pillar. The external sale of food materials added ¥0.10bn of revenue through the reconciliation item, but the associated cost of sales reduced its incremental profit contribution. The full-year forecast calls for revenue of ¥93.0bn, up 5.2% YoY, with Q1 progress of 23.7%, close to the standard 25% reference level. The operating-income forecast of ¥5.3bn implies Q1 progress of only 11.1%, 13.9 percentage points below the standard reference level. Ordinary-income progress is similarly low at 11.0% versus the ¥5.1bn full-year forecast. This profile places the earnings outlook principally on a second-half improvement in store-level profitability, cost discipline, and corporate-cost absorption. Asset-sale gains supported pre-tax income in Q1 but do not improve underlying operating momentum.
Financial Health
Liquidity is sound, with a current ratio and quick ratio of 163.8% and working capital of ¥7.42bn. Cash and deposits of ¥12.62bn exceed short-term loans of ¥1.00bn by 12.62x. Current assets of ¥19.05bn also exceed current liabilities of ¥11.63bn, limiting near-term refinancing pressure. Interest-bearing debt totals ¥17.43bn, consisting primarily of ¥16.43bn of long-term loans. Debt-to-equity of 1.15x is above a conservative 1.0x threshold but remains below the 2.0x aggressive-leverage warning level. Debt-to-capital is 35.9%, remaining below the 40% investment-grade reference point. Interest coverage of 9.78x is currently strong, although lower operating income has reduced the earnings cushion available for debt service. The balance sheet carries substantial acquisition-related assets: goodwill is ¥14.72bn, equal to 47.2% of equity and 21.9% of total assets. Intangible assets total ¥18.76bn, or 28.0% of total assets, leaving book equity meaningfully exposed to the continuing value of acquired brands and other intangible assets. Asset retirement obligations amount to ¥5.68bn, equal to 15.9% of liabilities, reflecting significant store-restoration and lease-exit obligations. This ARO ratio is high because the restaurant and café network requires future restoration payments upon store closures or lease expirations; it increases fixed non-debt claims on the balance sheet and raises the financial impact of portfolio rationalization.
Notable B/S Changes
Intangible assets: ¥18.76bn, representing 28.0% of total assets - high concentration in intangible assets increases dependence on sustained brand and acquired-business earnings. Goodwill: ¥14.72bn, representing 47.2% of equity and 21.9% of total assets - elevated M&A-related asset concentration leaves equity sensitive to impairment risk. Asset retirement obligations: ¥5.68bn, representing 15.9% of liabilities - sizeable future store-restoration obligations increase the cost of store-network rationalization. Long-term loans: ¥16.43bn, down ¥1.03bn YoY - deleveraging is constructive, although long-term borrowings remain the principal component of ¥17.43bn interest-bearing debt.
Cash Flow Quality
The earnings-quality profile is weakened by the gap between ordinary income of ¥0.56bn and pre-tax income of ¥0.64bn, which reflects a net ¥0.08bn extraordinary gain. Gross gain on sales of non-current assets was ¥0.15bn, offset by ¥0.07bn of extraordinary losses, including ¥0.06bn of head-office transfer costs. The asset-sale gain supports reported pre-tax profit but is non-recurring and does not remedy the underlying decline in operating income. The quality alert identifying high one-time items is therefore material: non-operating and extraordinary items have an outsized influence on a small net-income base. The 64.5% effective tax rate further reduced the conversion of pre-tax income into net income. The resulting tax burden factor of 0.355 is substantially below the normal 0.70-plus reference range and is a major contributor to the 1.0% net margin. Management's core earnings recovery should be assessed primarily through operating-income margin and ordinary-income growth rather than asset-sale gains.
Dividend Sustainability
The full-year dividend forecast is ¥54 per share, unchanged under the disclosed dividend revision status. Based on forecast EPS of ¥135.28, the prospective dividend payout ratio is approximately 39.9%. This is below the 60% sustainability benchmark and leaves a theoretical earnings buffer for reinvestment and debt reduction. Retained earnings of ¥23.72bn provide a substantial accounting capital base relative to the projected annual dividend commitment. However, dividend resilience remains linked to recovery in recurring operating profit because Q1 EPS of ¥10.60 represents only 7.8% of the full-year EPS forecast. The absence of a dividend forecast revision indicates that management currently maintains its payout framework, but the operating-margin recovery implied by full-year guidance is central to its durability.
Risk Assessment
Business risks include Restaurant demand risk: consumer discretionary spending, traffic, ticket size, and weather-sensitive dining demand can affect store sales and operating leverage., Cost inflation risk: Q1 SG&A increased 5.2% against 2.9% revenue growth, demonstrating sensitivity to labor, occupancy, utilities, and other store-operating costs., Margin recovery execution risk: the full-year operating-income plan requires material improvement from the Q1 operating margin of 2.7%., Store portfolio risk: asset retirement obligations of ¥5.68bn and the prior-year restaurant-store impairment indicate that closures, relocations, or lease exits can carry meaningful charges., Acquisition and brand-value risk: goodwill of ¥14.72bn and intangible assets of ¥18.76bn require acquired businesses and brand assets to sustain expected earnings..
Financial risks include Capital-efficiency risk: reported ROIC of 3.3% and annualized ROE of 2.9% are below acceptable return thresholds, limiting value creation from the existing asset and capital base., High tax-burden risk: the 64.5% effective tax rate reduced net-income conversion, with a tax burden factor of 0.355 versus a normal level above 0.70., Leverage and earnings-cushion risk: D/E is 1.15x and interest-bearing debt is ¥17.43bn; coverage is presently adequate at 9.78x but is sensitive to further operating-profit deterioration., Asset retirement obligation risk: AROs equal 15.9% of liabilities, a high ratio driven by future store-restoration obligations that can become more burdensome during network restructuring., Goodwill concentration risk: goodwill equals 47.2% of equity, an elevated level close to the 50% warning threshold; weaker acquired-business earnings could heighten impairment exposure..
Key concerns include LOW_OPERATING_EFFICIENCY: EBIT margin of 2.7% is below the 5% concern threshold. The root cause is unfavorable operating leverage, with SG&A growth exceeding revenue growth and segment profits declining. For a labor- and rent-intensive food-service operator, cost pressure is structurally relevant; the impact is that modest sales volatility can have a disproportionate effect on profit., CAPITAL_EFFICIENCY: ROIC of 3.3% is below the 5% warning threshold. The root cause is low operating profit relative to a balance sheet containing substantial PPE, goodwill, and intangible assets. The impact is that the company must improve store-level and acquired-asset returns to support its capital structure., HIGH_ONE_TIME_ITEMS: asset-sale gains and other extraordinary items are material relative to the small net-income base. The root cause is the ¥0.15bn gain on sale of non-current assets, partly offset by ¥0.07bn of extraordinary losses. The impact is that reported pre-tax earnings overstate the strength of recurring operations., HIGH_TAX_BURDEN: the 64.5% effective tax rate is well above the 40% alert level. The root cause is the high tax charge relative to ¥0.64bn of pre-tax income. The impact is depressed net-profit conversion and reduced support for ROE and EPS., HIGH_ARO_RATIO: asset retirement obligations of ¥5.68bn equal 15.9% of liabilities, well above the 5% alert level. The root cause is the store-based operating model's restoration obligations. The impact is greater financial exposure if management accelerates closures or portfolio optimization..
Investment Implications
Key takeaways include Revenue growth remained positive at 2.9% YoY, but Q1 profitability weakened sharply as operating income fell 42.2% YoY., The operating-margin decline of 209bp was driven primarily by SG&A growth exceeding sales growth, rather than a severe deterioration in gross margin., Restaurant is the core business by segment profit, while café has higher segment margin but suffered a sharper YoY margin contraction., The full-year forecast requires a substantial improvement in operating-profit generation after Q1 operating-income progress reached only 11.1% of the annual target., Liquidity and interest coverage are adequate, but low ROIC and elevated goodwill, intangibles, and asset retirement obligations increase the importance of disciplined capital allocation..
Metrics to watch include Consolidated operating margin and SG&A-to-sales ratio, Restaurant and café segment-profit margins, Same-store sales, customer traffic, and ticket-size trends, Labor, rent, utility, and food-cost inflation relative to sales growth, Progress toward the ¥5.3bn full-year operating-income forecast, Goodwill-to-equity ratio and impairment indicators, Asset retirement obligations and store closure or restructuring charges, Effective tax rate and conversion of ordinary income into net income.
Regarding relative positioning, The company combines a high gross-margin food-service model with currently weak operating efficiency. Its 72.7% gross margin is consistent with a service-oriented restaurant and café format, but the 70.0% SG&A ratio leaves only a 2.7% operating margin. Liquidity is stronger than its low profitability might suggest, while balance-sheet risk is moderated by current-ratio strength and interest coverage but elevated by acquisition-related intangible assets and sizeable store-restoration obligations.