TOKYO BASE Co.,Ltd. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥15.90B
• Operating Income: ¥1.05B
• Net Income: ¥289M
• EPS: ¥13.58

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: A solid Q3 with clear operating margin expansion and strong earnings acceleration, albeit with limited visibility on cash flow due to unreported items. Revenue grew 17.5% YoY to 159.04, while operating income rose 63.8% to 10.55 and net income more than doubled (+104.1%) to 5.90, highlighting improved operating leverage. Gross margin stood at 44.6%, and the operating margin improved to 6.6% (10.55/159.04), signaling better cost control and merchandising. Based on derived prior-period figures, operating margin expanded by roughly 187 bps YoY (from ~4.8% to ~6.6%). Net margin expanded by about 157 bps YoY (from ~2.1% to ~3.7%), consistent with profit growth outpacing sales. Ordinary margin increased by about 113 bps (from ~4.9% to ~6.1%), aided by modest non-operating income and manageable non-operating expenses. Earnings quality cannot be fully assessed as operating cash flow and capital expenditure data are unreported; this is a key limitation. Liquidity is healthy with a current ratio of 175% and cash (36.69) comfortably covering short-term loans (7.00), reducing near-term refinancing risk. Leverage at a headline D/E of 1.13x reflects total liabilities to equity, but interest-bearing debt is 22.65 against cash of 36.69, implying a net cash position. Interest coverage is strong at 46x, indicating limited financial stress despite the presence of debt. The effective tax rate is elevated at 53.8% (3.37 tax on 6.26 PBT), which may normalize and offer incremental upside to net profit if one-off factors are at play. ROE is a healthy 10.5% via DuPont (NPM 3.7% × asset turnover 1.063 × leverage 2.65x), suggesting an improving return profile primarily driven by better margins. SG&A ratio is approximately 40.5% of sales, leaving a positive gap to gross margin and supporting operating profit expansion; however, the SG&A breakdown is unreported, limiting granular diagnosis. Dividend payout ratio is estimated at 36.8%, appearing prudent versus earnings, but FCF coverage cannot be assessed without OCF/capex. Forward-looking, continued merchandise margin discipline and SG&A efficiency are the key drivers to sustain mid-single-digit operating margins. Near-term risks include demand volatility in apparel, potential inventory build (inventory unreported), and the unusually high tax rate.

Profitability Analysis

ROE decomposition: ROE 10.5% = Net Profit Margin (3.7%) × Asset Turnover (1.063) × Financial Leverage (2.65x). The most material change YoY is the net profit margin, inferred from net income growth (+104.1%) far outpacing revenue growth (+17.5%). Business drivers likely include improved merchandise margins (44.6% gross margin) and SG&A discipline (SG&A at ~40.5% of sales), leading to operating margin expansion to ~6.6%. Asset turnover appears stable at ~1.06 and financial leverage is moderate; neither likely drove the bulk of the ROE change this quarter. The margin uplift seems operationally driven and potentially sustainable if mix, pricing, and store productivity hold, but the absence of inventory data limits confirmation of merchandise risk and markdown exposure. Watch for SG&A growth relative to sales; while current data suggest positive operating leverage, lack of SG&A breakdown (personnel, rent) obscures fixed-cost absorption and the sustainability of current run-rate.

Growth Assessment

Revenue growth of 17.5% YoY to 159.04 indicates solid demand and/or footprint expansion. Profit growth significantly outpaced sales (OP +63.8%, NP +104.1%), implying favorable mix and cost leverage. Operating margin expanded to ~6.6%, and net margin to ~3.7%, pointing to improved profitability quality at the P&L level. However, growth quality cannot be validated without OCF; earnings could be flattered by working capital timing or lower depreciation (unreported). Outlook hinges on continued gross margin discipline, SG&A control, and maintaining store productivity; any slowdown in same-store sales could compress margins given apparel sector operating leverage.

Financial Health

Liquidity is strong: current ratio 175.2% and quick ratio 175.2%, with cash and deposits (36.69) exceeding short-term loans (7.00). No warning on current ratio (<1.0) or D/E (>2.0); D/E (total liabilities/equity) is 1.13x, within conservative bounds. The company appears in a net cash position when comparing cash (36.69) to total interest-bearing debt (22.65), which supports flexibility. Interest coverage of 46.12x indicates ample buffer against rate increases. Maturity mismatch risk is limited: current assets (83.42) comfortably exceed current liabilities (47.61), and accounts receivable (14.00) plus cash provide coverage for payables (12.45) and short-term debt. Off-balance-sheet obligations are not disclosed in the data; none can be assessed.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be calculated—this is a primary constraint on earnings quality assessment. Free cash flow cannot be derived due to missing OCF and capex; hence, FCF coverage of dividends and growth investments is unknown. No clear signs of working capital manipulation are observable from available data, but the absence of inventory and detailed WC movements (AR/AP/inventory turns) limits detection of build-ups or timing effects. Given the apparel model’s sensitivity to inventory, the lack of inventory disclosure is a key blind spot.

Dividend Sustainability

The calculated payout ratio is 36.8%, which is comfortably below the 60% benchmark and suggests room to sustain distributions relative to earnings. However, FCF coverage is unassessable due to missing OCF and capex data, and DPS is unreported. Balance sheet strength (net cash position and strong liquidity) provides a cushion for dividend continuity in the near term. Policy outlook cannot be inferred without management guidance; monitoring payout discipline against cash generation will be critical.

Risk Assessment

Business Risks:

• Apparel demand volatility and fashion miss risk impacting sell-through and markdowns
• Potential inventory build and markdown risk (inventory data unreported)
• Store productivity and fixed-cost leverage risk if same-store sales slow
• Brand and supplier concentration risk typical in specialty retail
• Execution risk in merchandising, pricing, and channel mix

Financial Risks:

• Elevated effective tax rate (53.8%) depressing net earnings; potential variability
• Exposure to interest rates and credit markets, albeit mitigated by strong coverage
• Currency risk on imported merchandise affecting gross margin (if USD/other exposures exist)
• Limited visibility on cash generation and capex due to unreported cash flow statements

Key Concerns:

• Absence of operating cash flow and capex data impedes validation of earnings quality
• Unreported inventory obscures sell-through and working capital risks
• Sustainability of margin gains without SG&A breakdown (personnel, rent) insight

Investment Implications

Key Takeaways:

• Clear operating and net margin expansion with profits outpacing sales growth
• Healthy ROE at 10.5% driven primarily by margin improvement
• Strong liquidity and interest coverage; net cash relative to interest-bearing debt
• High effective tax rate dampens net profit; normalization would be an upside lever
• Data gaps on OCF, capex, and inventory are the main constraints on conviction

Metrics to Watch:

• OCF/Net Income and free cash flow once disclosed
• Gross margin trend and markdown rates
• SG&A ratio and fixed-cost absorption vs sales growth
• Inventory levels and turnover; sell-through metrics
• Same-store sales and traffic/conversion
• Effective tax rate normalization
• Net cash position and debt maturities
• Dividend policy updates and payout consistency

Relative Positioning: Within Japanese specialty apparel retailers, TOKYO BASE currently demonstrates mid-single-digit operating margins with improving trajectory, solid liquidity, and moderate leverage (net cash basis), placing it in a healthier-than-average operational stance, though data opacity on cash flows and inventory keeps it from best-in-class transparency.

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