JM HOLDINGS CO.,LTD. FY2026 FY Earnings Report

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Executive Summary

The fiscal year ended July 2026 resulted in lower earnings despite higher revenue due to declining profit margins. The key characteristic was the divergence between revenue growth and earnings growth. Revenue was ¥1985.4B (+6.6% YoY), Operating Income was ¥90.3B (-10.2%), Ordinary Income was ¥91.8B (-9.5%), and Net Income was ¥48.8B (-24.8%). The primary factors were the decline in gross margin and increase in SG&A expenses, which preceded revenue growth in the Supermarket Business, as well as the expansion of extraordinary losses, including an impairment loss of ¥13.1B, which pressured bottom-line earnings.

Factors Affecting Earnings

【Revenue】Revenue was ¥1985.4B, representing a +6.6% YoY increase. The core Supermarket Business accounted for 97.0% of the revenue mix and led overall growth with a +6.7% increase on a standalone basis. Other Businesses (including restaurants and events-related operations) also increased revenue by +5.2%, with both segments securing revenue growth.

【Profit and Loss】The gross profit margin declined to 28.0% from 28.7% in the previous year, while the SG&A ratio increased to 23.5% from 23.3%, resulting in Operating Income declining to ¥90.3B (-10.2%). The +7.5% growth in SG&A expenses exceeded the +6.6% revenue growth rate, indicating that the Company was unable to convert higher revenue into earnings growth. Ordinary Income also declined to ¥91.8B (-9.5%). In addition, extraordinary losses of ¥14.5B, including an impairment loss of ¥13.1B, exceeded extraordinary gains of ¥3.8B, causing Net Income to decline to ¥48.8B (-24.8%). This was a higher-revenue, lower-earnings result, with the decline in gross margin, cost increases, and impairment losses being the primary drivers of the earnings decline.

Segment Analysis

The Supermarket Business generated revenue of ¥1926.0B (+6.7%), segment profit of ¥85.4B (-10.7%), and a profit margin of 4.4%. It is the core business, accounting for approximately 93.8% of consolidated profit despite higher revenue and lower earnings. Other Businesses generated revenue of ¥59.4B (+5.2%), profit of ¥5.7B (-4.5%), and a profit margin of 9.6%. Although its profitability remains higher than that of the core business, its smaller scale has not enabled it to offset the decline in profit margins. Both segments posted lower earnings, while impairment losses of ¥12.3B were recorded in the Supermarket Business, highlighting the profitability of store assets as a challenge.

Key Financial Metrics

【Profitability】The Operating Income margin declined by approximately 0.9pt to 4.5% from 5.4% in the previous year, while the Net Income margin also declined to 2.5% from 3.5%. The gross margin declined to 28.0% from 28.7% in the previous year, clearly indicating margin compression amid revenue growth.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥87.6B, 1.77 times Net Income of ¥48.8B, indicating solid cash backing for accounting earnings. However, inventories increased by ¥10.9B, placing pressure on working capital.【Investment Efficiency】ROE of 9.9% has been trending downward from the previous year, affected by the increase in the Equity Ratio and lower profit margins. Capital expenditures of ¥41.9B were 1.49 times depreciation of ¥28.1B, indicating continued investment for growth.【Financial Soundness】The Equity Ratio was 64.3%, and cash and deposits were ¥202.4B, indicating a sound financial base. Interest-bearing debt was limited, and the burden of financial expenses was also small.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥87.6B, an increase of +31.9% from ¥66.4B in the previous year, securing cash generation exceeding Net Income of ¥48.8B. Investing Cash Flow was -¥52.1B, of which capital expenditures accounted for ¥41.9B, reflecting continued investment in stores and the logistics network. Financing Cash Flow was -¥29.5B, mainly due to dividend payments of ¥12.2B and debt repayments. As a result, Free Cash Flow was positive at ¥35.5B, securing financial capacity even after investment. However, the ¥10.9B increase in inventories was a factor depressing OCF, and inventory turnover trends will affect capital efficiency going forward.

Quality of Earnings

Net Income was ¥48.8B compared with Ordinary Income of ¥91.8B, representing a large divergence of approximately 47%. The primary factors were extraordinary losses of ¥14.5B (including an impairment loss of ¥13.1B) exceeding extraordinary gains of ¥3.8B, as well as the high effective tax rate. Impairment losses increased substantially from ¥2.8B in the previous year, pressuring bottom-line earnings as a temporary factor. Non-operating income was only ¥2.3B, equivalent to approximately 0.1% of revenue, indicating that Ordinary Income is largely dependent on Operating Income. Accordingly, the current-period Net Income can be interpreted as having been strongly affected not only by normal business earning power but also by the temporary factor of impairment losses on store assets.

Earnings Forecast and Guidance

For the next fiscal year, the Company plans Revenue of ¥2055.0B (+3.5%), Operating Income of ¥110.0B (+21.9%), Ordinary Income of ¥111.0B (+20.9%), and EPS of ¥130.70. The plan assumes recovery of the Operating Income margin from 4.5% in the current fiscal year to approximately 5.4%, with earnings growth expected to exceed revenue growth. Achieving this plan will require recovery of the gross margin, which declined during the current fiscal year, as well as control of SG&A expense growth, which exceeded revenue growth. The plan also assumes that the impairment losses that expanded during the current fiscal year will normalize in the next fiscal year, enabling the earnings growth rate to exceed the revenue growth rate.

Shareholder Returns

The annual dividend was ¥25 per share (interim dividend of ¥12 and year-end dividend of ¥13), with a Payout Ratio of 25.7%, a level substantially below the general benchmark. No share repurchases were conducted during the current fiscal year, and the Payout Ratio therefore equals the Total Return Ratio. Against dividend payments of approximately ¥12.7B, both Free Cash Flow of ¥35.5B and OCF of ¥87.6B were more than sufficient, indicating high cash-based sustainability of the current dividend. For the next fiscal year, the Company plans to increase the dividend to ¥26 per share, indicating a gradual dividend growth policy based on earnings recovery.

Risk Factors

1. Concentration in the Core Business: The Supermarket Business accounts for 97.0% of revenue and approximately 93.8% of segment profit. This creates a structure in which price competition in food retail and fluctuations in product procurement costs directly affect consolidated performance.

2. Declining Gross Margin and Rising Costs: The gross profit margin declined by approximately 0.7pt YoY, while the +7.5% increase in SG&A expenses exceeded the +6.6% revenue growth rate. Increases in labor, logistics, and procurement costs could place further pressure on the thin Operating Income margin.

3. Impairment of Store Assets: Impairment losses increased substantially to ¥13.1B from ¥2.8B in the previous year, of which ¥12.3B arose in the Supermarket Business. The profitability of unprofitable stores and progress in restructuring the store network will be key areas of focus going forward.

Industry Benchmark (For Reference; Based on Company Research)

Industry Benchmark (retail)

Profitability and Returns

The Operating Income margin exceeds the industry median, while the Net Income margin is slightly below the median due to the impact of extraordinary losses.

Growth and Capital Efficiency

The Revenue growth rate exceeds the industry median, indicating a relatively favorable position in terms of revenue growth.

※Source: Company research

Key Takeaways from the Financial Results

1. Revenue increased by +6.6%, but the Operating Income margin declined by approximately 0.9pt to 4.5%. The inability to convert higher revenue into earnings growth is a key point of focus in the current-period results.

2. Extraordinary losses, centered on the ¥13.1B impairment loss, placed significant pressure on Net Income. The Net Income decline rate (-24.8%) substantially exceeded the Ordinary Income decline rate (-9.5%). The impact of temporary factors should be distinguished when evaluating bottom-line earnings.

3. OCF increased by +31.9% YoY and maintained cash generation of 1.77 times Net Income. The soundness of the financial base, reflected in a Payout Ratio of 25.7% and an Equity Ratio of 64.3%, supports the earnings growth plan and dividend increase policy for the next fiscal year.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,062–¥1,126 at Cost of Equity ±1%, and ¥1,090–¥1,099 at ω±0.1.

Notes:

• Goodwill amortization of ¥4.0 per share has been added back to earnings (for non-cash expense treatment and comparability with IFRS companies).

(Calculation model: Residual Income Model (Ohlson-type, with an explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated values based solely on publicly disclosed data; these figures are not forecasts of the market share price or recommendations of any specific investment action, and do 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 professionals as necessary.

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