JM HOLDINGS CO.,LTD. FY2026 Q3 Earnings Report

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Executive Summary

Although the company secured revenue growth, improvements in gross profit were absorbed by higher SG&A expenses and a heavy tax burden, resulting in flat operating income and lower net income. Revenue was ¥1495.8B (+7.6% YoY), operating income was ¥75.4B (+0.1%), ordinary income was ¥77.0B (+1.1%), and net income was ¥38.6B (-10.7%). While the core Supermarket Business drove revenue growth, its profit margin declined. In addition, the high effective tax rate of 49.7% was a primary factor behind the decline in net income.

Factors Affecting Earnings

【Revenue】Revenue increased to ¥1495.8B (+7.6% YoY). By segment, the Supermarket Business drove overall growth with revenue of ¥1460.2B (+7.7%), accounting for 97.6% of total revenue, while Other Businesses also grew complementarily to ¥57.8B (+4.9%).

【Profitability】Operating income was ¥75.4B (+0.1% YoY), essentially flat, while the operating margin declined to 5.0% from 5.4% in the previous year. Although the gross margin was maintained at 28.1%, the increase in the SG&A ratio to 23.1% absorbed the benefits of revenue growth. Segment profit for the Supermarket Business was ¥70.7B (-0.6% YoY), and its margin declined by approximately 41bp to 4.8%, making it the primary cause of the deterioration in the company-wide profit margin. Extraordinary losses included a one-time impairment loss of ¥2.7B on closed stores. In addition, the high effective tax rate of 49.7% resulted in the reduction of profit before tax of ¥76.7B to net income of ¥38.6B. In conclusion, the company achieved revenue growth but experienced lower profit.

Segment Analysis

The Supermarket Business is the core business, generating revenue of ¥1460.2B (+7.7% YoY) and accounting for 97.6% of total revenue. However, segment profit declined to ¥70.7B (-0.6% YoY), and the profit margin fell to 4.8%. Other Businesses, including food service, event-related operations, outsourcing, and facility operation and management, achieved revenue of ¥57.8B (+4.9%) and profit of ¥4.7B (+5.6%), representing both revenue and profit growth. Its profit margin was 8.1%, exceeding that of the core business. However, its revenue contribution was only 2.9%, limiting its impact on consolidated profitability. The fact that revenue growth in the core business has not translated into profit growth is the primary cause of the decline in the consolidated operating margin.

Key Financial Indicators

【Profitability】The operating margin was 5.0%, the net profit margin was 2.6%, the gross margin was 28.1%, and the SG&A ratio was 23.1%, confirming a structure in which profit growth has lagged revenue growth. 【Cash Quality】Comprehensive income of ¥40.0B was slightly higher than net income of ¥38.6B, reflecting the addition of other comprehensive income items such as ¥1.5B in valuation differences on securities. The divergence between the two figures is not material. 【Investment Efficiency】ROE was 8.0%, indicating a profitability structure in which high total asset turnover offsets the low net profit margin. Total assets were ¥781.3B, and net assets were ¥481.2B. 【Financial Soundness】The equity ratio was high at 61.6%, while cash and deposits of ¥212.4B covered approximately 90% of current liabilities of ¥236.1B. Interest expense was ¥0.5B against long-term borrowings of ¥28.2B, indicating a minimal interest burden.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is not available, an analysis of fund movements based on changes in the balance sheet indicates that cash and deposits increased by +16.0% to ¥212.4B from ¥183.1B in the previous year. Inventories increased by +16.8% to ¥114.9B from ¥98.4B in the previous year, suggesting inventory buildup accompanying revenue growth. Accounts payable increased to ¥100.2B from ¥90.1B in the previous year, and the increase in trade payables partially eased pressure on working capital. Short-term borrowings increased to ¥51.5B from ¥35.5B in the previous year, while long-term borrowings declined to ¥28.2B from ¥33.3B, indicating a shift in the composition of interest-bearing debt toward the short-term side. Net assets increased to ¥481.2B from ¥453.5B in the previous year, and the capital base steadily expanded, primarily due to the accumulation of retained earnings.

Earnings Quality

When distinguishing profit from recurring business activities from one-time factors, operating income of ¥75.4B and ordinary income of ¥77.0B reflect the underlying strength of the core business. Meanwhile, extraordinary income of ¥3.8B was recorded against extraordinary losses of ¥4.1B, including an impairment loss of ¥2.7B on closed stores, resulting in a small net negative one-time impact. Non-operating income was ¥2.1B and non-operating expenses were ¥0.5B, both small in scale, limiting the divergence between ordinary income and operating income. In contrast, income taxes of ¥38.1B were recorded against profit before tax of ¥76.7B, resulting in a high effective tax rate of 49.7%. This significant tax burden weighing on net income is an important factor in assessing earnings quality. Comprehensive income of ¥40.0B was close to net income of ¥38.6B, indicating that accrual-related factors from other comprehensive income items such as valuation differences on securities were minor.

Earnings Forecast and Guidance

The full-year company plan calls for revenue of ¥1960.0B (+5.3% YoY), operating income of ¥109.0B (+8.5%), and ordinary income of ¥110.0B (+8.4%). The cumulative Q3 progress rates were 76.3% for revenue, 69.1% for operating income, and 70.0% for ordinary income. Revenue slightly exceeded the standard progress rate of 75%, while profit progress was below that level. Achieving the full-year plan will require the generation of approximately ¥33.6B in operating income in Q4, premised on an improvement in the profit margin, which declined on a cumulative basis. There were no revisions to either the earnings forecast or the dividend forecast during the quarter.

Shareholder Returns

The Q2 dividend was ¥12.00 per share, and the full-year forecast dividend is ¥24.00 per share (on a post-stock-split basis following the November 2025 stock split). The payout ratio based on cumulative Q3 net income of ¥38.6B was 15.8%, while the forecast payout ratio based on full-year forecast EPS of ¥137.37 was approximately 17.5%; both figures are based solely on dividends. In light of retained earnings of ¥429.5B and cash and deposits of ¥212.4B, the company has a substantial capital and cash base to fund dividends. As there has also been no revision to the dividend forecast, there appears to be considerable scope for continued stable dividends.

Risk Factors

1. Revenue growth but lower profit in the core business: While revenue in the Supermarket Business increased by +7.7% YoY, segment profit declined by -0.6% and the profit margin fell by approximately 41bp. If margin pressure from procurement prices, labor costs, logistics expenses, price competition, and other factors continues, achieving the full-year operating income plan will become more challenging.

2. Net income compression from the heavy tax burden: The effective tax rate was high at 49.7%. Although profit before tax remained stable at +1.1% YoY at the ordinary income stage, net income declined by -10.7%. The full-year net income progress rate was only 55.1%, and the tax burden structure may continue to constrain net income growth.

3. Profitability of the store portfolio: An impairment loss of ¥2.7B was recorded on assets related to closed stores. While the elimination of unprofitable stores may contribute to future profitability improvements, additional closures or impairments could create a burden in terms of both the recurrence of extraordinary losses and the efficiency of growth investments.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Profitability is positioned above the industry median.

Growth and Capital Efficiency

The revenue growth rate is significantly above the industry median and is positioned within the upper group.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Revenue growth of 7.6% exceeded the industry median (+3.0%), while operating income was essentially flat. The fact that revenue growth has not translated into profit growth is a structural feature of the current-period results. The decline in the core business profit margin of approximately 41bp is determining consolidated profitability.

2. ROE of 8.0% is supported by high total asset turnover, while the net profit margin of 2.6% and high effective tax rate of 49.7% constrain further improvement. Financial soundness remains conservative, as indicated by an equity ratio of 61.6% and high interest coverage.

3. The forecast payout ratio is low at approximately 17.5%, and concerns regarding dividend sustainability are limited given the substantial retained earnings and cash base. Meanwhile, whether the required profit margin improvement can be achieved in Q4 will be a key focus in assessing the likelihood of achieving the full-year plan.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥1,062–¥1,126 for a ±1% change in the cost of equity, and ¥1,089–¥1,099 for a ±0.1 change in ω.

Notes:

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

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

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

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AI Financial Analysis

Executive Summary

FY2026 Q3 results were operationally resilient but margin-dilutive, with below-the-line charges and a high tax burden driving a double-digit decline in profit attributable to owners. Cumulative revenue rose 7.6% YoY to ¥149.58bn. Operating income was effectively flat at ¥7.54bn, increasing only 0.1% YoY. Ordinary income increased 1.1% to ¥7.70bn, supported by a modest improvement in net non-operating income. Profit attributable to owners declined 10.3% YoY to ¥3.86bn. The gross margin narrowed by 34bp YoY to 28.1%, from 28.5% in the prior-year period. SG&A rose 7.8% YoY to ¥34.57bn, slightly faster than revenue growth, and the SG&A ratio increased by 4bp to 23.1%. Consequently, the operating margin compressed by 38bp to 5.0%. The net margin fell by 52bp to 2.6%, placing it below the 3% threshold generally viewed as comfortable under the stated benchmark. Extraordinary losses of ¥0.41bn exceeded extraordinary income of ¥0.38bn, including a ¥0.27bn impairment loss on closed supermarket stores. This impairment was excluded from segment profit but reduced reported pre-tax earnings. The effective tax rate was elevated at 49.7%, resulting in a tax burden of 0.503 and materially constraining conversion of pre-tax profit into net income. The core supermarket business generated ¥145.26bn of external revenue, up 7.7% YoY, but segment profit declined 0.6% to ¥7.07bn. Other businesses increased external revenue by 4.6% to ¥4.32bn and segment profit by 5.6% to ¥0.47bn. Management retained its full-year forecast, implying that sales delivery is broadly on track while operating-profit conversion must improve in Q4. The balance sheet remains sound, with substantial cash, a 169.8% current ratio, and low goodwill exposure. The principal near-term financial issue is the 45.0% YoY increase in short-term loans, although cash covers short-term borrowings by 4.12x. The investment debate is therefore centered on whether supermarket margin pressure, store-closure costs, and the elevated tax burden normalize sufficiently to support the full-year earnings plan.

Profitability Analysis

The supplied annualized DuPont analysis shows ROE of 10.7%, decomposed into a 2.6% net profit margin, 2.553x asset turnover, and 1.62x financial leverage. ROE is within the stated 10-15% “good” range, but its quality is constrained by a thin net margin rather than being driven by aggressive leverage. Asset turnover is the principal structural support for returns, consistent with a high-volume supermarket model. Financial leverage is moderate at 1.62x and does not indicate balance-sheet-driven return enhancement. The largest adverse earnings movement was in net profit conversion: net income declined 10.3% despite revenue growth of 7.6% and operating income stability. Gross profit rose 6.4% to ¥42.11bn, slower than revenue growth, producing a 34bp gross-margin contraction to 28.1%. SG&A increased 7.8% to ¥34.57bn, marginally exceeding sales growth and indicating unfavorable operating leverage. The operating margin consequently fell to 5.0% from 5.4%, a 38bp contraction. The supermarket segment remains the core business, contributing 93.5% of segment profit before corporate adjustments, but its segment profit margin on external revenue declined to 4.9% from 5.3%. Other businesses delivered a higher segment profit margin of 10.9% on external revenue, versus 10.8% a year earlier, but remain too small to offset supermarket margin pressure. Net non-operating income was positive, with ¥0.39bn of interest income against ¥0.53bn of interest expense, and interest coverage remained exceptionally strong at 142.19x. However, the tax burden of 0.503 was substantially below the normal benchmark of 0.70, and the 49.7% effective tax rate was the most material drag between operating performance and attributable profit. The elevated tax charge, together with net extraordinary losses, appears non-recurring in character at the reported-period level, whereas the gross-margin and SG&A-ratio deterioration should be monitored as operating issues.

Growth Assessment

Revenue growth of 7.6% indicates continued top-line momentum, led by the supermarket segment’s 7.7% increase in external sales to ¥145.26bn. Other businesses also expanded, with revenue up 4.6% to ¥4.32bn. Revenue growth exceeded the full-year forecast growth rate of 5.3%, and cumulative sales have reached 76.3% of the ¥196.00bn annual target, 1.3 percentage points above the standard 75% Q3 progress rate. This supports the attainability of the sales plan, subject to normal fourth-quarter trading conditions. Operating income progress is 69.1% against the ¥10.90bn full-year target, 5.9 percentage points below standard Q3 progress. Ordinary income progress is 70.0% against the ¥11.00bn forecast, also below the 75% reference level. Profit attributable to owners is only 55.1% of the ¥7.00bn forecast, reflecting the current-period impairment charge, net extraordinary losses, and high tax expense. The retained full-year forecast implies a marked recovery in Q4 profitability versus the cumulative run rate. Specifically, achieving guidance requires approximately ¥46.42bn of Q4 revenue, ¥3.36bn of operating income, and ¥3.14bn of profit attributable to owners. The required Q4 operating margin is approximately 7.2%, materially above the reported Q3 cumulative 5.0% margin. Revenue sustainability is underpinned by the scale of the supermarket business, but earnings sustainability depends on restoring merchandise margin and limiting SG&A growth relative to sales. The ¥0.27bn impairment on closed stores also highlights the importance of store-network productivity and disciplined closure decisions. In a food-retail context, competitive pricing, procurement costs, labor costs, and consumer traffic are key determinants of whether higher sales translate into higher profit.

Financial Health

Liquidity is healthy, with current assets of ¥40.10bn against current liabilities of ¥23.61bn, producing a current ratio of 169.8%. The quick ratio of 121.1% confirms that liquidity is adequate even excluding inventories. Working capital totaled ¥16.48bn. Cash and deposits of ¥21.24bn represented 27.2% of total assets and exceeded short-term loans of ¥5.15bn by 4.12x. Total interest-bearing debt was ¥7.97bn, equivalent to a conservative debt-to-equity ratio of 0.62x and debt-to-capital ratio of 14.2%. Total equity increased 6.1% YoY to ¥48.12bn, while the equity ratio remained robust at 61.3%. Interest coverage of 142.19x indicates negligible current debt-servicing pressure. The key quality alert is refinancing risk: 64.6% of interest-bearing debt is short term, above the 40% warning threshold. Short-term loans increased by ¥1.60bn, or 45.0% YoY, to ¥5.15bn, whereas long-term loans declined to ¥2.82bn from ¥3.33bn. This shift increases reliance on short-dated funding, though the risk is mitigated by cash holdings substantially exceeding short-term debt and by the strong current and quick ratios. Accounts payable increased 11.1% YoY to ¥10.02bn, broadly consistent with expansion in purchasing activity. Goodwill was only ¥1.13bn, or 2.3% of equity and 1.4% of assets, limiting M&A-related impairment dependence. Asset retirement obligations were ¥1.21bn, representing a relevant long-term store and facility obligation but not a material solvency constraint relative to equity.

Notable B/S Changes

Short-term loans: +¥1.60bn (+45.0%) to ¥5.15bn — increased short-term funding reliance lifted the short-term debt ratio to 64.6%; liquidity mitigation is substantial because cash and deposits of ¥21.24bn cover short-term loans by 4.12x.

Cash Flow Quality

Cash-flow quality cannot be assessed from the reported figures in this dataset.

Dividend Sustainability

The disclosed interim dividend is ¥12.00 per share. The full-year dividend forecast is ¥24.00 per share after reflecting the November 2025 two-for-one stock split. Based on forecast EPS of ¥137.37, the implied full-year dividend payout ratio is approximately 17.5%, which is conservative and well below the 60% sustainability benchmark. The calculated payout ratio of 15.8% using the interim dividend against cumulative Q3 net income is also low. Retained earnings of ¥429.54bn provide a substantial accounting capital base relative to the forecast cash dividend obligation. The absence of a dividend forecast revision indicates management has maintained its shareholder-return stance despite the Q3 decline in attributable profit. Dividend coverage should remain resilient if the company achieves its ¥7.00bn full-year attributable-profit forecast, but the key determinant is recovery in fourth-quarter earnings conversion.

Risk Assessment

Business risks include High priority — Supermarket margin risk: the core supermarket segment increased revenue 7.7% YoY but segment profit declined 0.6%, indicating that pricing, merchandise mix, procurement costs, or operating costs are absorbing sales growth., High priority — Food-retail competition risk: a 34bp gross-margin decline in a volume-driven supermarket model leaves profitability sensitive to promotional intensity, competitor pricing, and input-cost changes., Medium priority — Store-network productivity risk: ¥0.27bn of impairment losses on closed supermarket stores indicates that underperforming locations can create recurring closure and asset-writeoff exposure., Medium priority — Labor and operating-cost inflation risk: SG&A grew 7.8%, faster than revenue growth of 7.6%, reducing operating leverage..

Financial risks include Medium priority — Refinancing risk: short-term debt represents 64.6% of interest-bearing debt, above the 40% alert threshold, and short-term loans rose 45.0% YoY to ¥5.15bn., Low priority — Tax-conversion risk: the 49.7% effective tax rate and 0.503 tax burden materially reduced net income conversion; persistence would impede achievement of full-year net-income guidance., Low priority — Balance-sheet impairment risk: goodwill exposure is limited at 2.3% of equity, although fixed-asset impairment from store closures remains relevant..

Key concerns include The full-year operating-income forecast requires a Q4 operating margin of approximately 7.2%, compared with the 5.0% cumulative Q3 margin., Attributable-profit progress of 55.1% is materially behind the normal 75% Q3 pace, making the forecast dependent on a strong Q4 and normalization of below-the-line charges., Cash-flow conversion, capital expenditure funding, and free-cash-flow coverage cannot be evaluated from the reported figures in this dataset..

Investment Implications

Key takeaways include Top-line performance is solid: Q3 cumulative sales rose 7.6% YoY and are tracking modestly ahead of the full-year sales progress benchmark., Profitability is the central issue: operating income was flat despite higher sales, with gross-margin compression and SG&A growth slightly exceeding revenue growth., The earnings miss versus the trajectory implied by guidance is concentrated below operating income, reflecting net extraordinary losses and an unusually high effective tax rate., The balance sheet provides a cushion, with ¥21.24bn of cash, a 169.8% current ratio, 0.62x debt-to-equity, and minimal goodwill exposure., The dividend policy appears conservative relative to forecast earnings, with an implied 17.5% forecast payout ratio..

Metrics to watch include Supermarket segment profit margin and consolidated gross margin, SG&A growth relative to revenue growth, particularly labor and store operating costs, Fourth-quarter operating margin versus the approximately 7.2% required to achieve guidance, Effective tax rate and tax burden normalization, Store closures, impairment losses, and asset retirement obligations, Short-term loans and the short-term debt ratio.

Regarding relative positioning, JM Holdings exhibits the balance-sheet strength, high asset turnover, and conservative dividend payout expected of a financially sound food retailer. Its annualized 10.7% ROE is respectable, but the current 5.0% operating margin and 2.6% net margin demonstrate weaker profit conversion than its sales growth would suggest. Relative positioning will depend primarily on the company’s ability to rebuild supermarket segment margins while preserving its liquidity and capital discipline.