| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥515.0B | ¥581.8B | -11.5% |
| Operating Income / Operating Profit | ¥3.2B | ¥8.1B | -60.5% |
| Ordinary Income | ¥3.8B | ¥-16.8B | +239.6% |
| Net Income | ¥3.7B | ¥-24.0B | +115.3% |
| ROE | 2.5% | -12.8% | - |
FY2026 full-year results delivered Revenue of ¥515.0B (YoY -¥66.8B, -11.5%), Operating Income of ¥3.2B (YoY -¥4.9B, -60.5%), Ordinary Income of ¥3.8B (YoY +¥20.6B, +239.6%), and Net Income attributable to owners of parent of ¥3.7B (YoY +¥27.7B, +115.3%). While top-line declined and operating profit contracted significantly, the company secured a final profit. Gross margin improved to 60.1% (+3.2pt) but SG&A remained at ¥306.1B and did not decline in line with sales, raising the SG&A ratio to 59.4% (+3.9pt) and reducing the operating margin to 0.6% (-0.8pt). Ordinary and net income stages turned from loss to profit year-over-year, though this included one-off factors such as a ¥1.5B gain on sale of subsidiary shares. Total assets contracted to ¥325.9B (YoY -¥14.6B), equity decreased to ¥147.1B (YoY -¥40.9B), and the Equity Ratio remained at 45.1%.
[Revenue] Revenue was ¥515.0B, down ¥66.8B (-11.5%) year-over-year. The Group reports apparel and related planning and sales as a single reporting segment; no detailed segment disclosure is provided, but the decline is presumed driven by market conditions and changes in consumer behavior. Gross margin improved to 60.1% from 56.9% (+3.2pt), likely reflecting merchandise mix optimization and procurement efficiency, but gross profit in absolute terms decreased to ¥309.3B (YoY -¥21.7B).
[Profitability] Operating Income was ¥3.2B, a large decline of ¥4.9B (-60.5%) year-over-year. Despite the gross margin improvement, SG&A costs remained at ¥306.1B (SG&A ratio 59.4%), only down ¥16.8B from ¥322.9B prior year, indicating insufficient cost elasticity versus the revenue decline. In non-operating items, interest income rose to ¥1.1B (prior year ¥0.5B), and an equity-method investment loss of ¥24.4B was recorded (similar level as prior year); overall non-operating income of ¥1.7B exceeded non-operating expenses of ¥1.1B, resulting in Ordinary Income of ¥3.8B, a marked improvement from last year’s ¥-16.8B loss and a turn to profit. In extraordinary items, the company recorded a ¥1.5B gain on sale of subsidiary shares but also ¥1.4B impairment loss, producing profit before tax of ¥3.9B. Income taxes were minimal at ¥0.2B; after deducting Net Income attributable to non-controlling interests of ¥1.8B, Net Income attributable to owners of parent was ¥3.7B, turning positive from ¥-24.0B in the prior year. In summary, despite revenue decline and large operating profit contraction, improvements in non-operating and extraordinary items (including one-offs) secured final profitability.
[Profitability] Operating margin was 0.6% versus 1.4% in the prior year (-0.8pt); the 60.1% gross margin (prior year 56.9%, +3.2pt) was offset by a rising SG&A ratio of 59.4% (prior year 55.5%, +3.9pt). ROE recovered to 2.5% from -14.7% in the prior year, but Net Profit Margin remained low at 0.7% (prior year -4.1%), reflecting reliance on one-off items including extraordinary gains. [Cash Quality] Operating Cash Flow / Net Income was 2.24x, indicating good cash backing of profit, but OCF/EBITDA was weak at 0.67x (Operating CF ¥8.2B ÷ EBITDA ¥12.3B), with cash conversion efficiency deteriorated by working capital movements and equity-method investment losses. [Investment Efficiency] Total Asset Turnover was 1.58x (Revenue ¥515.0B ÷ Total Assets ¥325.9B); accounts receivable fell substantially from ¥77.6B to ¥24.4B improving receivables turnover, but inventory turnover days remained elevated at 89 days (Inventories ¥50.0B ÷ Daily Sales ¥1.41B × 365), posing markdown and impairment risk. [Financial Soundness] Equity Ratio declined to 45.1% (prior year 55.2%) but short-term liquidity is healthy with Current Ratio 172.4% (Current Assets ¥191.5B ÷ Current Liabilities ¥111.1B) and Quick Ratio 127.4%. Cash and deposits of ¥113.2B are 5.7x short-term borrowings of ¥20.0B, limiting maturity mismatch risk. Interest-bearing debt is ¥70.0B (Long-term ¥50.0B, Short-term ¥20.0B), producing Debt/EBITDA of 5.71x—high relative to earnings power—and Interest Coverage of 3.91x (EBIT ¥3.2B ÷ Interest expense ¥0.8B), indicating room for improvement.
Operating CF was ¥8.2B, a large decline of -62.8% YoY. Operating CF subtotal (before working capital changes) was ¥9.7B; inventory reduction contributed +¥3.6B, while accounts receivable increase -¥1.2B and trade payables decrease -¥7.7B deteriorated working capital, and after corporate tax payments of -¥1.7B Operating CF totaled ¥8.2B. Investing CF was a net inflow of ¥5.6B, as proceeds from sale of subsidiary shares of ¥18.4B far exceeded capital expenditure of -¥5.9B and intangible asset investments of -¥6.5B. Financing CF was -¥14.3B, with net short-term borrowings effectively zero (increase +¥20.0B, decrease -¥20.0B), dividend payments of -¥13.8B, and lease liabilities repayments of -¥0.6B as main items. Free Cash Flow was positive at ¥13.8B, but Investing CF depended on one-off proceeds from subsidiary disposals, limiting repeatability. CapEx/Depreciation ratio was 0.65x (CapEx ¥5.9B ÷ Depreciation ¥9.1B), indicating restrained investment and a cautious stance toward maintenance and renewal spending.
Of Net Income attributable to owners of parent of ¥3.7B, extraordinary gain of ¥1.5B (gain on sale of subsidiary shares) and extraordinary loss of ¥1.4B (impairment loss) largely offset, so the net contribution from one-off items was limited. The company recorded an equity-method investment loss of ¥24.4B in non-operating items, partially offset by interest income of ¥1.1B and others. Ordinary Income of ¥3.8B versus Net Income of ¥3.7B are at similar levels, and minimal income taxes of ¥0.2B likely reflect utilization of deferred tax assets or tax adjustments. Comprehensive income was -¥0.3B, materially below Net Income of ¥3.7B, driven by Other Comprehensive Income of -¥4.0B (share of other comprehensive income of equity-method affiliates). Operating CF of ¥8.2B exceeded Net Income of ¥3.7B, supporting cash backing of profits, but OCF/EBITDA at 0.67x is low; working capital deterioration (notably trade payables decrease -¥7.7B) and non-cash expenses (Depreciation ¥9.1B, Impairment ¥1.4B) indicate fragile cash generation capacity.
Full-year guidance projects Revenue ¥529.7B (YoY +2.9%), Operating Income ¥13.5B (YoY +320.9%), Ordinary Income ¥13.0B (YoY +239.6%), and Net Income attributable to owners of parent ¥7.4B. Actual progress versus guidance stands at 97.2% for Revenue (¥515.0B ÷ ¥529.7B), but only 23.7% for Operating Income (¥3.2B ÷ ¥13.5B) and 49.3% for Net Income (¥3.7B ÷ ¥7.4B), indicating significant shortfall on profit metrics. Actual EPS of ¥10.19 is about half of forecast EPS ¥20.63, suggesting SG&A reductions and earnings improvements did not proceed as planned.
A year-end dividend of ¥38 per share was paid, totaling ¥13.8B. The payout ratio is approximately 381% by calculation (Total dividends ¥13.8B ÷ Net Income ¥3.7B), a level far exceeding earnings power and unsustainable. With Free Cash Flow of ¥13.8B and dividends of ¥13.8B, FCF coverage is 1.00x, but given that Investing CF included one-off subsidiary sale proceeds of ¥18.4B, genuine headroom is limited. The dividend forecast for the following year is ¥0, implying a priority on restoring earnings and foregoing dividends.
Inventory stagnation risk: Inventories are ¥50.0B with inventory turnover days at 89 days and remain elevated; increases in seasonal or dead stock could prompt markdown pressure and higher impairment risk. Although gross margin improved to 60.1%, failure to compress inventories could lead to renewed margin deterioration amid intensified price competition.
SG&A rigidity risk: SG&A of ¥306.1B (SG&A ratio 59.4%) did not fall sufficiently with revenue decline, reversing operating leverage. Fixed and semi-fixed costs such as store rents and labor are heavy, and prolonged demand weakness would accelerate profit deterioration.
Leverage risk: Interest-bearing debt of ¥70.0B yields Debt/EBITDA of 5.71x—high relative to earnings power—and Interest Coverage of 3.91x provides limited interest payment buffer in a rising-rate environment. Asset retirement obligations of ¥11.6B (6.5% of total liabilities) also pose risk of one-off cash outflow upon store closures or reorganization.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 0.6% | 4.6% (1.7%–8.2%) | -4.0pt |
| Net Profit Margin | 0.7% | 3.3% (0.9%–5.8%) | -2.6pt |
Both operating margin and net profit margin trail the industry median substantially, placing the company in the lower tier for profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -11.5% | 4.3% (2.2%–13.0%) | -15.8pt |
Revenue growth of -11.5% compares to industry median +4.3%, showing significant underperformance on the top line.
※ Source: Company compilation
Gross margin improved to 60.1% (+3.2pt), showing effects of merchandise mix optimization, but rising SG&A ratio of 59.4% (+3.9pt) left operating margin at a low 0.6%. If inventory turnover days of 89 can be compressed and structural SG&A reductions achieved, operating leverage could re-emerge and margin recovery is possible.
Operating CF of ¥8.2B exceeded Net Income of ¥3.7B, providing cash backing for profits, but OCF/EBITDA of 0.67x shows weak conversion efficiency; working capital (particularly trade payables decline of -¥7.7B) improvement is a key issue. Free Cash Flow of ¥13.8B depended on subsidiary sale proceeds of ¥18.4B and is not repeatable. CapEx/Depreciation of 0.65x indicates restrained investment; to sustain competitiveness medium-to-long term, reallocation to store refresh and strengthening of e-commerce infrastructure is required.
Leverage at Debt/EBITDA 5.71x is high relative to earnings power and Interest Coverage at 3.91x heightens interest sensitivity. Dividends are forecast at ¥0 next year, suggesting prioritization of earnings recovery and leverage reduction. Given results-to-forecast shortfalls—Operating Income at 24% and Net Income at 49% of guidance—execution on SG&A cuts and inventory optimization will be key near-term re-rating catalysts.
This report was automatically generated by AI analyzing XBRL financial statement data and is an earnings analysis document. It does not constitute a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.