CHIKARANOMOTO HOLDINGS Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

Despite higher revenue, a deterioration in profit margins resulted in a substantial decline in earnings, producing a higher-revenue, lower-profit result. Revenue increased to ¥9.01B (+5.9% YoY), while Operating Income fell to ¥0.24B (-48.6%), Ordinary Income to ¥0.32B (-27.8%), and Net Income to ¥0.19B (-71.0%), with the decline widening at each profit level. The primary factors were the adverse reversal in operating leverage caused by a decline in gross margin (68.4%, -1.6pt) and an increase in the SG&A ratio (65.7%, +1.2pt), as well as the reversal of the gain on sale of fixed assets (¥0.36B) recorded in the previous year.

Factors Affecting Performance

【Revenue】Revenue increased to ¥9.01B, up +5.9% YoY. The Domestic Restaurant Operations Business generated ¥4.60B (+4.4% YoY), accounting for 55.9% of the revenue mix and representing the core business. The Overseas Restaurant Operations Business generated ¥3.63B (+4.8% YoY), accounting for 40.3% of the mix. Both segments grew steadily and in a balanced manner, apparently benefiting from increased customer traffic and higher average spending at existing businesses.

【Profit and Loss】Operating Income fell to ¥0.24B (-48.6% YoY), and the Operating Income margin declined to 2.7% from approximately 4.9% in the previous year. Both the gross margin, at 68.4% (-1.6pt), and the SG&A ratio, at 65.7% (+1.2pt), deteriorated, with higher costs weighing on profitability. Ordinary Income of ¥0.32B (-27.8% YoY) was supported by ¥0.11B in non-operating income, including a ¥0.05B foreign exchange gain; however, Net Income declined substantially to ¥0.19B (-71.0%). Whereas the Company recorded a ¥0.36B extraordinary gain from the sale of fixed assets in the same period of the previous year, it recorded ¥0.02B in extraordinary losses this period, including losses on the retirement of fixed assets. The reversal of this temporary factor and the increase in the effective tax rate (approximately 19.6% in the previous year → approximately 37.2% in the current period) amplified the deterioration in the bottom line. In conclusion, the Company posted higher revenue but lower earnings.

Segment Analysis

The Domestic Restaurant Operations Business generated revenue of ¥4.60B (+4.4% YoY) and Operating Income of ¥0.19B (-42.9% YoY), with a margin of 4.0%, down from the previous year. The Overseas Restaurant Operations Business generated revenue of ¥3.63B (+4.8% YoY) and Operating Income of ¥0.04B (-79.6% YoY), with a margin of 1.0%, representing a pronounced decline. While both segments secured revenue growth, profits declined substantially in both the domestic and overseas businesses, with the deterioration in overseas profitability in particular weighing on Company-wide earnings. From Q1 of the current period, a portion of wholesale revenue and related profit and loss associated with franchised restaurants was reclassified from the Product Sales Business to the Domestic Restaurant Operations Business segment. Comparisons with the same period of the previous year are based on the revised classification.

Key Financial Indicators

【Profitability】The Operating Income margin was 2.7% and the Net Income margin was 2.0%, both substantially lower than in the previous year. ROE remained at 1.5%, directly reflecting the decline in Net Income.【Cash Flow Quality】There was a gap between Ordinary Income of ¥0.32B and Net Income of ¥0.19B, attributable to the recognition of extraordinary losses and the increase in the effective tax rate (approximately 37.2%).【Investment Efficiency】Revenue of ¥9.01B against total assets of ¥19.34B indicates that total asset turnover remained low, reflecting the substantial asset base, including cash and deposits of ¥6.91B.【Financial Soundness】The Equity Ratio remained high at 62.2%, while current assets of ¥9.70B substantially exceeded current liabilities of ¥4.72B. Short-term borrowings decreased to ¥0.10B, indicating continued cash-rich and conservative financial management.

Cash Flow Analysis

As cash flow statement data has not been disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and deposits amounted to ¥6.91B, down from ¥7.59B in the previous year, while short-term borrowings were reduced from ¥0.14B to ¥0.10B during the period. Property, plant and equipment increased to ¥6.20B from the previous year, indicating that restaurant-related investment has continued. Retained earnings amounted to ¥5.02B, slightly down from ¥5.13B in the previous year, apparently reflecting the decrease in Net Income and dividend payments. Overall, although the cash position remains substantial, funds have been trending downward from the previous year due to investment activities and debt repayments.

Earnings Quality

The current period’s earnings structure is centered on recurring restaurant operating profits; however, in the same period of the previous year, the one-time gain on sale of fixed assets of ¥0.36B boosted Net Income. In addition to the reversal of this factor, the Company recorded ¥0.02B in extraordinary losses this period, including losses on the retirement of fixed assets, resulting in a gap of approximately 42% between Ordinary Income of ¥0.32B and Net Income of ¥0.19B. Of the ¥0.11B in non-operating income, ¥0.05B was a foreign exchange gain, which is also non-recurring in nature and should therefore be considered when evaluating the quality of Ordinary Income. The increase in the effective tax rate from approximately 19.6% in the previous year to approximately 37.2% should also be noted as a factor depressing the bottom line.

Earnings Forecast and Guidance

Progress against the full-year plan was 22.4% for Revenue, 9.2% for Operating Income, 12.1% for Ordinary Income, and 10.2% for Net Income, all below the simple progress benchmark of 25%. The delays in progress for Operating Income and Net Income are particularly notable, suggesting that the decline in the Q1 gross margin and the increase in SG&A expenses will need to be offset in the second half. Neither the earnings forecast nor the dividend forecast was revised during the quarter.

Shareholder Returns

The Company’s annual dividend plan is ¥24, representing an increase from the previous year’s actual dividend of ¥10 (a reference figure, not the combined interim and year-end amount). The Payout Ratio based on the full-year forecast EPS of ¥59.61 is approximately 40.3%, a reasonable level. The Company has a strong financial foundation, with cash and deposits of ¥6.91B and an Equity Ratio of 62.2%, supporting dividend sustainability.

Risk Factors

1. Deterioration in overseas business profitability: Operating Income in the Overseas Restaurant Operations Business plunged -79.6% YoY, and its margin declined to 1.0%. While revenue continues to grow steadily, profitability has deteriorated substantially, increasing the business’s impact on Company-wide earnings.

2. Structural burden of asset retirement obligations: Asset retirement obligations amounted to ¥1.26B, representing 17.3% of total liabilities, and future cash outflows associated with restaurant closures and restoration obligations are expected to be of a certain scale. This burden is likely to become more apparent as the restaurant portfolio is reshuffled.

3. Adverse reversal in operating leverage due to higher costs: SG&A expenses increased to ¥5.92B from ¥5.49B in the previous year, expanding at a pace exceeding the +5.9% revenue growth rate. If costs such as personnel expenses and rents continue to rise, the Operating Income margin may decline further.

Industry Benchmark (Reference; Company Research)

Industry Benchmark (retail)

Profitability and Returns

The Company’s profitability is slightly below the industry median.

Growth and Capital Efficiency

The revenue growth rate is also slightly below the industry median, placing the Company from the middle to slightly below the middle of the industry in terms of both revenue growth and profitability.

※Source: Company research

Key Takeaways from the Results

1. Despite higher revenue, the Operating Income margin declined to 2.7%, confirming an adverse reversal in operating leverage due to the deterioration in gross margin and the increase in SG&A expenses. Even excluding the reversal of the extraordinary gain recorded in the previous year, the decline in core business profitability is a structural issue identifiable from the earnings data.

2. Operating Income in the overseas segment plunged -79.6% YoY. Given that the business accounts for 40.3% of the revenue mix, changes in its profitability warrant attention as a highly sensitive factor for Company-wide performance.

3. Profit progress against the full-year plan (Operating Income 9.2%, Net Income 10.2%) was below revenue progress (22.4%), making the presence or absence of profitability improvement in the second half a key determinant of whether the full-year plan will be achieved.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥451–¥478 at ±1% for the Cost of Equity, and ¥463–¥467 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a time lag 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, 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 future stock 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. 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 with professionals as necessary.

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