UNIFORM NEXT CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥7.40B
• Operating Income: ¥541M
• Net Income: ¥350M
• EPS: ¥34.69

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

Uniform Next Co., Ltd. (TSE: 3566) reported FY2025 Q3 results showing robust top-line expansion and pronounced operating leverage. Revenue grew 17.9% year over year to ¥7,396 million, while operating income rose 78.9% to ¥541 million, indicating significant fixed-cost absorption and SG&A discipline. Gross profit reached ¥2,281 million, implying a gross margin of 30.8%, which, alongside stronger operating profit growth, suggests favorable product mix and/or improved pricing and procurement. Ordinary income was ¥546 million, and net income increased 71.4% to ¥350 million, for a net margin of 4.73%. DuPont analysis indicates ROE of 9.50%, driven by 4.73% net margin, 1.347x asset turnover, and moderate financial leverage of 1.49x (assets/equity). The operating margin stands at approximately 7.3%, materially higher than net margin, reflecting a normalizing tax burden (estimated ~21% using income tax over ordinary income) and minimal interest expense. Liquidity appears strong, with a current ratio of 256.7% and working capital of about ¥2,006 million; solvency is sound with total liabilities to equity of 0.43x. The reported equity ratio of 0.0% is clearly a non-disclosure placeholder; based on available figures, equity to assets is approximately 67.1%, indicating a conservative balance sheet. Interest coverage is very high at ~261x, underscoring minimal financial risk from debt service. Cash flow data, depreciation/amortization, and inventory balances are unreported (shown as zeros), limiting assessment of cash conversion, capital intensity, and inventory management. Dividend per share and payout ratio are reported as zero, which likely reflects non-disclosure for the quarter rather than a definitive policy stance. Overall, the company exhibits improving profitability and efficient asset utilization, supported by a low-leverage capital structure. However, the absence of cash flow and certain balance sheet details warrants caution when evaluating earnings quality and sustainability. Continued monitoring of gross margin resilience, SG&A efficiency, and customer acquisition costs will be important to validate the durability of operating leverage. Given the single-entity (non-consolidated) basis under JGAAP, scope and comparability to peers may differ, and certain segmental dynamics may be less transparent.

Profitability Analysis

ROE decomposition (DuPont): ROE 9.50% = Net margin 4.73% × Asset turnover 1.347 × Financial leverage 1.49. Net margin improved alongside 71.4% YoY net income growth versus 17.9% revenue growth, indicating margin expansion. Operating margin is about 7.32% (¥541m / ¥7,396m), implying healthy conversion of gross profit to operating profit; the spread between gross margin (30.8%) and operating margin (~7.3%) reflects SG&A intensity typical for e-commerce/apparel distribution, but improved year over year given operating income growth outpacing sales. Ordinary margin is ~7.38%, with negligible interest burden (interest expense ¥2.1m), supporting strong interest coverage (~260.7x). The implied effective tax rate using reported tax over ordinary income is approximately 21.0%, despite the provided “0.0%” metric (likely a data artifact). Operating leverage is evident: operating income +78.9% versus revenue +17.9%, indicating substantial fixed-cost absorption and/or marketing efficiency gains. Margin quality appears supported by mix/pricing and SG&A control; however, lack of D&A data (reported as zero) prevents assessing EBITDA and non-cash cost structure under JGAAP.

Growth Assessment

Revenue grew 17.9% YoY to ¥7.40bn, a strong performance for a single-entity e-commerce/distribution model in workwear/uniforms. Profit growth was significantly higher (OP +78.9%, NP +71.4%), demonstrating improved unit economics and cost leverage. Sustainability hinges on the balance between customer acquisition costs and repeat purchase behavior; the widening gap between gross and operating margin improvements suggests SG&A efficiencies, possibly lower advertising ratio or logistics/productivity gains. As an apparel/uniform supplier, growth can be cyclical with B2B investment and employment trends; however, diversified online channels can provide resilience. Outlook depends on continued gross margin stability (procurement, FX on imports, and product mix) and maintaining marketing efficiency amid competition. The asset turnover of 1.347x indicates efficient utilization of the asset base; sustaining revenue growth without commensurate asset expansion would further support ROE. Absence of segment data and order backlog limits visibility; nevertheless, current momentum implies positive near-term trajectory if demand conditions and cost discipline persist.

Financial Health

Liquidity is strong: current assets ¥3,286m vs current liabilities ¥1,280m yields a current ratio of ~2.57x and working capital of ~¥2,006m. Quick ratio matches the current ratio due to unreported inventories; in reality, inventories likely exist, so true quick ratio is lower than stated. Solvency is conservative: total liabilities ¥1,588m vs equity ¥3,685m (D/E ~0.43x). The true equity ratio (equity/assets) is roughly 67.1%, despite a reported 0.0% placeholder, indicating a robust capital base. Interest burden is minimal (¥2.1m) and interest coverage is ~261x, implying low refinancing risk. No cash and equivalents were disclosed (reported as zero), so absolute liquidity can’t be verified from cash; however, the current asset base appears ample relative to near-term obligations.

Cash Flow Quality

Cash flow data (operating, investing, financing) are not disclosed for the period (zeros indicate unreported). As a result, OCF/Net Income and Free Cash Flow cannot be meaningfully assessed despite the provided ratios showing 0.00. Earnings quality appears solid from the P&L perspective (strong operating profit growth, modest interest), but without OCF and working capital movements, we cannot validate cash conversion. Inventory balances are also unreported, constraining analysis of inventory turnover and potential build-ups. Key uncertainties include timing of receivables collection and payables terms during growth. Once disclosed, we would evaluate OCF vs. net income, FCF after maintenance capex, and changes in working capital to confirm sustainability of earnings.

Dividend Sustainability

Annual DPS and payout ratio are reported as 0.00, which likely reflects non-disclosure rather than a definitive zero payout policy for the year-to-date. Without OCF and FCF data, cash coverage of dividends cannot be evaluated. From a balance sheet standpoint, low leverage and ample equity provide capacity; however, prudent payout decisions would depend on growth investment needs (marketing, systems, inventory) and cash generation. Policy outlook is unclear in the absence of guidance; monitoring full-year announcements and historical payout behavior is necessary to assess medium-term dividend sustainability.

Risk Assessment

Business Risks:

• Demand cyclicality tied to corporate employment and capex in industries using uniforms/workwear
• Competitive intensity in online apparel/uniform retailing affecting pricing and customer acquisition costs
• Procurement and input cost volatility (including FX impact on imported products)
• Logistics and fulfillment cost inflation impacting gross-to-operating margin conversion
• Customer concentration risk if top clients or industries represent a large share of sales
• Brand/reputation and service-level risks affecting repeat purchase rates
• Execution risks in technology, SEO, and digital marketing efficiency

Financial Risks:

• Limited visibility on cash generation due to undisclosed OCF/FCF
• Potential working capital swings during growth (receivables and inventory) not observable due to non-disclosure
• Inventory obsolescence risk in apparel categories (balances unreported)
• Small-cap market liquidity and valuation volatility
• Tax rate variability versus assumptions

Key Concerns:

• Absence of cash flow and inventory disclosures constrains assessment of earnings quality
• Reported equity ratio and cash balances are placeholders, requiring caution in interpreting liquidity strength
• Sustainability of operating leverage if advertising or logistics costs re-accelerate

Investment Implications

Key Takeaways:

• Strong top-line growth (+17.9% YoY) with outsized operating profit growth (+78.9%) indicates material operating leverage
• Gross margin at 30.8% and operating margin ~7.3% underscore improved unit economics
• ROE of 9.5% is supported by healthy asset turnover and moderate leverage
• Balance sheet appears conservative (equity/assets ~67%, liabilities/equity ~0.43x), limiting solvency risk
• Data gaps (OCF, FCF, inventories, cash) limit confirmation of cash conversion and capital intensity

Metrics to Watch:

• Gross margin trajectory and product mix
• SG&A ratio, especially advertising/marketing expense to sales
• Operating margin and operating leverage as revenue scales
• OCF/Net income and FCF once disclosed
• Working capital metrics: receivable days, payable days, and inventory turnover (when disclosed)
• Effective tax rate versus implied ~21%
• Asset turnover and ROE versus internal targets

Relative Positioning: Within Japanese small-cap e-commerce/distribution peers in workwear/uniforms, the company currently exhibits above-average operating margin in the mid-7% range with conservative leverage, positioning it favorably on profitability and balance sheet prudence; confirmation of cash conversion is needed to solidify its standing.

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