JICHODO Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥3.43B
• Operating Income: ¥461M
• Net Income: ¥75M
• EPS: ¥111.75

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

Jichodo Co., Ltd. (35970) reported FY2026 Q1 consolidated results under JGAAP showing resilient profitability despite a modest top-line contraction. Revenue declined 2.6% year over year to ¥3.429 billion, while operating income rose 2.1% to ¥461 million, indicating effective cost control and likely improved product mix. Gross profit was ¥1.179 billion with a gross margin of 34.4%, which is healthy for the workwear/apparel segment and consistent with value-added positioning. Operating margin stood at approximately 13.5%, reflecting disciplined SG&A management against a slightly lower sales base. Ordinary income of ¥658 million exceeded operating income by roughly ¥197 million, implying material non-operating contributions (e.g., interest/dividend income or FX gains), which supported headline profitability. Net income reached ¥322 million (up 331% YoY), though the magnitude of the YoY increase likely reflects a low base and/or extraordinary items in the comparison period. The DuPont framework yields a net margin of 9.39%, asset turnover of 0.083x, and financial leverage of 1.11x, combining to an ROE of 0.87% for the quarter. Asset turnover is characteristically low, reflecting an asset-heavy, inventory-intensive model, while leverage is minimal, indicating a conservative capital structure. Liquidity is very strong with a current ratio of 1,217% and quick ratio of 787%, underscoring ample short-term coverage and limited reliance on external funding. Total liabilities of ¥3.834 billion versus equity of ¥36.974 billion translate to a debt-to-equity ratio of about 0.10x and an implied equity ratio of roughly 89.8% (despite the reported equity ratio field showing 0% due to disclosure limitations). Inventory at ¥10.821 billion is high relative to quarterly cost of sales, consistent with seasonal and SKU breadth requirements in workwear but a key area to monitor for obsolescence risk. Cash flow statements and depreciation are undisclosed (showing as zero), limiting analysis of earnings quality, capex intensity, and free cash flow conversion this quarter. EPS was ¥111.75, but share count and other per-share metrics were not disclosed, constraining per-share diagnostics beyond EPS. Overall, the quarter demonstrates margin resilience, positive operating leverage, and a fortress balance sheet, while the lack of cash flow data and reliance on non-operating gains temper confidence in the sustainability of the profit mix. The outlook hinges on inventory normalization, demand trends in core end markets (construction, logistics, manufacturing), and the repeatability of non-operating income. Data limitations (notably cash flow and depreciation) should be addressed in subsequent filings to better assess earnings quality and capital allocation.

Profitability Analysis

ROE decomposition (DuPont): Net margin 9.39% × Asset turnover 0.083 × Leverage 1.11 = ~0.87% ROE for the quarter. Margin quality appears solid at the gross level (34.4%), and operating income growth (+2.1% YoY) against a revenue decline (-2.6% YoY) indicates improved operating efficiency and/or favorable mix. Operating margin is ~13.5%, suggesting efficient SG&A control. Ordinary income exceeds operating income by ~¥197 million, indicating notable non-operating income contribution; the sustainability of this component should be monitored. The low asset turnover (0.083x) reflects significant inventory and conservative balance sheet management; structurally, this caps ROE absent higher margins or increased leverage. Financial leverage is minimal at ~1.11x, consistent with an implied equity ratio near 90%; this depresses ROE but enhances financial stability. Operating leverage appears favorable this quarter (profit growth despite lower sales), implying cost flexibility. Without disclosed depreciation, EBITDA and EBITDAbased metrics cannot be assessed; however, operating income provides a reasonable view of core profitability.

Growth Assessment

Revenue declined 2.6% YoY to ¥3.429 billion, suggesting modest softness in demand or timing effects, potentially influenced by seasonality in workwear. Profit growth outpaced sales, with operating income up 2.1% YoY, pointing to improved mix, pricing discipline, or SG&A efficiencies. Net income surged 331% YoY to ¥322 million; this likely reflects a low prior-year base and possible extraordinary items or non-operating swings. Ordinary income of ¥658 million indicates material non-operating tailwinds; the growth durability depends on repeatability of such gains. With asset turnover at 0.083x, sustaining growth will likely come from product innovation, channel expansion (e-commerce/wholesale), and inventory velocity improvements rather than balance sheet leverage. The high gross margin denotes pricing power or differentiated product features (functionality, durability), supporting medium-term revenue quality. Absent cash flow disclosures, we cannot confirm cash conversion; hence, growth quality cannot be fully validated this quarter. Outlook hinges on end-market conditions in construction, logistics, and manufacturing, where demand has been steady but sensitive to macro cycles. Monitoring backlog/order intake, cancellations/returns, and channel inventory will be key to assessing revenue sustainability.

Financial Health

Liquidity is exceptionally strong: current ratio ~1,217% (¥30.61b CA / ¥2.51b CL) and quick ratio ~787% (ex-inventory), underscoring abundant working capital. Working capital of ~¥28.09 billion provides a substantial cushion for operations and seasonality. Solvency is robust, with total liabilities of ¥3.83b versus equity of ¥36.97b (debt-to-equity ~0.10x). The implied equity ratio is approximately 89.8% (¥36.97b / ¥41.14b), indicating a highly conservative capital structure. Financial leverage at ~1.11x is low, reducing refinancing and interest rate risks. The gap between ordinary and operating income suggests financial income and/or other non-operating gains; interest expense is undisclosed. With cash and cash equivalents undisclosed, near-term cash on hand cannot be verified; however, the balance sheet composition implies ample liquid assets beyond inventory. Overall solvency and liquidity positions are strong; the primary financial health watchpoint is inventory management rather than leverage.

Cash Flow Quality

Operating cash flow, investing cash flow, and financing cash flow are undisclosed this quarter, preventing direct assessment of earnings-to-cash conversion. The reported OCF/Net income ratio of 0.00 and FCF of 0 reflect non-disclosure rather than true zero cash flows. Earnings quality assessment must therefore rely on accrual metrics and balance sheet context. Inventory stands at ¥10.82b versus quarterly COGS of ¥2.34b, implying roughly 416 days of inventory on a quarterly basis (Inventory/COGS × ~90 days), which is elevated but may reflect seasonality and product breadth in workwear. Without receivables and payables detail, working capital movements and cash conversion cycle cannot be quantified. The difference between ordinary and operating income indicates reliance on non-operating items; absent cash flow disclosure, the cash nature of these items is unclear. Capex cannot be inferred due to missing depreciation and investing cash flow data. In sum, cash flow quality cannot be conclusively judged this quarter; future filings with full CF statements are needed.

Dividend Sustainability

Annual DPS and payout ratio are shown as 0.00, indicating non-disclosure rather than an actual zero dividend. EPS for the quarter is ¥111.75, but share count and cash flows are not disclosed, preventing a robust payout capacity analysis. With an implied equity ratio near 90% and minimal leverage, balance sheet capacity for dividends appears ample in principle. However, the absence of operating and free cash flow data precludes FCF coverage analysis, and inventory intensity could absorb cash in certain periods. Policy outlook cannot be inferred from the provided data; historical payout trends and guidance, if any, would be necessary to assess sustainability.

Risk Assessment

Business Risks:

• Demand cyclicality in core end markets (construction, logistics, manufacturing) affecting uniform/workwear orders
• Inventory obsolescence or markdown risk given high inventory levels relative to quarterly COGS
• Competitive pricing pressure in workwear/apparel potentially compressing margins
• Input cost volatility (cotton, synthetic fibers, logistics) impacting gross margin
• Channel concentration or wholesale dependence increasing order volatility
• Non-operating income volatility affecting ordinary income

Financial Risks:

• Earnings-to-cash conversion uncertainty due to non-disclosed cash flows
• Potential working capital absorption from inventory builds impacting FCF
• Limited visibility on capex and depreciation, obscuring maintenance investment needs
• Exposure to marketable securities/financial income if ordinary income relies on investment returns

Key Concerns:

• Sustainability of non-operating income that lifted ordinary income above operating income
• Elevated inventory relative to quarterly throughput and its implications for cash and margins
• Lack of cash flow disclosure hindering assessment of earnings quality and dividend capacity

Investment Implications

Key Takeaways:

• Resilient profitability: operating income grew 2.1% YoY despite a 2.6% revenue decline
• Healthy gross margin of 34.4% and operating margin ~13.5% indicate disciplined cost control
• Ordinary income meaningfully above operating income suggests non-operating tailwinds
• Balance sheet is very conservative: implied equity ratio ~89.8%, D/E ~0.10x
• Liquidity is ample with current ratio ~1,217% and quick ratio ~787%
• Inventory intensity is high; execution on inventory turnover is critical for cash conversion
• Limited disclosure on cash flows and depreciation constrains earnings quality assessment

Metrics to Watch:

• Operating margin trajectory and SG&A ratio
• Ordinary income composition (financial vs. core operations)
• Inventory turnover and days inventory on hand
• OCF, FCF, and working capital movements once disclosed
• Revenue trends in core verticals and order backlog indicators
• Any guidance or disclosure on dividend policy and capex

Relative Positioning: Within Japan’s workwear/apparel space, Jichodo exhibits stronger balance sheet conservatism and liquidity than typical peers, with above-average operating margins this quarter; however, revenue momentum is softer and reliance on non-operating income appears higher, making cash flow disclosure and inventory efficiency key differentiators to watch.

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