C'BON COSMETICS Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.61B
• Operating Income: ¥125M
• Net Income: ¥115M
• EPS: ¥26.94

Income Statement

Balance Sheet

Cash Flow Statement

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

Verdict: A mixed quarter with solid top-line growth and operating leverage, but headline net income declined sharply due to a tough prior-year comparison likely influenced by non-recurring items and/or tax effects. Revenue grew 6.9% YoY to 46.10, driven by continued recovery in demand and stable gross profitability (gross margin 75.2%). Operating income rose 18.0% YoY to 1.25, lifting operating margin to 2.7%. Ordinary income increased 21.8% YoY to 1.44, supported by 0.21 of non-operating income (notably 0.11 investment securities gains and 0.04 dividends). Despite operational improvements, net income fell 45.2% YoY to 1.15, pulling net margin down to 2.5%, suggesting last year benefited from one-off positive items or a lower tax base. Operating margin expanded by roughly 25 bps YoY (from ~2.46% to 2.71%), while net margin compressed by about 238 bps (from ~4.87% to 2.49%). Earnings quality is good this quarter: OCF of 2.09 exceeded net income by 1.82x, indicating solid cash conversion. The balance sheet remains conservative with a current ratio of 186.6% and quick ratio of 170.8%, anchored by 27.42 in cash and 9.23 in receivables against 25.46 in current liabilities. ROE is low at 2.0% (DuPont: margin 2.5% × asset turnover 0.532 × leverage 1.50x), and ROIC of 3.3% is below a 5% warning threshold, highlighting modest capital efficiency. SG&A intensity remains high at 72.4% of sales, capping operating margin expansion. Non-operating income accounted for a meaningful 18.2% of pre-tax earnings contribution, though not the primary driver. Cash generation likely supports maintenance capex and ordinary dividends (proxy FCF of ~1.43 = OCF 2.09 minus capex 0.66), but the reported payout ratio of 74.5% looks elevated versus profit and ROIC. Going forward, the focus is on sustaining revenue momentum while structurally lowering SG&A to unlock margin and ROIC uplift. Watch for normalization of tax rate and any absence of prior-year one-offs to reduce volatility in net income. Overall, execution on cost discipline and working capital should translate operating gains into durable free cash flow.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.0% = Net Profit Margin 2.5% × Asset Turnover 0.532 × Financial Leverage 1.50x. The largest YoY swing is in net profit margin, which declined materially (net margin down ~238 bps to 2.49%) despite higher operating margin. Business drivers: operating profit benefited from revenue growth and contained cost of sales, but below-the-line factors (prior-year one-offs and/or a more normalized tax rate at 19.5%) reduced net income this year. Sustainability: the operating margin uplift (+~25 bps) appears more sustainable than last year’s net profit level; however, SG&A intensity at 72.4% leaves limited room for operating leverage without restructuring or channel mix changes. Asset turnover (0.532 based on half-year revenue vs average assets proxy) remains modest for a consumer/cosmetics player with significant cash on hand, weighing on ROE; this could improve with stronger sales per store/consultant or better asset utilization. Financial leverage is conservative at ~1.50x assets/equity, contributing modestly to ROE. Concerning trends: SG&A growth is not disclosed in detail but SG&A at 33.39 (72.4% of sales) remains elevated relative to revenue scale, implying that if SG&A grows in line with or faster than sales, operating margin expansion could stall.

Growth Assessment

Revenue growth of 6.9% YoY to 46.10 looks healthy and is consistent with gradual consumer recovery and potentially improved in-store/customer activity. Operating income grew 18.0% YoY to 1.25, indicating positive operating leverage despite high SG&A intensity. Ordinary income growth (+21.8%) benefited marginally from non-operating income (0.21), led by investment securities gains (0.11) and dividends (0.04), but the core driver remains operations. Net income fell 45.2% YoY to 1.15, implying last year’s net was inflated by non-recurring gains or unusually low taxes; absent disclosure of extraordinary items, we assume a tough comparison rather than a structural deterioration. Margin mix: operating margin improved to 2.7%; net margin compressed to 2.5% due to below-the-line normalization. Outlook: near-term growth sustainability hinges on maintaining sales momentum while executing SG&A discipline. If revenue growth persists in mid-single digits and SG&A is contained, operating margin could gradually expand. Key watchpoints include channel mix (own stores vs. online), customer retention, and productivity per salesperson/store to enhance asset turnover.

Financial Health

Liquidity is strong: current ratio 186.6% and quick ratio 170.8%, supported by cash and deposits of 27.42 and receivables of 9.23 versus current liabilities of 25.46. No warnings on Current Ratio (<1.0) or leverage (D/E 0.50x is conservative). Maturity mismatch risk is low given cash exceeds current liabilities and inventory is modest (4.04), while accounts payable are small (0.63). Interest-bearing debt details are unreported, but interest coverage is effectively very high (reported 384.62x), suggesting minimal financial risk from borrowing costs. Total equity of 57.74 provides a solid buffer against 28.93 in liabilities. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF of 2.09 exceeds net income of 1.15 (OCF/NI = 1.82x), indicating high-quality earnings with strong cash conversion. Working capital dynamics appear favorable given the cash build and modest payables; however, the lack of detailed working capital reconciliation limits deeper analysis of receivables and inventory turns. Capex of 0.66 is manageable; a proxy FCF of ~1.43 (OCF 2.09 minus capex 0.66) suggests capacity to fund ordinary dividends and maintenance investments. With Investing CF and Dividends Paid unreported, full FCF coverage analysis is constrained. No clear signs of working capital manipulation are evident from the limited data, as cash generation outpaced accounting profit.

Dividend Sustainability

The calculated payout ratio is 74.5%, which is above the <60% benchmark for comfortable sustainability, especially given low ROE (2.0%) and ROIC (3.3%). Proxy FCF of ~1.43 indicates coverage for ordinary dividends may be adequate near term, but headroom is limited if growth capex or restructuring outlays rise. Given the high payout vs modest profitability, maintaining or increasing dividends would rely on continued OCF strength and/or SG&A-led margin improvements. Policy outlook: without explicit guidance, we assume a stable-to-cautious stance; a shift toward balancing shareholder returns with ROIC improvement would be prudent.

Risk Assessment

Business Risks:

• High SG&A intensity (72.4% of sales) constrains operating margin and profit scalability
• Dependence on in-person sales/service model exposes productivity and fixed-cost leverage risk
• Cosmetics demand sensitivity to consumer sentiment and competitive promotions
• Potential inventory obsolescence risk in cosmetics SKUs with shelf-life considerations
• Execution risk in channel mix optimization (stores vs. e-commerce) and customer retention

Financial Risks:

• Low ROIC (3.3%) and ROE (2.0%) indicate subpar capital efficiency
• Dividend payout ratio of 74.5% pressures retained earnings and reinvestment capacity
• Non-operating income contribution (0.21; 18.2% ratio) introduces some earnings variability
• Tax rate normalization can cause volatility in bottom-line results

Key Concerns:

• Net income down 45.2% YoY despite higher operating profit, likely due to prior-year one-offs or tax effects
• Sustained margin expansion requires structural SG&A reduction or significant sales productivity gains
• Limited disclosure on investing cash flows and dividend cash amounts constrains full FCF assessment

Investment Implications

Key Takeaways:

• Core operations improved: revenue +6.9% and operating income +18.0%, with ~25 bps operating margin expansion
• Net margin compressed by ~238 bps due to below-the-line normalization versus a high prior-year base
• Strong liquidity and cash generation (OCF/NI 1.82x) support near-term stability
• Capital efficiency remains weak (ROIC 3.3%, ROE 2.0%), necessitating margin and asset turnover improvements
• Dividend affordability is acceptable on a cash basis but tight relative to earnings and ROIC

Metrics to Watch:

• SG&A-to-sales ratio and progress on cost efficiency
• Operating margin trajectory and gross margin stability
• OCF to net income ratio and inventory/receivables turns
• Revenue growth by channel (stores vs. online) and same-store metrics
• ROIC trend and capex discipline
• Effective tax rate and presence/absence of non-recurring items

Relative Positioning: Within Japanese mid-cap cosmetics/beauty peers, C'BON exhibits healthy liquidity and improving operating profit but lags on profitability quality and capital efficiency, with higher SG&A intensity and lower ROIC/ROE than best-in-class direct-to-consumer or mass retail peers.

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