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

Financial Highlights

• Net Sales: ¥4.61B
• Operating Income: ¥125M
• Net Income: ¥-61M
• 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

C'BON (49260) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥4.61bn, up 6.9% YoY, indicating a modest top-line recovery. Gross profit reached ¥3.240bn, translating to a very high gross margin of 70.3%, consistent with a premium cosmetics/service model and value-added direct channels. Operating income was ¥125m (+18.0% YoY), lifting operating margin to 2.7%, showing some operating leverage despite continued SG&A investments. Ordinary income was ¥144m, suggesting modest positive non-operating contributions and limited interest burden. Net income came in at ¥115m, down 45.2% YoY, implying adverse non-recurring items and/or tax effects relative to the prior year; this contrasts with improved operating profit and warrants focus on below-OP drivers. DuPont metrics show net margin of 2.49%, asset turnover of 0.532x, and financial leverage of 1.50x, yielding ROE of 1.99%, which is low but improving on the operating line. Liquidity is sound with a current ratio of 185% and quick ratio of 169%, supported by working capital of ¥2.123bn. Solvency appears conservative with a debt-to-equity ratio of 0.49x and interest coverage at 625x, underscoring minimal financial risk from debt service. Operating cash flow was negative at ¥-234m despite positive earnings, resulting in an OCF/Net Income ratio of -2.04, highlighting an earnings–cash gap that requires monitoring. Inventories are ¥404m, and with negative OCF, working capital movements (receivables, inventories, payables) are likely key drivers of cash usage. DPS was reported as ¥0 with a payout ratio of 0%, consistent with the current focus on rebuilding cash given negative OCF. The equity ratio was shown as 0.0% in the dataset but should not be interpreted as zero given total equity of ¥5.774bn; the implied assets-to-equity ratio is 1.50x. Several items in the cash flow and share data were disclosed as zero; per disclosure conventions, these reflect unreported line items rather than actual zeros. Overall, the quarter shows healthy gross profitability and improving operating income, offset by weaker net income and negative operating cash flow, indicating that execution on cost control and working capital discipline remains critical. Looking ahead, sustaining revenue growth while converting earnings to cash will be the key to stabilizing the financial profile and reinstating shareholder returns.

Profitability Analysis

ROE_decomposition: ROE 1.99% = Net Margin 2.49% × Asset Turnover 0.532 × Financial Leverage 1.50. Net margin is modest, asset turnover is low for consumer products, and leverage is conservative, leading to a low overall ROE. margin_quality: Gross margin is high at 70.3%, reflecting a premium product/service mix and direct channel economics. Operating margin is 2.7% (¥125m / ¥4.61bn), indicating elevated SG&A intensity. Ordinary margin is 3.1% and net margin is 2.49%, with the gap between OP and net partly explained by taxes and potential extraordinary items. Interest burden is negligible (¥0.2m), supporting clean operating profitability. operating_leverage: Operating income growth (+18% YoY) outpaced revenue growth (+6.9% YoY), demonstrating positive operating leverage in the period. The small absolute OP base suggests leverage sensitivity: modest revenue delta can materially affect operating profit given the high gross margin and fixed cost structure.

Growth Assessment

revenue_sustainability: Revenue rose 6.9% YoY to ¥4.61bn; sustainability depends on traffic and spend in the company’s direct channels/salons and effectiveness of customer acquisition and retention. profit_quality: Gross profit scaled with sales, but the conversion to operating profit remains constrained by SG&A. Net income declined 45.2% YoY despite OP growth, pointing to the influence of below-operating items and/or tax normalization relative to a strong prior-year comparator. outlook: With high gross margins and low financial leverage, incremental sales should translate to disproportionate OP gains if SG&A is contained. However, conversion to net profit and cash is the swing factor, contingent on working capital discipline and limited extraordinary charges.

Financial Health

liquidity: Current ratio 185.2% and quick ratio 169.0% indicate ample short-term liquidity. Working capital totals ¥2,122,979,000. solvency: Debt-to-equity is 0.49x (Total liabilities ¥2.820bn vs. Equity ¥5.774bn). Interest coverage is 625x (OP ¥125m / Interest ¥0.2m), signaling low refinancing risk. capital_structure: Assets of ¥8.667bn and equity of ¥5.774bn imply financial leverage (Assets/Equity) of 1.50x, conservative for the sector. The reported equity ratio of 0.0% appears as an undisclosed datapoint; implied equity ratio is approximately 66.6% based on provided balances.

Cash Flow Quality

earnings_quality: Operating CF of ¥-234,291,000 vs. net income of ¥115,000,000 yields OCF/NI of -2.04, indicating weak cash conversion this half. This likely reflects working capital outflows rather than core profitability issues given positive OP. FCF_analysis: Investing CF was shown as ¥0 (undisclosed), so capex could not be assessed; FCF was indicated as 0 in the dataset and should be treated as not disclosed. True FCF cannot be derived without capex detail. working_capital: Inventories are ¥404,029,000. With negative OCF and strong liquidity ratios, changes in receivables, inventories, or payables likely drove cash use; tighter inventory turnover and collections will be essential to restore cash generation.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 and payout ratio is 0.0%. With EPS of ¥26.94 and negative OCF, retaining earnings is consistent with preserving liquidity. FCF_coverage: FCF is not disclosed; thus, dividend coverage by FCF cannot be assessed. Current policy appears conservative given cash outflow from operations. policy_outlook: A resumption of dividends would likely require sustained positive OCF, visibility on capex needs, and stabilization of net income. Monitoring management commentary on capital allocation is key.

Risk Assessment

Business Risks:

• Dependence on direct salon/channel traffic and customer retention.
• Marketing efficiency and customer acquisition cost pressure.
• Inventory obsolescence risk given product cycles and promotions.
• Competition from larger cosmetics peers and e-commerce pure-plays.
• Regulatory changes in cosmetics labeling, safety, and advertising.
• Labor availability and wage inflation impacting store-level profitability.
• Potential store footprint optimization leading to revenue volatility.
• Brand perception and repeat purchase dynamics in a premium segment.

Financial Risks:

• Negative operating cash flow despite positive net income.
• Sensitivity of earnings to working capital swings.
• Low operating margin leaves limited cushion for shocks.
• Potential extraordinary items affecting bottom line and volatility.
• Small scale limits economies of scale versus major peers.

Key Concerns:

• Earnings-to-cash conversion (OCF/NI ratio of -2.04).
• Sustainability of operating margin improvement amid SG&A pressure.
• Drivers of YoY net income decline despite higher OP (below-OP items/taxes).

Investment Implications

Key Takeaways:

• Revenue growth of 6.9% YoY with very strong gross margin (70.3%).
• Operating income up 18% YoY; operating margin at 2.7% shows leverage potential.
• Net income down 45.2% YoY, highlighting below-operating headwinds.
• ROE is low at 1.99% given modest margins and low asset turnover.
• Liquidity and solvency are solid (current ratio 185%, D/E 0.49x).
• Operating cash flow negative (¥-234m), creating a cash conversion gap.
• Dividend suspended (DPS ¥0), consistent with conserving cash.

Metrics to Watch:

• Same-store sales and customer retention/average ticket.
• SG&A ratio and efficiency initiatives.
• Operating cash flow and OCF margin.
• Working capital days (inventory, receivables, payables).
• Extraordinary gains/losses and tax rate normalization.
• Capex and store count/format changes.
• EBITDA margin trajectory and OP sensitivity to sales.

Relative Positioning: Smaller-scale, high-gross-margin player with direct-channel strengths but structurally lower operating margins and ROE versus major Japanese cosmetics peers; conservative leverage offsets operational volatility, making cash conversion the key differentiator.

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
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