Achilles (5142) FY2027 Q1 Earnings Report

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Executive Summary

This was a strong earnings period, with substantial increases in operating income and ordinary income in addition to revenue growth, clearly demonstrating improved profitability. Revenue was ¥21.36B (+16.2% YoY), operating income was ¥1.18B (+164.0%), ordinary income was ¥1.53B (+306.4%), and net income was ¥1.02B (+315.4%). Operating leverage was effective due to a decline in the cost-of-sales ratio and restrained growth in SG&A expenses (+1.5% YoY), while ordinary income also benefited from higher non-operating income, including a ¥0.20B foreign exchange gain.

Factors Affecting Earnings

【Revenue】Revenue was ¥21.36B, up +16.2% YoY. While the two core businesses led growth, with the First Business Division at ¥13.49B (+21.4%) and the Second Business Division at ¥6.59B (+20.0%), the Shoes BU continued to decline, with revenue of ¥1.56B (-21.4%), becoming a headwind to overall company growth.

【Profit and Loss】Operating income was ¥1.18B (+164.0% YoY), and the gross profit margin improved to 22.4%. Gross profit growth (+19.5%) exceeded the increase in SG&A expenses (+1.5%), supporting profit expansion. Ordinary income of ¥1.53B (+306.4% YoY) benefited significantly from ¥0.44B in non-operating income, including a ¥0.20B foreign exchange gain, resulting in net income of ¥1.02B (+315.4% YoY). Extraordinary losses were minor, consisting of a ¥0.02B loss on disposal of fixed assets. Overall, this was an earnings period characterized by revenue and profit growth.

Segment Analysis

The First Business Division recorded revenue of ¥13.49B (+21.4%), operating income of ¥0.97B (+66.2%), and a profit margin of 7.2%. The Second Business Division recorded revenue of ¥6.59B (+20.0%), operating income of ¥0.88B (+70.4%), and a profit margin of 13.3%, demonstrating the highest profitability company-wide. The Shoes BU recorded revenue of ¥1.56B (-21.4%) and an operating loss of ¥0.07B, improving from the ¥0.11B loss in the previous year, although it remained in the red. Unallocated company-wide expenses totaled ¥0.60B, an increase of +8.9% YoY, partially offsetting the growth in total segment profit. While revenue and profit growth in the First and Second Business Divisions drove company-wide performance, improving the profitability of the Shoes BU remains an area to monitor.

Key Financial Indicators

【Profitability】The operating margin improved to 5.5% from 2.4% in the same period of the previous year, while the net profit margin improved to 4.8% from 1.3%. The gross profit margin increased to 22.4% from 21.8% in the same period of the previous year.【Cash Flow Quality】Comprehensive income was ¥1.71B, exceeding net income of ¥1.02B. The difference consisted of ¥0.64B in valuation differences on available-for-sale securities and ¥0.15B in foreign currency translation adjustments, indicating that accrual-related factors were limited.【Investment Efficiency】Annualized ROE was 9.2%, supported by the total asset turnover ratio and an equity ratio of 51.3%.【Financial Soundness】Current assets of ¥48.57B substantially exceeded current liabilities of ¥23.67B, while cash and deposits of ¥9.96B exceeded short-term borrowings of ¥6.90B. Against interest-bearing debt of ¥17.15B, the equity ratio was 51.3%, indicating a stable capital base.

Cash Flow Analysis

As the cash flow statement has not been disclosed, funding trends are assessed based on changes in the balance sheet. Cash and deposits were ¥9.96B, up from ¥9.75B in the same period of the previous year, while accounts payable were ¥9.99B, an increase of +27.9% from ¥7.81B in the same period of the previous year. The increase in purchases accompanying revenue expansion is considered the primary driver of the increase in accounts payable, indicating that part of working capital was absorbed on the liability side. Inventories were ¥9.11B, slightly up from ¥8.95B in the same period of the previous year, broadly in line with revenue growth. Property, plant and equipment was ¥19.43B, representing only a modest increase YoY, indicating that large-scale investment remained limited.

Quality of Earnings

Of ordinary income of ¥1.53B, operating income from the core business was ¥1.18B. The difference of ¥0.35B represents the net amount of non-operating income of ¥0.44B (including a ¥0.20B foreign exchange gain and ¥0.08B in dividend income) and non-operating expenses of ¥0.09B (including ¥0.08B in interest expenses). The foreign exchange gain was equivalent to 17.1% of operating income, and it should be noted that the increase in ordinary income (+306.4%) reflects not only improvement in the core business but also the impact of foreign exchange, a temporary factor. Extraordinary losses consisted solely of a ¥0.02B loss on disposal of fixed assets and had a minor impact on net income. Comprehensive income of ¥1.71B exceeded net income of ¥1.02B, primarily due to an increase in valuation differences on securities; therefore, it does not impair the underlying quality of earnings for the current period.

Earnings Forecasts and Guidance

Against the full-year revenue forecast of ¥82.50B, Q1 progress was 25.9%, a standard level. Meanwhile, progress against the full-year operating income forecast of ¥2.20B (-26.0% YoY) was 53.4%, and progress against the full-year ordinary income forecast of ¥2.00B (-49.0% YoY) was 76.4%; both substantially exceeded the standard progress rate of 25%. The high Q1 progress despite the full-year forecast assuming lower profit YoY suggests that the Q1 foreign exchange gain and the effect of restrained SG&A expenses may have been conservatively assumed for the full year. The earnings forecast and dividend forecast have been revised this time.

Shareholder Returns

The full-year dividend forecast is ¥50.00 per share, and the forecast payout ratio based on the full-year EPS forecast of ¥160.99 is 31.1%. Based on the average number of shares outstanding during the period of 13,665,761 shares, total annual dividends are approximately ¥0.68B, resulting in a similar payout ratio relative to the full-year net income forecast of ¥2.20B. Retained earnings of ¥15.97B provide a reasonable capacity to fund dividends. There was no new disclosure regarding share repurchases; evaluation is based on the payout ratio rather than the total return ratio.

Risk Factors

1. Profitability of the Shoes BU: Revenue declined -21.4% YoY, and the segment loss of ¥0.07B continues. A delayed recovery in demand could weigh on improvement in the company-wide profit margin.

2. Quality of Ordinary Income: The ¥0.20B foreign exchange gain was equivalent to 17.1% of operating income of ¥1.18B, and a reversal in foreign exchange rates could become a source of volatility in ordinary income. The 76.4% progress rate for full-year ordinary income may include this temporary factor.

3. Short-Term Debt Composition and Working Capital: The ratio of short-term liabilities, including short-term borrowings of ¥6.90B, is relatively high, while accounts payable increased +27.9% YoY. Although cash and deposits exceed short-term borrowings, the refinancing terms of borrowings and the sustainability of increased purchases require continued monitoring.

Industry Benchmark (Reference; Company Research)

Key Takeaways from the Results

1. Revenue increased +16.2%, while operating income increased +164.0%, confirming strong operating leverage driven by improved gross profit margins and restrained SG&A expenses. Revenue and profit growth in the First and Second Business Divisions were the primary drivers.

2. The operating margin improved to 5.5% but remained below the industry median of 8.7%, while the increase in ordinary income included the temporary factor of a foreign exchange gain. How to assess the high Q1 progress rate while the full-year forecast assumes lower profit YoY will be a key point to monitor going forward.

3. The current ratio and equity ratio (51.3%) remain at stable levels, and the company is improving profitability while maintaining its financial foundation. Meanwhile, the continued losses in the Shoes BU and increase in accounts payable warrant attention from a working capital perspective.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥2,786–¥2,948 at ±1% for the cost of equity, and ¥2,852–¥2,873 at ±0.1 for ω.

Notes:

• As net income progress against the full-year forecast (46%) exceeds the standard rate (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of forecast tend to exceed their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a time lag relative to the full-year forecast).

(Calculation model: Residual income model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share 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 discretion and responsibility, after consulting a professional where necessary.

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