| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥182.5B | ¥172.4B | +5.9% |
| Operating Income / Operating Profit | ¥42.8B | ¥53.7B | -20.3% |
| Ordinary Income | ¥42.9B | ¥53.6B | -19.9% |
| Net Income / Net Profit | ¥76.3B | ¥36.6B | +108.5% |
| ROE | 31.8% | 20.3% | - |
For the cumulative results to Q3 FY2026, Revenue was ¥182.5B (YoY +¥10.1B +5.9%), Operating Income was ¥42.8B (YoY -¥10.9B -20.3%), Ordinary Income was ¥42.9B (YoY -¥10.7B -19.9%), and Net Income was ¥76.3B (YoY +¥39.7B +108.5%). Revenue expanded steadily, but deterioration in gross margin and increases in SG&A led to a significant decline in profit at the operating level. Conversely, recognition of a special gain on sale of investment securities of ¥67.6B caused Net Income to surge to more than double the prior year. The quarter highlighted weakening core earnings power and dependence on one-off gains.
[Revenue] Revenue was ¥182.5B, up +5.9% YoY. By segment, KeePerLABO Operations generated ¥100.3B (YoY +7.1%, 55.0% of total), and KeePerr Products & Related Business generated ¥87.1B (YoY +5.3%, 47.7% of total), with both segments growing steadily. LABO operations benefited from network expansion and comp store sales growth, while the products-related business was driven by increased sales of KeePer coating agents and chemical products. However, Cost of Sales rose to ¥97.9B (YoY +15.4%), increasing at a much faster pace than Revenue, and Gross Margin deteriorated to 46.4% from 52.4% in the prior year (down ~6.0pt). This is presumed to reflect higher raw material costs and increased store operation expenses.
[Profitability] Gross Profit declined to ¥84.7B (YoY -6.3%), and SG&A rose to ¥41.9B (YoY +12.4%), growing faster than Revenue. SG&A Ratio increased to 22.9% from 21.3% in the prior year (+1.6pt), with upfront costs such as personnel, advertising, and system investments weighing on results. As a result, Operating Income was ¥42.8B (YoY -20.3%), and Operating Margin compressed to 23.4% from 31.1% (down 7.7pt). Ordinary Income was ¥42.9B (YoY -19.9%), reflecting a similar downtrend to Operating Income; non-operating items were broadly neutral. A special gain on sale of investment securities of ¥67.6B was recorded, pushing Profit Before Tax to ¥110.5B (YoY +106.2%). After deducting Corporate Taxes of ¥34.2B, Net Income was ¥76.3B (YoY +108.5%), producing an unusually high Net Margin of 41.8%—driven by the one-off ¥67.6B special gain and therefore should be assessed separately from recurring earning power. In conclusion, results show revenue up but profit down, with a clear deterioration in core business profitability.
KeePerLABO Operations posted Revenue of ¥100.3B (YoY +7.1%), Operating Income of ¥11.2B (YoY -45.3%), and an Operating Margin of 11.2%. Revenue increased but profits fell sharply; declines in store operation efficiency and higher personnel and maintenance costs pressured profitability. KeePerr Products & Related Business reported Revenue of ¥87.1B (YoY +5.3%), Operating Income of ¥31.6B (YoY -4.8%), and an Operating Margin of 36.2%, maintaining a high margin level. High-margin product sales remain a pillar of the company's overall profitability. Of total Operating Income of ¥42.8B, Products & Related accounted for 73.8% and LABO Operations 26.2%, indicating high dependence on the products business. Improving LABO profitability is key to restoring overall margins.
[Profitability] Operating Margin stood at 23.4%, down 7.7pt from 31.1% a year earlier, reflecting the combined impact of lower gross margin and higher SG&A Ratio. Net Margin is 41.8% but, excluding the special gain of ¥67.6B, the substantive net margin is estimated at about 8%, highlighting weakened core earning power. ROE is high at 31.8% but is driven by the one-off gain; fundamental ROE is expected to decline when Net Income normalizes. [Cash Quality] Cash and Deposits are ¥132.8B, representing 41.5% of Total Assets and up +218.3% YoY, with liquidity markedly improved following the sale of investment securities. Inventory Days have extended to approximately 66 days from about 51 days a year earlier, raising concerns about inventory efficiency. [Investment Efficiency] Total Asset Turnover fell to 0.570x from about 0.695x YoY, indicating worse asset efficiency. Fixed Assets increased to ¥142.3B (YoY +40.9%) as store expansion investments precede returns, diluting turnover. [Financial Soundness] Equity Ratio improved to 74.9% from 72.7% YoY, at a very healthy level. Interest-bearing Debt is ¥5.6B (long-term borrowings), effectively near zero net debt when considering Cash of ¥132.8B—i.e., a net cash position. Current Ratio is 340.0% and Quick Ratio is 306.3%, indicating very strong short-term liquidity and minimal funding risk. Asset retirement obligations are ¥9.7B, accounting for 12.1% of Total Liabilities, and should be noted as a potential future cash outflow risk associated with store expansion.
The cash flow statement is not disclosed, but balance sheet movements indicate Cash and Deposits rose to ¥132.8B (+¥91.1B, +218.3% YoY), primarily due to the sale and cash inflow from investment securities associated with the ¥67.6B gain. Investment securities declined to ¥0.8B (down ¥42.7B, -98.1% YoY), reflecting reduced market risk and increased liquidity. Inventories increased to ¥17.6B (+¥5.8B, +49.2% YoY), showing marked stock buildup tied to demand assumptions and assortment strengthening, increasing working capital cash strain. Long-term borrowings declined to ¥5.6B (down ¥3.8B, -40.3% YoY), indicating de-leveraging. Retained Earnings rose to ¥237.5B (+¥59.9B, +33.7% YoY), expanded by the Net Income of ¥76.3B (including the one-off gain). From a Free Cash Flow perspective, cash generation from operations likely weakened due to gross margin deterioration and inventory buildup, but one-off cash inflow from the sale substantially increased period cash—thus the period’s cash increase does not reflect sustainable operating strength. Going forward, improving inventory turns and optimizing working capital, and restoring core operating CF, are key to enhancing capital efficiency.
Of Net Income ¥76.3B, a special gain on sale of investment securities accounted for ¥67.6B, meaning one-off factors comprised 88.6% of reported Net Income. Adjusting Ordinary Income of ¥42.9B by an effective tax rate of about 31% yields an estimated ordinary-base Net Income of approximately ¥29.6B, indicating substantive earning power is far below reported Net Income. Non-operating income was ¥1.0B, mainly ¥0.6B in dividend income, and non-operating expenses were ¥0.8B, mainly ¥0.6B in foreign exchange losses, leaving non-operating items roughly neutral. From an accrual perspective, the large inventory increase (+¥5.8B) is a cash binding factor and reduces the quality of Operating Income. Excluding the special gain, ordinary-base earnings indicate the sustainable profit-generating capacity, making recovery of gross margin and SG&A efficiency essential to improve earnings quality.
Full Year guidance is Revenue ¥263.0B (YoY +13.9%), Operating Income ¥72.9B (YoY +2.7%), Ordinary Income ¥72.9B (YoY +2.2%), and Net Income ¥93.4B (YoY +91.0%). Progress to Q3 cumulative results is: Revenue 69.4%, Operating Income 58.7%, Ordinary Income 58.8%, Net Income 81.7%. While operating and ordinary progress are behind schedule, Net Income is front-loaded due to the one-off gain. To achieve the full-year forecast, Q4 would need Revenue of ¥80.5B (vs. prior year Q4 ¥45.8B, +75.8%) and Operating Income of ¥30.1B (requiring +155.9% vs. prior year Q4), implying a significant upside requirement and high difficulty. The 58.7% progress rate for Operating Income suggests downside revision risk to the full-year guidance; Q4 performance and company disclosures warrant close monitoring. EPS guidance based on Net Income ¥93.4B is ¥342.22, compared with cumulative Q3 EPS of ¥279.64, indicating limited upside for full-year earnings per share.
A dividend of ¥40 per share was paid at Q3-end, with full-year dividend guidance of ¥60. Based on the average shares outstanding of 27,291 thousand shares, total full-year dividends amount to approximately ¥1.64B, yielding a Payout Ratio of about 17.5% against the full-year Net Income guidance of ¥93.4B—a conservative level. Given cash and deposits of ¥132.8B, dividend sustainability is very high. No share buyback was disclosed; the current policy is dividend-centric. With a low Payout Ratio, there is considerable room for future dividend increases or enhanced shareholder returns, and evolution of capital policy is key to improving shareholder value.
Gross Margin Deterioration Risk: Cost of Sales Ratio is 53.6%, worsening 6.0pt from 47.6% YoY, with higher raw material costs and increased store operating expenses pressuring profitability. Continued increases in procurement prices or elevated personnel and energy costs could entrench gross margin decline and further compress Operating Margin. Progress in price pass-through and cost efficiency will be important monitoring metrics.
Inventory Buildup and Lower Capital Efficiency Risk: Inventories rose to ¥17.6B (+49.2% YoY), and Inventory Days extended to about 66 days from ~51 days a year earlier. While driven by demand assumptions and assortment strengthening, risks of stagnant or obsolete inventory are elevated and cash tied up in working capital is increasing. Potential inventory write-downs or worsening cash conversion cycle could deteriorate capital efficiency.
LABO Business Profitability Risk: KeePerLABO Operations Operating Income fell to ¥11.2B (YoY -45.3%), with margin down to 11.2% from 20.5% a year earlier (down 9.3pt). Store expansion-related operational efficiency declines, difficulty securing personnel, and weather-driven demand variability are pressuring profitability. Insufficient improvement in existing store utilization or inadequate earnings management for new stores could continue to exert downward pressure on overall corporate profits.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 23.4% | 8.2% (3.6%–18.0%) | +15.3pt |
| Net Margin | 41.8% | 6.0% (2.2%–12.7%) | +35.8pt |
Operating Margin exceeds the industry median by 15.3pt, maintaining a high-profitability profile. Net Margin is substantially above the industry median due to one-off gains, but relative advantage narrows on an ordinary basis.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.9% | 10.4% (-1.1%–19.5%) | -4.5pt |
Revenue growth is 4.5pt below the industry median, placing the company in the mid-to-lower range for growth. Strengthening top-line expansion capability is a challenge.
※ Source: Company compilation
Decline in core earnings due to gross margin deterioration and higher SG&A is apparent; Operating Margin fell to 23.4% (down 7.7pt YoY). LABO margin declined to 11.2% (down 9.3pt), making store operation efficiency improvement central to restoring corporate profitability. A strong Q4 operating recovery would require a substantial upside, making full-year guidance attainment challenging. Cost control, ability to pass on price increases, and recovery in existing store utilization are short-term focal points.
While Net Income surged to ¥76.3B due to the ¥67.6B gain on sale of investment securities, core Net Income excluding the one-off is estimated at approximately ¥29.6B, well below reported figures. Cash rose to ¥132.8B and the financial position is very robust, but inventories increased by +49.2% and Inventory Days extended to 66 days. Optimizing working capital and improving the cash conversion cycle are medium-term priorities to enhance capital efficiency. The Payout Ratio is about 17.5%, conservative, leaving ample room for enhanced shareholder returns; evolution of capital policy is expected.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.