ICHIKURA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥8.40B
• Operating Income: ¥-919M
• Net Income: ¥-596M
• Earnings per Unit (EPU): ¥-107.96

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: Weak quarter with widening operating losses, negative ROE, and strained liquidity despite positive operating cash flow. Revenue declined 4.7% YoY to 84.05, while gross profit was 52.24, implying a gross margin of 62.2%. SG&A at 61.43 exceeded gross profit by 9.19, driving operating income to a loss of -9.19 (operating margin -10.9%). Ordinary income was -9.27 and net income -5.95 (EPS -107.96 JPY), underscoring a continued loss-making profile. ROE printed at -16.5% on high financial leverage of 5.41x (assets 194.93 vs equity 36.00), with asset turnover of 0.431 and net margin of -7.1%. The company generated positive operating cash flow of 6.21 despite the net loss, likely supported by non-cash items (depreciation 2.81) and working capital movements, but OCF/NI at -1.04 signals an earnings quality concern due to directionally opposite signs. Liquidity is tight with a current ratio of 79.2% and negative working capital of -27.77; short-term loans of 33.80 add refinancing pressure. Debt service capacity is weak: EBITDA of -6.38 and interest expense of 0.27 yield a negative interest coverage (-33.55x). ROIC is deeply negative at -24.2%, indicating value destruction. Non-operating items were modest (income 0.21, expenses 0.29), offering little offset to operating weakness. The tax line shows a benefit (-1.94), cushioning net loss but not altering the structural picture. Cash and deposits of 51.15 provide some buffer against near-term obligations, though current liabilities (133.62) remain well above current assets (105.85). Equity remains thin at 36.00, constraining flexibility and heightening sensitivity to further losses. Dividend visibility is low given losses and unreported DPS; any distribution would likely rely on balance sheet resources rather than earnings. Forward-looking, management likely needs SG&A rightsizing and revenue stabilization to restore operating leverage; until then, liquidity management and debt rollover risk are key focal points.

Profitability Analysis

ROE decomposition: ROE (-16.5%) = Net Profit Margin (-7.1%) × Asset Turnover (0.431) × Financial Leverage (5.41x). The dominant drag is net margin, reflecting operating losses as SG&A (61.43) exceeded gross profit (52.24). Asset turnover at 0.431 is modest and leverage is high, but the change driver vs prior periods is primarily profitability (operating margin -10.9% and EBITDA margin -7.6%). Business causes include negative operating leverage from revenue contraction (-4.7% YoY) and a cost base that did not flex down sufficiently (SG&A above gross profit). Sustainability: absent a material revenue rebound or cost restructuring, the current margin pressure appears persistent rather than one-time; depreciation (2.81) is recurring and non-operating gains are minimal. Red flags: SG&A growth vs revenue growth cannot be measured due to unreported YoY SG&A, but the absolute gap (gross profit < SG&A by 9.19) is structurally concerning. Ordinary income (-9.27) tracks operating losses, indicating limited cushion from non-operating results.

Growth Assessment

Top-line fell 4.7% YoY to 84.05, indicating demand softness and/or reduced transactional volume. Gross margin held at a high 62.2%, suggesting mix/price discipline or service-heavy revenue, but it was insufficient to counteract fixed/semi-fixed SG&A. Operating income deteriorated to -9.19; we cannot compute precise bps YoY changes due to missing prior margin data, but directionally profitability worsened. With EBITDA at -6.38 and minimal non-operating offsets, earnings quality is driven primarily by core operations rather than one-off items. Revenue sustainability is uncertain in light of the negative operating leverage; a further small decline in sales risks disproportionately larger losses. Outlook hinges on SG&A normalization, store/network efficiency, and potential seasonal uplift; however, negative ROIC (-24.2%) implies returns are below cost of capital, pressuring future investment appetite. Near term, stabilization rather than growth appears the base case absent evidence of restructuring.

Financial Health

Liquidity is weak: current ratio 0.79 (<1.0 warning) and quick ratio 0.79; working capital is -27.77. Maturity mismatch risk is present: current liabilities (133.62) exceed current assets (105.85), and short-term loans (33.80) elevate refinancing needs, though cash and deposits (51.15) partially mitigate. Solvency is stretched: D/E is 4.41 (>2.0 warning) with equity only 36.00 against total assets of 194.93. Interest-bearing debt detail is unreported, but disclosed loans total 43.84 (short 33.80, long 10.04). Debt service capacity is poor: EBITDA negative and interest coverage -33.55x. No explicit off-balance sheet obligations are disclosed in the data provided; absence of disclosure does not preclude leases or guarantees. Overall, balance sheet resilience is limited and sensitive to further losses.

Cash Flow Quality

OCF was +6.21 despite NI of -5.95, yielding OCF/NI = -1.04 (<0.8 threshold flag due to opposite signs). Drivers likely include non-cash depreciation (2.81), tax benefit (-1.94), and working capital inflows; without a detailed CF statement, sustainability is uncertain. Investing CF is unreported; therefore we cannot compute FCF precisely or assess capex intensity. Financing CF was -9.91, indicating net repayments/dividends/other financing outflows; with OCF positive, cash likely declined modestly after financing outflows. Potential working capital red flags include the structural negative working capital position; however, inventory data are unreported, limiting manipulation assessment. Given negative EBITDA and operating losses, positive OCF may not be repeatable without continued working capital releases.

Dividend Sustainability

Dividend data (DPS, total dividends) are unreported; a calculated payout ratio of -13.0% suggests possible distributions despite losses, but this cannot be validated from the dataset. With NI negative and EBITDA negative, coverage from earnings is not available; FCF coverage cannot be assessed due to missing investing CF/capex. Balance sheet capacity exists via cash (51.15), but liquidity pressure (current ratio 0.79) and refinancing needs argue for preservation of cash. Policy outlook: prudence would suggest suspension or reduction until profitability and FCF normalize; clarity requires management guidance.

Risk Assessment

Business Risks:

• Demand softness leading to revenue decline (-4.7% YoY)
• Negative operating leverage as SG&A exceeds gross profit
• Potential inventory risk/obsolescence (inventory levels unreported)
• Execution risk around cost restructuring and store/network optimization
• Seasonality/event-driven volatility typical for apparel/bridal exposures

Financial Risks:

• Low liquidity (current ratio 0.79) and negative working capital (-27.77)
• High leverage (D/E 4.41) and thin equity base (36.00)
• Refinancing risk on short-term loans (33.80) amid negative EBITDA
• Weak debt service capacity (interest coverage -33.55x)
• Potential covenant pressure due to losses and ROIC -24.2%

Key Concerns:

• Sustained operating losses (operating margin -10.9%)
• ROE -16.5% and ROIC -24.2% indicate value destruction
• OCF/NI -1.04 suggests earnings quality inconsistency
• Limited non-operating income to buffer core weakness
• Data gaps (capex, inventories, DPS) cloud assessment of FCF and dividend capacity

Investment Implications

Key Takeaways:

• Operating structure currently loss-making with SG&A > gross profit by 9.19
• Liquidity tight; current liabilities materially exceed current assets
• Leverage high with equity thin, magnifying losses into ROE -16.5%
• Positive OCF driven by non-cash/working capital; durability uncertain
• ROIC -24.2% underscores need for restructuring or mix shift to profitable lines

Metrics to Watch:

• Quarterly SG&A trajectory versus gross profit (aim for breakeven crossover)
• Operating margin and EBITDA improvement toward positive territory
• Working capital movements (especially inventories and payables) and OCF sustainability
• Net debt and short-term loan rollover profile
• Capex/Investing CF disclosure to evaluate FCF and dividend capacity

Relative Positioning: Versus domestic specialty retail/bridal peers, the company is weaker on profitability (negative EBITDA and operating margin), more leveraged (D/E > 4x), and tighter on liquidity (current ratio < 1), leaving limited buffer against macro or demand shocks.

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