Quick View
| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥80.9B | ¥77.5B | +4.4% |
| Operating Income | −¥5.7B | −¥6.4B | +11.3% |
| Ordinary Income | −¥7.4B | −¥7.8B | +5.0% |
| Net Income | −¥6.8B | −¥7.4B | +7.3% |
| ROE | −11.1% | −74.3% | - |
Executive Summary
Although revenue increased, the operating loss continued and improvement in profitability remained limited. Revenue was ¥80.9B (+4.4% YoY), operating income was ¥-5.7B (an 11.3% improvement in the loss amount from ¥-6.4B in the previous year), ordinary income was ¥-7.4B (同+5.0%), and net income was ¥-6.8B (同+7.3%). Growth in the core pawnbroking and secondhand goods trading business supported the increase in revenue; however, the structure in which selling, general and administrative expenses exceed gross profit continued, and the consolidated operating loss remained.
Factors Affecting Performance
【Revenue】Revenue was ¥80.9B, up +4.4% year on year. By segment, the pawnbroking and secondhand goods trading business, which accounts for approximately 97% of consolidated revenue, increased from ¥74.98B to ¥78.46B, with growth in pawn fee revenue (¥6.35B→¥6.88B) driving growth. Meanwhile, the Electrical Equipment Business (industrial lighting and electrical conduit) recorded ¥2.5B, a decline from the previous year, indicating that growth remains dependent on the core business.
【Profit and Loss】The gross profit margin was 28.2%, within the benchmark range for general retail, but the SG&A ratio was 35.3%, exceeding gross profit, resulting in an operating margin of -7.0%. The segment loss in the pawnbroking and secondhand goods trading business narrowed from ¥-3.4B to ¥-2.6B, but consolidated operating loss reached ¥-5.7B after the addition of ¥3.7B in corporate expenses. Ordinary loss was ¥-7.4B, with non-operating expenses of ¥1.8B, including ¥0.6B in interest expenses and ¥1.2B in handling fees, expanding the loss. Extraordinary income and losses were very small (income of ¥0.0B and loss of ¥0.1B), and their impact on performance was limited. In conclusion, the results reflect higher revenue and a reduced loss, while the structurally loss-making condition continues.
Segment Analysis
The pawnbroking and secondhand goods trading business recorded revenue of ¥78.5B (approximately 97% of the consolidated total), an operating loss of ¥-2.6B, and a profit margin of -3.3%, representing a narrower loss from ¥-3.4B in the previous year. The Electrical Equipment Business is small in scale, with revenue of ¥2.5B, but highly profitable, recording operating income of ¥0.9B and a profit margin of 36.5%; its impact on consolidated performance is limited. Corporate expenses, consisting of administrative expenses not allocated to individual segments, were ¥-3.7B and expanded the consolidated operating loss in addition to the loss in the core business. Improvement in consolidated performance is structurally dependent on a recovery in the profitability of the core pawnbroking and secondhand goods trading business.
Key Financial Metrics
【Profitability】The operating margin was -7.0% and the net profit margin was -8.5%, both in loss territory. Since the SG&A ratio of 35.3% exceeded the gross profit margin of 28.2%, profitability in the core business remains a challenge.【Cash Flow Quality】Inventories were ¥21.8B, accounting for 21.5% of total assets, and inventory days had lengthened to approximately 103 days on an annualized basis, indicating high risks of funds being tied up and inventory valuation losses.【Investment Efficiency】ROE was -11.1%. The deterioration in the net profit margin was the primary cause of the decline in capital efficiency, while the impacts of total asset turnover and financial leverage were relatively small.【Financial Soundness】The equity ratio improved substantially to 61.0% due to a private placement of new shares; however, all ¥32.6B of interest-bearing debt consisted of short-term borrowings, and insufficient interest coverage amid operating losses represents a major financial risk.
Cash Flow Analysis
As actual figures from the cash flow statement were not included in the disclosed data, cash trends are analyzed based on changes in the balance sheet. Cash and deposits increased significantly from ¥5.6B in the same period of the previous year to ¥34.2B, primarily due to ¥43.7B in funds raised through a private placement of new shares. Total assets expanded from ¥62.8B to ¥101.2B, while net assets increased from ¥9.9B to ¥61.7B, substantially strengthening the capital base. Meanwhile, inventories of ¥21.8B accounted for 21.5% of total assets, indicating that funds continue to be tied up in inventory and that cash generation from operating activities is likely limited. Short-term borrowings remained unchanged at ¥32.6B, suggesting that the funds raised through the capital increase were allocated to business operating funds and stabilization of the financial base.
Quality of Earnings
In terms of recurring business performance, the narrowing loss in the pawnbroking and secondhand goods trading business contributed to an improvement in operating performance. Extraordinary income and losses (income of ¥0.0B and loss of ¥0.1B) were insignificant, and the impact of temporary factors was limited. Of the ¥1.8B in non-operating expenses, ¥0.6B in interest expenses and ¥1.2B in handling fees expanded the ordinary loss; the difference from ¥0.1B in non-operating income indicates a heavy financial cost burden. Comprehensive income was ¥-7.0B, almost at the same level as net income attributable to owners of the parent of ¥-6.8B, with no significant divergence aside from foreign currency translation adjustments of ¥-0.3B. The tax burden (income taxes, etc. of ¥-0.7B) was limited, and the deterioration in profit and loss was primarily attributable to the profitability structure of the underlying business. No significant concerns regarding earnings quality from an accrual perspective are evident.
Earnings Forecasts and Guidance
The full-year forecasts are revenue of ¥104.2B (+1.8% YoY), operating income of ¥-6.0B, ordinary income of ¥-7.2B, and forecast EPS of ¥-3.23, with no revisions to the earnings or dividend forecasts as of the current quarter. The Q3 cumulative revenue progress rate was approximately 77.7%, exceeding the standard 75% level. Meanwhile, the cumulative operating loss was ¥5.7B, representing 94.7% of the full-year forecast, while the cumulative ordinary loss was ¥7.4B, already exceeding the full-year forecast at 102.6%. Improvement in profit and loss is necessary to achieve the full-year forecasts over the remaining quarters, and progress on the profit front is more challenging than on the revenue front.
Shareholder Returns
The Q2 dividend was ¥0 per share, and the full-year dividend forecast is also ¥0, meaning that the company continues to pay no dividends. As net income attributable to owners of the parent is negative, a meaningful payout ratio cannot be calculated. No share repurchases have been confirmed, and the company has not provided shareholder returns from the perspective of the total return ratio. Given the reliance on short-term borrowings and the interest payment burden, the no-dividend policy is viewed as a measure prioritizing the maintenance of the financial base.
Risk Factors
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Business Concentration Risk: The pawnbroking and secondhand goods trading business accounts for approximately 97% of consolidated revenue, indicating a high degree of dependence on a single business. Although the segment loss in this business narrowed to ¥-2.6B, it remains loss-making, and consolidated performance is structurally dependent on improvements in the profitability of this business.
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Financial Risk (Short-Term Borrowings and Interest Burden): All ¥32.6B of interest-bearing debt consists of short-term borrowings, resulting in a high degree of reliance on refinancing. With operating losses continuing, interest coverage remains negative, indicating insufficient capacity to pay interest from internal funds.
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Inventory Accumulation Risk: Inventories of ¥21.8B account for 21.5% of total assets, and inventory days have lengthened to approximately 103 days on an annualized basis. Fluctuations in demand in the secondhand luxury goods market could result in markdown sales or inventory valuation losses.
Industry Benchmark (For Reference; Based on Our Analysis)
Industry Benchmark (retail)
Profitability and Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | −7.0% | 3.2% (0.7%–6.8%) | −10.2pt |
| Net Profit Margin | −8.5% | 1.4% (0.1%–4.4%) | −9.8pt |
The company's profitability is substantially below the industry median, and both its operating and net profit margins rank below those of its industry peers.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 4.4% | 3.0% (1.2%–10.3%) | +1.4pt |
The revenue growth rate is slightly above the industry median but remains below the upper bound of the IQR.
※Source: Based on our analysis
Key Takeaways from the Earnings Results
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Revenue increased by 4.4%, but the operating margin remained at -7.0%, indicating from the earnings data that growth has not translated directly into improved profitability. The fixed-cost structure, in which the SG&A ratio of 35.3% exceeds the gross profit margin of 28.2%, makes it difficult to convert higher revenue into profit.
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The loss in the core pawnbroking and secondhand goods trading business narrowed from the previous year, confirming an improvement trend at the business-unit level. However, the consolidated operating loss, including corporate expenses, continues, and progress in profit and loss against the full-year forecast (102.6% for ordinary loss) exceeds revenue progress (77.7%).
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The private placement of new shares substantially improved the equity ratio from 6.3% to 61.0%, while cash and deposits increased to ¥34.2B. Although the financial base was strengthened, all interest-bearing debt consists of short-term borrowings, and the continuation of no dividends and losses even after the capital raising remains a notable characteristic.
This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.
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AI Financial Analysis
Executive Summary
FY2026 Q3 results showed a modest operational improvement, but the group remained materially loss-making and its balance-sheet repair has not yet translated into sustainable profitability. Revenue increased 4.4% year on year to ¥8.09bn. Operating loss narrowed by ¥72m to ¥567m from a ¥639m loss in the prior-year period. Net loss attributable to owners of the parent narrowed by ¥49m to ¥665m, equivalent to EPS of negative ¥2.71. Gross profit declined 0.6% to ¥2.29bn despite revenue growth. Accordingly, gross margin compressed 142bp year on year to 28.2%. SG&A expense fell 2.9% to ¥2.85bn, and the SG&A-to-sales ratio improved 265bp to 35.3%. The reduction in SG&A more than offset the lower gross margin, improving operating margin by 123bp to negative 7.0%. The pawnshop and used-goods business generated 97.0% of consolidated revenue and reduced its segment loss by 25.4% to ¥257m. The electrical business was the core business by segment profit contribution, producing ¥90m of segment profit, up 2.4% year on year, although its revenue fell 2.8%. Unallocated corporate costs rose 6.6% to ¥371m and absorbed the segment-level improvements. Below operating profit, ¥61m of interest expense and ¥116m of commission expense widened the ordinary loss to ¥742m. The company completed a ¥4.37bn third-party allotment during the quarter, which substantially strengthened equity and liquidity. Cash of ¥3.42bn slightly exceeded short-term loans of ¥3.26bn, but all interest-bearing debt remains short term and refinancing discipline is therefore critical. Inventory expanded 51.2% year on year to ¥2.18bn, while inventory days of 103-106 days and a 121-day cash conversion cycle indicate substantial working-capital intensity. Full-year guidance implies that the company expects losses to remain for FY2026, with Q3 cumulative revenue already at 77.7% of forecast but operating and net losses at 94.7% and 98.2% of their respective full-year forecast losses. The investment focus is therefore on whether the dominant pawnshop/used-goods business can turn segment profitability positive while management contains inventory, corporate overhead, and financing costs.
Profitability Analysis
The reported annualized DuPont ROE is negative 14.4%, comprising a negative 8.2% net profit margin, 1.067x asset turnover, and 1.64x financial leverage. The overriding driver of the negative ROE is the loss-making net margin rather than excessive financial leverage. Asset turnover of 1.067x indicates that the revenue base remains meaningful relative to assets, but this level of turnover cannot compensate for a negative operating margin. The annualized ROIC of negative 11.4% reinforces that operating assets and capital are not currently earning their cost of capital. Gross margin fell to 28.2% from 29.7%, a 142bp deterioration, suggesting that sales growth was achieved with weaker merchandise margins or an adverse sales mix. SG&A fell to ¥2.85bn from ¥2.94bn, causing the SG&A ratio to improve to 35.3% from 37.9%. This 265bp SG&A-ratio improvement exceeded the gross-margin decline and drove operating-margin improvement to negative 7.0% from negative 8.2%. However, SG&A still exceeded gross profit by ¥568m, so the group requires a further reduction in fixed costs, a gross-margin recovery, or both to reach operating breakeven. The segment trend is constructive: electrical segment profit rose to ¥90m, while the pawnshop and used-goods segment loss narrowed to ¥257m. These gains were partly offset by unallocated corporate expenses increasing to ¥371m from ¥348m. Interest burden remains material because interest expense of ¥61m was incurred despite an operating loss, and the negative 9.24x interest-coverage ratio means EBIT does not service financing costs. The 1.325 interest-burden ratio is mechanically above 1.0 because both EBIT and pre-tax profit are negative; it should not be interpreted as favorable debt-service capacity. The effective tax rate was 8.9%, with a tax benefit moderating the pre-tax loss. Small extraordinary items, including a ¥2m impairment loss, were immaterial to the earnings trend. Under JGAAP, goodwill of ¥263m is subject to amortization and impairment testing; however, goodwill is only 4.3% of equity and is not the principal cause of current weak profitability.
Growth Assessment
Revenue growth of 4.4% was led by the pawnshop and used-goods business, where revenue increased 4.6% to ¥7.85bn. Within that segment, product sales increased to ¥7.16bn and pawn interest revenue increased to ¥688m from ¥635m, supporting top-line resilience. The electrical business contracted 2.8% to ¥247m, although its segment profit improved slightly to ¥90m. The pawnshop and used-goods segment remains the principal determinant of group earnings because it represents approximately 97% of consolidated revenue. Its reduced loss is encouraging, but the segment is not yet profitable and therefore cannot absorb corporate costs. Group gross profit fell by ¥14m despite ¥341m of incremental revenue, demonstrating that revenue growth presently has limited incremental gross-profit conversion. Inventory increased by ¥737m year on year, substantially faster than revenue, which raises the hurdle for future sell-through and margin realization. Full-year revenue guidance is ¥10.42bn, implying Q4 revenue of roughly ¥2.32bn and a quarterly run rate below the cumulative Q3 average. Q3 cumulative revenue progress is 77.7%, only 2.7 percentage points above the standard 75% progress rate and broadly consistent with the full-year sales target. Full-year operating-loss guidance is ¥600m; the cumulative ¥567m Q3 loss represents 94.5% of the forecast loss, 19.5 percentage points worse than the standard 75% loss-progress benchmark. Full-year net-loss guidance is ¥677m; the cumulative ¥665m loss represents 98.2% of the forecast loss, 23.2 percentage points worse than the standard benchmark. Delivering guidance therefore requires a near-breakeven Q4 operating result and an almost breakeven Q4 net result. The absence of a forecast revision indicates management has retained that recovery assumption. Near-term growth quality will depend on disciplined buying, inventory turnover, pawn-loan yield and recovery performance, and conversion of revenue gains into gross profit rather than further inventory accumulation.
Financial Health
Liquidity ratios appear strong following the capital increase: the current ratio is 220.6%, the quick ratio is 164.2%, and working capital is ¥4.66bn. Current assets of ¥8.52bn exceed current liabilities of ¥3.86bn by a substantial margin. Cash and deposits increased ¥2.86bn year on year to ¥3.42bn, largely consistent with the ¥4.37bn third-party allotment disclosed during the period. Total equity increased to ¥6.17bn from ¥0.99bn in the prior period, while owners' equity rose to ¥5.62bn from ¥0.39bn. The equity injection improved the capital adequacy ratio to 55.6% from 6.3%, materially reducing immediate balance-sheet stress. Debt-to-equity is 0.64x and debt-to-capital is 34.6%, both within conservative benchmark ranges. However, refinancing risk remains a major financial concern because all ¥3.26bn of interest-bearing debt is short term. Short-term loans equal 84.4% of current liabilities and 32.2% of total assets. Cash covers short-term debt by only 1.05x, leaving limited cash headroom if inventory monetization weakens or lenders reduce facilities. The current ratio does not fully eliminate this risk because ¥2.18bn of current assets are inventories, whose liquidation value and timing can be volatile in used luxury goods and collateralized lending markets. Inventory represents 21.5% of total assets and increased to ¥2.18bn from ¥1.44bn. Accounts receivable are modest at ¥471m, representing 4.7% of assets, limiting trade-credit concentration relative to inventory exposure. Noncurrent liabilities are low at ¥81m, and asset-retirement obligations are limited at ¥16m. Goodwill of ¥263m and intangible assets of ¥304m together account for only 5.6% of assets, limiting balance-sheet dependence on acquisition-related asset values. Retained earnings remain deeply negative at ¥4.71bn, reflecting accumulated losses and underscoring the importance of achieving a durable earnings turnaround rather than relying on repeated equity issuance.
Notable B/S Changes
Cash and deposits: +¥2.86bn (+510.9%) to ¥3.42bn — liquidity improved substantially, principally alongside the disclosed ¥4.37bn third-party allotment; cash only modestly exceeds ¥3.26bn of short-term loans. Inventories: +¥0.74bn (+51.2%) to ¥2.18bn — inventory accumulated far faster than revenue, consistent with elevated 103-106 inventory days and raising markdown, valuation, and cash-conversion risk. Total equity: +¥5.18bn to ¥6.17bn — the capital increase materially recapitalized the group and lifted capital adequacy to 55.6% from 6.3%, but continuing losses remain a constraint on capital efficiency. Capital stock: +¥2.95bn to ¥6.68bn and capital surplus: +¥2.95bn to ¥4.72bn — reflects equity financing that strengthened solvency but increased the importance of per-share earnings recovery. Noncurrent liabilities: -¥0.67bn to ¥0.08bn — long-term funding has been substantially reduced, leaving the debt structure concentrated entirely in short-term loans. Goodwill: -¥0.25bn (-8.8%) to ¥0.26bn — the balance is modest relative to equity and assets, limiting acquisition-accounting risk, although loss-making operations warrant continued impairment monitoring.
Cash Flow Quality
The operating cash flow, investing cash flow, financing cash flow, capital expenditure, and free-cash-flow figures are not included in the available financial data. Earnings quality can nonetheless be assessed through balance-sheet movements and profit composition. The ¥665m loss attributable to owners is operating in nature, as it follows a ¥567m operating loss rather than being caused primarily by extraordinary charges. Extraordinary loss was only ¥10m, including a ¥2m impairment loss, while extraordinary income was ¥1m; these items were not material to the result. The principal non-operating drag was ¥180m of non-operating expense, including ¥61m of interest expense and ¥116m of commission expense. The 51.2% year-on-year inventory increase to ¥2.18bn exceeded the 4.4% revenue increase by a wide margin. Inventory days of 103-106 days exceed both the 60-day retail warning threshold and the 90-day quality-alert threshold. The 121-day cash conversion cycle also exceeds the 120-day warning threshold. These indicators point to capital being tied up in merchandise and raise risks of markdowns, valuation losses, or cash conversion delays. For a pawnshop and used-goods operator, inventory liquidity, product authentication, pricing accuracy, and resale velocity are particularly important determinants of cash realization. The ¥2.86bn increase in cash should be interpreted in the context of the disclosed ¥4.37bn third-party allotment, rather than as evidence of internally generated cash flow. Future cash-flow quality will be determined by whether inventory growth moderates and whether the operating loss narrows without further equity-funded liquidity support.
Dividend Sustainability
The company paid no Q2 dividend and forecasts no FY2026 dividend. With EPS of negative ¥2.71 at Q3 and a forecast full-year EPS of negative ¥3.23, dividend capacity is appropriately constrained by continuing losses. A dividend payout ratio is not meaningful while earnings are negative and DPS is zero. Retained earnings are negative ¥4.71bn, further supporting capital preservation. The recent equity issuance strengthened the balance sheet but should principally be viewed as funding liquidity and business operations rather than creating capacity for shareholder distributions. The zero-dividend policy is therefore consistent with the current profitability, inventory, and refinancing profile. Any future dividend resumption would require sustained operating profitability, improved inventory cash conversion, and reduced dependence on short-term funding.
Risk Assessment
Business risks include Inventory and markdown risk: inventories rose 51.2% year on year to ¥2.18bn, while inventory days reached 103-106 days. In the used-goods and luxury resale market, slower sell-through, product valuation errors, changing consumer preferences, and counterfeit-control failures could require discounts or write-downs., Pawnshop and used-goods execution risk: this segment produces approximately 97% of group revenue but remains loss-making at the segment level, with a ¥257m loss. A failure to convert revenue growth and pawn interest income into segment profit would prevent group breakeven., Gross-margin risk: gross margin fell 142bp to 28.2% despite higher revenue. Continued competitive pricing, adverse merchandise mix, or markdown activity would erode the benefit of cost control., Corporate-cost risk: unallocated corporate costs increased 6.6% to ¥371m, offsetting improvements in operating segments. The fixed-cost base remains too high for the present gross-profit pool., Electrical-business risk: electrical revenue declined 2.8% to ¥247m. Although segment profit improved, its small scale and contracting sales limit its ability to diversify the group earnings base..
Financial risks include Debt-service risk: interest coverage is negative 9.24x because EBIT was a ¥567m loss while interest expense was ¥61m. This indicates operating earnings do not cover cash interest obligations., Refinancing risk: 100% of ¥3.26bn interest-bearing debt is short term. Although cash is ¥3.42bn, cash-to-short-term-debt coverage is only 1.05x and could narrow if inventory requires additional funding., Capital-efficiency risk: annualized ROE is negative 14.4% and annualized ROIC is negative 11.4%. The recent capital injection improves solvency but may dilute returns if operating profitability does not recover., Equity-raising and dilution risk: the ¥4.37bn third-party allotment substantially increased capital stock and capital surplus, but ongoing losses could require additional financing if the business does not generate cash., Foreign-currency and valuation risk: accumulated foreign-currency translation adjustments remain negative ¥1.10bn, and comprehensive loss of ¥700m exceeded net loss of ¥684m..
Key concerns include Highest priority — profitability: EBIT margin is negative 7.0%, below the 5% concern threshold, and full-year guidance requires a sharp Q4 loss reduction., Highest priority — inventory conversion: high inventory days and a 121-day cash conversion cycle create a direct link between operating execution and liquidity., High priority — short-term funding: the maturity concentration in short-term loans makes continued lender support and prudent cash preservation important., High priority — overhead absorption: segment-level improvement will not produce consolidated profitability without a reduction in unallocated corporate costs., Moderate priority — goodwill impairment: goodwill is modest at 4.3% of equity, but the group remains loss-making and recorded a small impairment loss during the period; future operating underperformance should be monitored..
Investment Implications
Key takeaways include Revenue growth and lower SG&A narrowed the operating loss, but gross-margin pressure means the turnaround remains incomplete., The pawnshop and used-goods business is the decisive earnings driver, accounting for roughly 97% of revenue while still reporting a segment loss., The ¥4.37bn capital increase transformed liquidity and capitalization, raising total equity to ¥6.17bn, but does not resolve operating losses., Inventory expansion and high inventory days are the central operating and cash-conversion risk., All debt is short term, making refinancing conditions and cash preservation more important than the headline current ratio alone., FY2026 guidance requires a substantial Q4 improvement, as cumulative operating and net losses have already reached 94.5% and 98.2% of the respective full-year forecast losses..
Metrics to watch include Pawnshop and used-goods segment profit/loss and gross-margin progression, Consolidated gross margin and SG&A-to-sales ratio, Unallocated corporate expenses, Inventory balance, inventory days, sell-through, and markdown activity, Short-term loan balance, cash-to-short-term-debt ratio, and interest expense, Q4 operating-loss reduction relative to the ¥600m full-year operating-loss forecast, Need for additional equity financing and resulting per-share dilution.
Regarding relative positioning, The company has a gross margin within the broad 25-35% general-retail range, but its negative 7.0% operating margin, negative annualized ROE and ROIC, inventory days above 100, and fully short-term debt structure place it below financially sound retail and resale peers. The post-capital-raise liquidity position is stronger than the prior period, but sustainable relative positioning depends on restoring the core pawnshop and used-goods operation to profitability and improving merchandise cash conversion.