| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥199.7B | ¥181.9B | +9.8% |
| Operating Income / Operating Profit | ¥38.4B | ¥33.8B | +13.5% |
| Ordinary Income | ¥37.5B | ¥33.3B | +12.5% |
| Net Income / Net Profit | ¥22.3B | ¥21.1B | +5.7% |
| ROE | 9.7% | 10.5% | - |
For the six months ended Aug 2026 (Q2 cumulative), Revenue was ¥199.7B (YoY +¥17.8B +9.8%), Operating Income was ¥38.4B (YoY +¥4.6B +13.5%), Ordinary Income was ¥37.5B (YoY +¥4.2B +12.5%), and Net Income was ¥22.3B (YoY +¥1.2B +5.7%). Operating margin improved to 19.2% (+0.6pt vs. 18.6% prior year). Gross margin was maintained at 42.9% while SG&A growth was contained (+4.0%) below revenue growth (+9.8%), producing positive operating leverage. However, Net Income growth lagged Operating Income due to a higher effective tax rate (40.4%) and widening foreign exchange losses (¥0.77B, prior year ¥0.24B).
[Revenue] Revenue was ¥199.7B (+9.8% YoY), showing solid trends. The company operates a single Curves segment, primarily franchising women-only fitness clubs. Steady expansion in store count and a resilient membership base likely drove the revenue increase. Cost of sales rose to ¥114.0B (+11.1% YoY), outpacing revenue growth, but gross margin was broadly maintained at 42.9% (down 0.7pt from 43.6% prior year).
[Profitability] Operating Income was ¥38.4B (+13.5% YoY), rising faster than revenue. SG&A was ¥47.3B (+4.0% YoY), restrained relative to revenue growth, improving operating margin to 19.2% (+0.6pt from 18.6%). Non-operating items were net -¥0.90B (prior year -¥0.50B), with the main driver being higher FX losses of ¥0.77B (prior year ¥0.24B). Interest expense was ¥0.27B (prior year ¥0.29B), slightly lower, reflecting reductions in interest-bearing debt. Ordinary Income reached ¥37.5B (+12.5% YoY). Extraordinary losses were negligible at ¥0.01B, so profit before tax was ¥37.4B (+12.6% YoY). Income taxes increased to ¥15.1B (prior year ¥12.2B), lifting the effective tax rate to 40.4% (prior year 36.5% +3.9pt). As a result, Net Income increased by only ¥1.2B to ¥22.3B (+5.7% YoY), and net margin slightly declined to 11.2% (from 11.6% prior year -0.4pt). In conclusion, while the company delivered top- and operating-level growth, external factors—tax burden and FX—constrained Net Income growth.
[Profitability] Operating margin improved to 19.2% (prior year 18.6% +0.6pt), Net margin was 11.2% (prior year 11.6% -0.4pt), and gross margin was 42.9% (prior year 43.6% -0.7pt). Operating-level profitability improved, but higher tax burden caused a slight decline in net margin. ROE was 9.7%, decomposable as Net margin 11.2% × Asset turnover 0.491 × Financial leverage 1.77. Prior year metrics were approximately Net margin 11.6%, Asset turnover 0.464, and leverage 1.94; improved turnover contributed positively, while lower leverage and reduced net margin detracted.
[Cash Quality] Operating Cash Flow (OCF) was ¥29.3B, 1.32x Net Income (¥22.3B), indicating solid cash conversion, though OCF/EBITDA was only 0.69x. Tax payments of ¥16.6B and inventory increases of ¥2.26B pressured cash conversion. The accrual ratio was -1.7%, indicating good cash backing of profits.
[Investment Efficiency] Capital expenditures were ¥1.72B, 0.44x of depreciation ¥3.94B, reflecting a conservative level. Intangible investments were ¥2.08B, accounting for about 55% of total investments ¥3.80B. Asset turnover improved to 0.491x from 0.464x, indicating better asset efficiency.
[Financial Soundness] Equity ratio improved to 56.4% (prior year 51.4% +5.0pt), current ratio 162.1%, quick ratio 146.7%, all at healthy levels. Long-term borrowings were substantially reduced to ¥23.1B (YoY -30.6%), Debt/EBITDA was 0.55x, D/E ratio about 0.10x, and interest coverage was 142x, indicating an extremely conservative financial profile.
OCF was ¥29.3B (+5.3% YoY). Profit before tax was ¥37.4B, to which depreciation ¥3.94B, goodwill amortization ¥0.56B, and other non-cash items were added, yielding ¥46.1B before working capital changes. Working capital movements included inventory increase -¥2.26B, trade receivables increase -¥0.43B, and trade payables increase +¥1.22B; inventory buildup and a reduction in accrued expenses -¥0.40B pressured OCF. Income taxes paid were -¥16.6B (prior year -¥13.1B), resulting in OCF of ¥29.3B. DSO was 104 days (trade receivables ¥56.7B ÷ daily sales ¥0.546B), indicating room to improve collection efficiency. Investing CF was -¥3.86B, mainly capital expenditures -¥1.72B and intangible asset acquisitions -¥2.08B. FCF was robust at ¥25.5B. Financing CF was -¥18.6B, primarily repayment of long-term borrowings -¥10.2B and dividend payments -¥8.44B. Cash and cash equivalents increased to ¥91.7B at period end (from ¥83.8B +¥7.9B), maintaining ample liquidity.
Earnings are recurring, with Operating Income ¥38.4B at the core. Non-operating items were net -¥0.90B, about 2.3% of Operating Income, mainly FX losses of ¥0.77B. Non-operating income was small at ¥0.15B (0.08% of revenue), composed of stable items such as interest income ¥0.05B, indicating low dependence. Extraordinary items were limited to an asset retirement loss of ¥0.01B, so no temporary profit boosts. The effective tax rate remains high at 40.4%; the presence of deferred tax liabilities ¥38.1B suggests persistent tax burden stemming from accounting-tax differences on intangibles (e.g., trademark rights ¥180.5B). The accrual ratio of -1.7% and OCF ¥29.3B exceeding Net Income ¥22.3B confirm cash backing of profits. However, OCF/EBITDA of 0.69x indicates somewhat weak cash conversion efficiency due to tax payments and working capital increases (inventory and reduction in accrued expenses), highlighting the need to refine working capital management.
Full Year guidance is Revenue ¥423.0B (+12.6% YoY), Operating Income ¥77.0B (+21.4% YoY), Ordinary Income ¥75.7B (+16.8% YoY), and Net Income ¥48.5B. Progress through Q2 cumulative is: Revenue 47.2% (¥199.7B ÷ ¥423.0B), Operating Income 49.8% (¥38.4B ÷ ¥77.0B), Ordinary Income 49.5% (¥37.5B ÷ ¥75.7B), and Net Income 45.9% (¥22.3B ÷ ¥48.5B). Compared to a standard H1 progress of 50%, Revenue is -2.8pt, Operating Income is roughly on track, and Net Income is -4.1pt, generally within expected ranges. Given stable operating profitability, if FX losses normalize and tax burden stabilizes in H2, achieving the full-year plan is highly feasible. The company revised earnings guidance this quarter, which improves plan precision.
A Q2-end dividend of ¥10 per share was declared. Based on average shares outstanding of 92,074 thousand shares during the period, total dividends amount to approximately ¥9.2B. Actual dividend payments were ¥8.44B, and the payout ratio is calculated at about 42.1% (dividends ¥9.2B ÷ Net Income ¥22.3B). Full-year forecasted dividend is ¥20 per share (ordinary dividend ¥10 + commemorative dividend ¥10), implying a payout ratio of about 38.8% against full-year Net Income forecast ¥48.5B. FCF of ¥25.5B covers dividend payments ¥8.44B by 3.02x, indicating very high dividend sustainability. Cash and cash equivalents are ¥95.0B and net interest-bearing debt is effectively near zero (Long-term borrowings ¥23.1B + current portion ¥20.4B - cash ¥95.0B = -¥51.5B), so there is no financing constraint on dividends. No share buybacks were observed; shareholder returns are via dividends only. Given low investment levels (CapEx/Depreciation 0.44x), balancing growth investment and returns will be a future consideration.
Intangible asset concentration risk: Intangible assets ¥209.8B account for 51.6% of total assets, of which trademark rights ¥180.5B represent the majority. Brand impairment or amortization/impairment could materially affect shareholders’ equity ¥229.2B and could deteriorate the equity ratio (currently 56.4%). Deferred tax liabilities ¥38.1B, arising from accounting-tax differences on intangibles, also indicate potential future tax burden variability.
Weak cash conversion efficiency: OCF/EBITDA 0.69x and DSO 104 days indicate somewhat low efficiency in converting profits to cash. Inventory increase ¥2.26B and decrease in accrued expenses ¥0.40B highlight working capital management issues; as revenue grows, working capital burden may expand and pressure OCF. While cash and cash equivalents ¥95.0B provide liquidity, careful cash management will be required if growth accelerates.
FX volatility and tax burden uncertainty: Increased FX losses ¥0.77B (prior year ¥0.24B) and a persistently high effective tax rate of 40.4% have reduced Net margin to 11.2% (prior year 11.6%). If Net Income growth continues to be constrained despite operating margin improvement to 19.2%, ROE at 9.7% may be capped. Accumulated foreign currency translation adjustments ¥13.5B also pose a reversal risk if the yen strengthens.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 19.2% | 14.0% (3.8%–18.5%) | +5.3pt |
| Net Margin | 11.2% | 9.2% (1.1%–14.0%) | +1.9pt |
Profitability materially exceeds the industry median, reflecting the high-margin franchise model advantage.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 9.8% | 21.0% (15.5%–26.8%) | -11.2pt |
Revenue growth trails the industry median, reflecting a mature fitness market with a focus on stable growth.
※Source: Company compilation
The company maintains industry-leading profitability with a 19.2% operating margin, and positive operating leverage has emerged due to SG&A containment, demonstrating the robustness of the business model. Progress toward the full-year operating income target of ¥77.0B is 49.8%, indicating a strong operating base for H2.
Financial soundness is extremely high: Debt/EBITDA 0.55x, interest coverage 142x, equity ratio 56.4%. FCF generation ¥25.5B and cash ¥95.0B support dividend sustainability (FCF coverage 3.02x) and capacity for future growth investment.
Concentration of intangible assets ¥209.8B (51.6% of total assets) and weak cash conversion efficiency indicated by OCF/EBITDA 0.69x are medium-term management metrics to monitor. Improving DSO (104 days) and refining working capital management, along with monitoring valuation and impairment risk for trademark rights, will be key to rating stability.
This report was automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.