Quick View
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥63.36B | ¥61.64B | +2.8% |
| Operating Income | ¥3.94B | ¥2.72B | +45.0% |
| Ordinary Income | ¥4.56B | ¥2.87B | +59.2% |
| Net Income | ¥3.58B | ¥1.95B | +83.3% |
| ROE | 7.8% | 4.5% | - |
Executive Summary
The current period was characterized by higher revenue and higher earnings, with profit growth significantly outpacing revenue growth. Revenue increased modestly to ¥63.36B (+2.8% YoY), while Operating Income rose to ¥3.94B (+45.0%), Ordinary Income to ¥4.56B (+59.2%), and Net Income to ¥3.58B (+83.3%), demonstrating an increasing growth rate at each successive profit level. The primary drivers of earnings growth were the rapid expansion of the Brand & Retail Business and improved profitability in the Apparel Business, which expanded the Operating Income margin to 6.2% (approximately 4.4% in the previous year).
Factors Affecting Financial Performance
【Revenue】Revenue was ¥63.36B, representing a 2.8% YoY increase. By segment, the Apparel Business (¥33.43B, +4.0%) and Brand & Retail Business (¥8.33B, +29.7%) led growth, while the Materials Business (¥17.43B, -8.0%) recorded lower revenue, limiting the overall increase. The Lifestyle Business (¥3.69B, +0.6%) and Real Estate Business (¥0.49B, +8.0%) remained broadly flat.
【Profitability】Operating Income was ¥3.94B (+45.0% YoY), Ordinary Income was ¥4.56B (+59.2%), and Net Income was ¥3.58B (+83.3%), representing earnings growth far exceeding revenue growth. By segment, profit in the Brand & Retail Business expanded sharply to ¥1.21B (+319.4%), while the Apparel Business also increased to ¥2.95B (+36.9%), driving company-wide earnings growth. In contrast, segment profit in the Materials Business declined to ¥0.62B (-19.7%). The reason Ordinary Income exceeded Operating Income was the recognition of ¥0.69B in non-operating income, primarily consisting of ¥0.37B in dividend income. Extraordinary income of ¥0.26B and extraordinary losses of ¥0.21B were both limited in scale, and their impact on Net Income was limited. In conclusion, this was a revenue-growth and earnings-growth result in which earnings growth substantially outpaced revenue growth, indicating profitability-led performance.
Segment Analysis
Of the five segments, the Brand & Retail Business and Apparel Business were the primary centers of profit growth. The Brand & Retail Business expanded sharply, with external revenue of ¥8.33B (+29.7% YoY) and segment profit of ¥1.21B (+319.4%), resulting in a substantial improvement in its segment profit margin to 14.5% (approximately 3.9% in the previous year). The Apparel Business achieved earnings growth exceeding its revenue growth, with external revenue of ¥33.43B (+4.0%) and segment profit of ¥2.95B (+36.9%), reaching a scale that accounted for more than half of total segment profit before adjustments. In contrast, the Materials Business recorded lower revenue and lower earnings, with external revenue of ¥17.43B (-8.0%) and segment profit of ¥0.62B (-19.7%), suggesting the impact of raw-material market conditions and demand. The Lifestyle Business and Real Estate Business continued to post modest revenue and earnings growth. Regarding company-wide profit growth, it is necessary to determine whether the rapid improvement in the Brand & Retail Business’s profitability is structural or temporary, driven by product mix and sales timing.
Key Financial Indicators
【Profitability】The Operating Income margin expanded to 6.2% from approximately 4.4% in the previous year, indicating operating leverage under a structure comprising a gross margin of 31.4% and an SG&A expense ratio of 25.2%. The Net Income margin was 5.7%, benefiting from growth in Operating Income and Ordinary Income as well as non-operating income, including dividend income. 【Cash Quality】Since Operating Cash Flow has not been disclosed, the cash conversion rate cannot be evaluated directly. However, accounts receivable and notes receivable totaled ¥22.89B, and including electronically recorded monetary claims, DSO was equivalent to 99 days. Together with inventories of ¥10.18B, working capital accounted for more than half of total assets, which warrants attention when assessing earnings quality. 【Investment Efficiency】ROE was 7.8% (Net Income margin of 5.7% × total asset turnover of 0.75x × financial leverage of 1.83x), with the sharp increase in Net Income serving as a key driver. 【Financial Soundness】The Equity Ratio was 54.7% (54.5% in the previous year), while the current ratio was 218.0% and the quick ratio was 178.7%, maintaining sound levels over both the short and long term. Interest coverage was high relative to interest-bearing debt of ¥16.59B, and financial leverage was not excessive.
Cash Flow Analysis
As the cash flow statement was not disclosed in the current results, funding trends are assessed based on changes in the balance sheet. Cash and deposits were ¥8.05B, down from ¥11.84B in the previous year, while accounts receivable and notes receivable increased to ¥22.89B (¥22.14B in the previous year), and inventories increased to ¥10.18B (¥9.99B in the previous year). The decline in cash on hand despite Net Income increasing to ¥3.58B suggests that part of the earnings growth may have been absorbed by increases in working capital, such as accounts receivable and inventories. Investments in property, plant and equipment and investment securities also increased to ¥12.93B (¥10.86B in the previous year), indicating that business expansion and investment activities used funds. Short-term borrowings increased to ¥8.34B (¥4.24B in the previous year), suggesting that funding required for working capital and investment was supplemented through short-term financing.
Earnings Quality
The current period’s earnings growth was supported by substantive improvements in Operating Income and Ordinary Income, while the impact of extraordinary items was limited. Extraordinary income of ¥0.26B and extraordinary losses of ¥0.21B were approximately offsetting, and the primary driver of the increase in Net Income to ¥3.58B was the expansion of Operating Income from the core business. Non-operating income of ¥0.69B primarily consisted of ¥0.37B in dividend income and represented only approximately 1.1% of revenue; therefore, non-operating factors did not excessively inflate overall earnings. Meanwhile, comprehensive income was ¥4.93B, exceeding Net Income of ¥3.58B, with the difference primarily attributable to a ¥1.36B increase in valuation difference on securities. This indicates that market factors separate from business earnings contributed to the increase in equity and warrants attention. Given the upward trend in accounts receivable and inventories, there is room for a conservative assessment of the cash backing of earnings in the absence of Operating Cash Flow disclosure.
Earnings Forecast and Guidance
Cumulative Q3 progress against the Full-Year forecast was 75.4% for revenue (broadly in line with the standard progress rate of 75%), compared with 98.6% for Operating Income, 99.2% for Ordinary Income, and 102.3% for Net Income, indicating that profit items are substantially ahead of schedule. This pace of progress indicates that profitability improvements, including the rapid expansion of the Brand & Retail Business, were realized before the second half. Against the Full-Year Net Income forecast of ¥3.50B, ¥3.58B has already been recorded. Because the progress rate exceeds 100%, both the possibility that the Full-Year forecast is conservative and the possibility of a reversal of special factors in the second half must be considered.
Shareholder Returns
The interim dividend was ¥50 per share, while the Full-Year dividend forecast is ¥147 per share, implying a year-end dividend forecast of ¥97, representing the difference. Based on the Full-Year Net Income forecast of ¥3.50B and the average number of shares outstanding during the period of 8.317 million shares, the forecast dividend Payout Ratio is approximately 34.9%, representing a ratio based solely on dividends. No share repurchases were identified from the available data, and no Total Return Ratio was calculated. Given that earnings progress is running ahead of the Full-Year forecast, the current dividend plan appears consistent with the earnings level.
Risk Factors
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Risk of prolonged collection of accounts receivable: In addition to accounts receivable and notes receivable of ¥22.89B, the collection period including electronically recorded monetary claims was equivalent to DSO of 99 days, exceeding the general benchmark of 60 days. Delays in cash collection associated with revenue growth could increase the working capital burden.
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Inventory accumulation risk: Inventories were ¥10.18B (¥9.99B in the previous year), and inventory days were equivalent to 64 days, exceeding the benchmark of 60 days. If demand fluctuates, valuation losses or disposal losses may arise.
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Short-term refinancing risk: Short-term borrowings increased to ¥8.34B (¥4.24B in the previous year), and the short-term liabilities ratio was equivalent to 50.3%. Cash and deposits of ¥8.05B only approximately covered short-term liabilities, warranting attention to the potential increase in refinancing costs if financial conditions deteriorate.
Industry Benchmark (Reference; Compiled by the Company)
Industry Benchmark (trading)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 6.2% | 3.3% (1.8%–5.0%) | +2.9pt |
| Net Income Margin | 5.6% | 3.1% (1.4%–6.3%) | +2.5pt |
The Company’s profitability clearly exceeds the industry median, with both its Operating Income margin and Net Income margin ranking in the upper tier.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.8% | 5.2% (-4.1%–8.6%) | −2.4pt |
The Revenue growth rate was below the industry median, indicating relative underperformance in top-line growth.
※Source: Compiled by the Company
Key Takeaways from the Financial Results
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A defining feature of the current results was that Net Income increased by +83.3% compared with revenue growth of 2.8%, making improved profitability the primary driver of performance expansion. The Operating Income margin of 6.2% exceeded the industry median of 3.3%, led by profit expansion in the Brand & Retail Business and Apparel Business.
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Progress against the Full-Year forecast reached 98.6% for Operating Income, 99.2% for Ordinary Income, and 102.3% for Net Income, creating a significant gap with revenue progress of 75.4%. The presence of seasonality or temporary factors in the second half will be an important point to monitor.
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Accounts receivable, electronically recorded monetary claims, and inventories together account for more than half of total assets, while both DSO and inventory days exceed benchmark levels. As Operating Cash Flow has not been disclosed, future disclosures will be necessary to assess the extent to which earnings growth is being converted into cash.
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. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.
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AI Financial Analysis
Executive Summary
Yagi delivered a strong FY2026 Q3 cumulative earnings result, with broad-based profit improvement materially outpacing modest sales growth. Revenue rose 2.8% year on year to ¥63.36bn. Operating income increased 45.0% to ¥3.94bn. Ordinary income rose 59.2% to ¥4.57bn. Net income attributable to owners surged 83.3% to ¥3.58bn. Gross profit expanded 16.0% to ¥19.92bn despite the limited top-line increase. The gross margin improved to 31.4% from 27.9% a year earlier, an expansion of approximately 358 basis points. The operating margin increased to 6.2% from 4.4%, an expansion of approximately 182 basis points. This indicates that gross-margin enhancement more than absorbed a 10.5% increase in SG&A expenses to ¥15.98bn. Apparel remained the largest profit contributor before corporate-cost adjustments, generating segment profit of ¥2.95bn. Brand & Retail was the fastest-growing operating business, with revenue up 29.7% and segment profit up 319.4% to ¥1.21bn. Non-operating income of ¥0.69bn, led by ¥0.37bn of dividend income and ¥0.09bn of foreign-exchange gains, also supported ordinary income. The swing from a ¥0.16bn equity-method loss in the prior-year period to ¥0.07bn of equity-method earnings added to the year-on-year improvement. Net income also included a modest net extraordinary gain of ¥0.46bn, principally a ¥0.26bn gain on sale of subsidiary shares offset by ¥0.21bn of extraordinary losses. The effective tax rate fell to 22.4% from a comparatively high prior-year tax burden, supporting the stronger conversion of pre-tax profit into net income. The reported annualized ROE of 10.4% is within the good benchmark range, supported by a 5.7% net margin and 1.83x financial leverage. Liquidity remains robust, with a 218.0% current ratio and ¥30.56bn of working capital. However, the near-doubling of short-term borrowings and reduced cash balance increase refinancing and liquidity-management sensitivity. The full-year operating-income forecast is nearly achieved by Q3, making the current run-rate stronger than the company forecast while placing emphasis on Q4 demand, working-capital discipline, and inventory realization.
Profitability Analysis
The reported annualized 10.4% ROE decomposes into a 5.7% net profit margin, 1.003x annualized asset turnover, and 1.83x financial leverage. Margin improvement is the principal driver of the current earnings acceleration: operating income rose 45.0% on revenue growth of only 2.8%. Gross margin rose approximately 358 basis points to 31.4%, while operating margin rose approximately 182 basis points to 6.2%. The smaller operating-margin expansion relative to gross-margin expansion reflects SG&A growth of 10.5%, materially above revenue growth. This SG&A investment or cost inflation warrants monitoring because continued double-digit expense growth would dilute operating leverage if sales growth stays low. The 5.7% net margin is sound for a trading and apparel-related group and benefits from dividend income, foreign-exchange gains, and the affiliate-income turnaround. Ordinary income of ¥4.57bn exceeded operating income by ¥0.62bn, equivalent to 1.0% of revenue, led by ¥0.37bn of dividend income. Interest expense was only ¥0.05bn, and interest coverage was an exceptionally strong 83.91x. The five-factor DuPont tax burden of 0.776 is normal, while the interest burden of 1.169 reflects non-operating income exceeding financing costs rather than debt-service pressure. Segment performance was mixed: Material revenue declined 8.0% to ¥17.43bn and segment profit declined 19.7% to ¥0.62bn; Lifestyle revenue rose 0.6% to ¥3.69bn and profit increased 9.0% to ¥0.40bn; Apparel revenue increased 4.0% to ¥33.43bn and profit grew 36.9% to ¥2.95bn; Brand & Retail revenue rose 29.7% to ¥8.33bn and profit rose 319.4% to ¥1.21bn; and Real Estate revenue increased 8.0% to ¥0.49bn with profit up 12.0% to ¥0.35bn. Apparel is the core business by segment-profit contribution, accounting for 53% of aggregate segment profit before corporate costs. Brand & Retail showed the highest segment margin at 14.5%, versus 8.8% for Apparel, 10.9% for Lifestyle, 7.1% for Real Estate, and 3.5% for Material. The segment mix shift toward Brand & Retail and improved Apparel profitability underpin the margin gains, while Material remains the principal operational drag.
Growth Assessment
Revenue growth of 2.8% was modest, but the composition improved substantially through the acceleration of Brand & Retail and higher Apparel profitability. Brand & Retail added approximately ¥1.91bn of revenue and ¥0.92bn of segment profit year on year, making it the largest contributor to incremental segment earnings. Apparel added approximately ¥1.27bn of revenue and ¥0.79bn of segment profit. These gains more than offset the ¥1.52bn sales decline and ¥0.15bn profit decline in Material. Real Estate provides a smaller but high-margin, recurring-style earnings contribution, with segment profit of ¥0.35bn on ¥0.49bn of revenue. FY2026 full-year guidance calls for revenue of ¥84.00bn, operating income of ¥4.00bn, ordinary income of ¥4.60bn, and net income of ¥3.50bn. Q3 cumulative progress is 75.4% for revenue, broadly aligned with the standard 75% pace. Operating-income progress is 98.6%, 23.6 percentage points above the standard Q3 pace. Ordinary-income progress is 99.2%, 24.2 percentage points above the standard pace. Net income has already reached 102.3% of the full-year target. The earnings outperformance reflects operating-margin expansion as well as favorable non-operating and tax factors. Consequently, the sustainability of the Q3 pace depends primarily on preserving gross margin, converting the elevated Brand & Retail sales base into recurring profits, and arresting the Material segment decline. The full-year forecast itself assumes only 0.7% revenue growth and 12.0% operating-income growth, implying a conservative outlook relative to Q3 cumulative performance.
Financial Health
Balance-sheet liquidity is strong, with current assets of ¥56.46bn against current liabilities of ¥25.90bn. The current ratio of 218.0% and quick ratio of 178.7% are comfortably above healthy benchmarks. Working capital totals ¥30.56bn. Total equity increased ¥2.86bn year on year to ¥46.04bn, and the capital adequacy ratio remained stable at 54.7%. Debt-to-equity is a conservative 0.83x, while debt-to-capital is 26.5%, both below cautionary thresholds. Interest-bearing debt totals ¥16.59bn, comprising ¥8.34bn of short-term loans and ¥8.24bn of long-term loans. Short-term loans increased ¥4.10bn, or 96.8% year on year, and the short-term debt ratio of 50.3% triggers a refinancing-risk alert because more than half of debt requires relatively near-term funding management. Cash and deposits fell ¥3.79bn, or 32.0%, to ¥8.05bn. Cash covers 0.97x of short-term loans, meaning that short-term funding is nearly but not fully covered by cash alone; nevertheless, the strong current and quick ratios mitigate immediate maturity-mismatch risk. Trade receivables of ¥22.89bn and electronically recorded monetary claims of ¥13.45bn form a substantial portion of the liquidity base and therefore elevate reliance on timely collection. Inventories increased 1.9% to ¥10.18bn. Investment securities increased ¥2.07bn to ¥12.93bn and represent 15.4% of total assets, contributing to asset value but exposing equity and comprehensive income to market-price movements. Treasury stock increased by ¥1.03bn to ¥1.67bn, consistent with capital returns or share repurchases and reducing reported equity. Intangible assets equal only 0.5% of assets, indicating limited balance-sheet exposure to acquired intangible-asset valuation risk.
Notable B/S Changes
Short-term loans: +¥4.10bn (+96.8%) to ¥8.34bn - funding has shifted toward shorter-tenor debt, raising refinancing sensitivity; the short-term debt ratio is 50.3%. Cash and deposits: -¥3.79bn (-32.0%) to ¥8.05bn - lower cash reduces immediate funding flexibility, although current and quick ratios remain robust at 218.0% and 178.7%, respectively. Treasury stock: -¥1.03bn (carrying-value increase of 159.9%) to negative ¥1.67bn - reflects meaningful treasury-share accumulation and reduces reported equity. Investment securities: +¥2.07bn (+19.1%) to ¥12.93bn - now 15.4% of total assets, increasing sensitivity of equity and comprehensive income to market valuations. Electronically recorded monetary claims: +¥3.43bn (+34.2%) to ¥13.45bn - expansion of receivable-related assets reinforces the need to monitor collection timing and cash conversion.
Cash Flow Quality
Working-capital quality is a central monitoring issue. The quality alert for high receivable days, at 99 days, indicates a long collection cycle for a trading-oriented business and raises the sensitivity of cash generation to customer payment timing. Accounts receivable of ¥22.89bn increased 3.4% year on year, while electronically recorded monetary claims increased 34.2% to ¥13.45bn. The combined receivable-related balance is therefore growing faster than revenue, which may absorb operating cash despite the strong reported profit growth. The quality alert for inventory days of 64 days also exceeds the 60-day threshold. Inventories rose to ¥10.18bn, and slower inventory rotation could increase markdown, obsolescence, or working-capital absorption risk in apparel-related operations. Accounts payable fell 18.9% to ¥7.54bn, while electronically recorded obligations were broadly flat at ¥2.08bn; this combination provides less supplier-financing support than in the prior-year period. The decline in cash and deposits to ¥8.05bn is directionally consistent with increased funding needs, including higher short-term borrowing. The strong current ratio provides a buffer, but the working-capital structure makes collections and inventory sell-through important determinants of cash conversion. No cash-flow-based coverage ratio is used in this assessment.
Dividend Sustainability
The company paid an interim Q2 dividend of ¥50 per share. The declared full-year dividend forecast is ¥147 per share. Against forecast EPS of ¥420.81, the implied dividend-only payout ratio is approximately 34.9%, comfortably below the 60% sustainability benchmark. The Q3 cumulative dividend measure of ¥50 per share represents a 12.8% payout ratio against Q3 cumulative net income, reflecting the interim payment rather than the full-year planned distribution. Retained earnings of ¥40.25bn provide a substantial internal capital base relative to the planned dividend. The increase in treasury stock by ¥1.03bn indicates that capital returns may also include share repurchases; this should be assessed through a total return ratio rather than a dividend payout ratio. Balance-sheet liquidity and low debt-to-capital support the capacity for the stated shareholder-return policy. Sustainability will nevertheless depend on operating cash conversion because receivable days and inventory days are elevated. The forecast dividend appears covered by the full-year earnings target, and Q3 net income has already exceeded that target.
Risk Assessment
Business risks include Material business deterioration: segment revenue declined 8.0% and segment profit declined 19.7%, leaving the group more dependent on Apparel and Brand & Retail for earnings growth., Apparel and retail demand risk: inventory days of 64 days exceed the alert threshold, increasing exposure to slower sell-through, discounting, and inventory valuation pressure., Brand & Retail execution risk: segment profit rose 319.4%; maintaining this high-growth contribution is important to preserving the current group margin improvement., Market-value risk in investment securities: investment securities total ¥12.93bn, or 15.4% of assets, and valuation differences on securities contribute materially to equity and comprehensive income..
Financial risks include Refinancing risk: the 50.3% short-term debt ratio exceeds the 40% alert threshold, following a 96.8% year-on-year rise in short-term loans to ¥8.34bn., Receivables-collection risk: DSO of 99 days exceeds the 60-day alert threshold, and receivable-related balances are significant relative to current assets., Liquidity-management risk: cash and deposits declined 32.0% to ¥8.05bn and cash covers 0.97x of short-term loans, although the current ratio remains strong at 218.0%., Working-capital funding risk: receivable-related assets and inventories require disciplined funding and conversion, particularly as accounts payable declined year on year..
Key concerns include Highest priority is working-capital discipline because long receivable days, above-threshold inventory days, lower cash, and higher short-term loans can jointly pressure cash conversion., The margin-led earnings improvement is compelling, but SG&A increased 10.5% against 2.8% revenue growth; sustained margin expansion requires continued gross-profit gains., Net income growth exceeds operating-income growth due partly to higher dividend income, an affiliate-income turnaround, and a net extraordinary gain, so recurring operating-profit delivery remains the primary earnings-quality indicator., The strong guidance-progress rates create a higher bar for Q4 execution and for assessing whether the current earnings level is sustainable..
Investment Implications
Key takeaways include Q3 cumulative operating income of ¥3.94bn is 98.6% of the full-year forecast, while net income of ¥3.58bn is already 102.3% of forecast., Gross margin improved approximately 358 basis points to 31.4%, driving operating-income growth substantially ahead of sales growth., Apparel is the core profit business, while Brand & Retail is the principal incremental growth engine and highest-margin segment., The annualized ROE of 10.4% is supported by a healthy net margin and moderate 1.83x financial leverage., Liquidity and solvency are sound, but the funding mix has shifted toward short-term borrowings amid a lower cash balance., A forecast ¥147 per-share dividend implies an approximately 34.9% dividend payout ratio versus forecast EPS..
Metrics to watch include Material segment revenue and profit recovery, Brand & Retail revenue growth and segment margin, Gross margin and SG&A-to-sales trend, Receivable days and the collection of trade and electronic receivables, Inventory days, apparel sell-through, and markdown exposure, Short-term loan balance, cash coverage of short-term debt, and refinancing terms, Full-year guidance revisions and Q4 operating-profit conversion.
Regarding relative positioning, Yagi combines a healthy liquidity profile, moderate leverage, and annualized ROE above the 10% good-performance threshold. Its 6.2% operating margin remains below the broad 8% benchmark for a good margin profile, but the Q3 margin trajectory is favorable. Relative to a diversified textile, apparel, and trading-oriented business, the key differentiator is currently profit mix improvement rather than top-line growth; this positioning is constructive operationally but remains dependent on working-capital conversion and the durability of Brand & Retail momentum.