ALBIS (7475) FY2026 Q3 Earnings Report

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Executive Summary

The Company reported higher revenue but lower earnings, with net income declining due to increased costs and a loss on disposal of fixed assets. Revenue was ¥765.4B (+3.3% YoY), Operating Income was ¥16.2B (-1.2%), Ordinary Income was ¥18.2B (-11.7%), and Net Income was ¥10.4B (-20.5%). Although Ordinary Income exceeded Operating Income due to non-operating income, the recognition of a ¥2.4B extraordinary loss on disposal of fixed assets reduced Net Income. Against the full-year forecast, progress rates were 75.0% for Revenue, compared with 71.8% for Operating Income, 64.6% for Ordinary Income, and 64.1% for Net Income, indicating notable delays at the earnings level and making an improvement in the Q4 profit margin a key focus.

Factors Affecting Financial Performance

【Revenue】Revenue increased 3.3% YoY to ¥765.4B, representing a progress rate of 75.0% against the full-year forecast of ¥1,020.8B, which is a standard level.

【Profit and Loss】Cost of sales was ¥526.6B, increasing at a faster pace than Revenue, while the gross profit margin remained broadly flat at 31.2% (equivalent to approximately 30.2% in the previous year). SG&A expenses increased to ¥222.6B (29.1% of Revenue), resulting in Operating Income of ¥16.2B (-1.2% YoY) and a decline in earnings. Although Ordinary Income was boosted by ¥1.96B in non-operating income, it declined to ¥18.2B (-11.7% YoY) because non-operating income contracted from ¥5.05B in the previous year. Following the recognition of a ¥2.4B loss on disposal of fixed assets as an extraordinary loss, Net Income was ¥10.4B (-20.5% YoY), resulting in higher revenue but lower earnings.

Key Financial Metrics

【Profitability】The Operating Income margin was 2.1%, approximately 9bp below the same period of the previous year, while the Net Income margin declined to 1.4% from an estimated 1.8% in the previous year. The gross profit margin was 31.2%, within the typical range for the retail industry; however, it was closely matched by the SG&A ratio of 29.1%, indicating a cost structure in which even modest cost fluctuations can have a significant impact on earnings.【Cash Flow Quality】As Operating Cash Flow (OCF) and other cash flow data have not been disclosed, an analysis based on working capital trends in the balance sheet indicates that Accounts Payable of ¥74.7B exceeded Accounts Receivable of ¥37.4B and Inventories of ¥29.0B, suggesting a working capital structure that utilizes supplier credit.【Investment Efficiency】ROE was 3.2% and annualized ROIC was 4.2%, both low in terms of capital efficiency. Under the DuPont decomposition, ROE consists of a 1.4% Net Income margin × 1.32x total asset turnover × 1.78x financial leverage, with the low Net Income margin being the primary factor suppressing ROE.【Financial Soundness】Although the Equity Ratio remained high at 56.2%, the current ratio was 98.2% and the quick ratio was 79.7%, both below 1x, indicating somewhat low short-term liquidity. In addition to long-term borrowings of ¥68.6B, the Company had ¥27.6B due for repayment within one year. The debt-to-equity ratio of 0.78x and interest coverage ratio of 22.51x do not indicate concerns regarding excessive leverage.

Cash Flow Analysis

As Operating Cash Flow, Investing Cash Flow, and Financing Cash Flow have not been disclosed, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits declined to ¥55.9B from ¥62.2B in the previous year, while property, plant and equipment increased by ¥40.3B to ¥363.4B from ¥323.1B in the previous year, suggesting that funding requirements for store investments and other purposes may have placed pressure on the cash balance. Long-term borrowings increased to ¥68.6B from ¥46.5B in the previous year, indicating that part of the funds for capital expenditures was likely procured through borrowings. Working capital was negative ¥2.8B, reflecting the continued structure of utilizing supplier credit, with Accounts Payable exceeding Accounts Receivable and Inventories. Given the current ratio of 98.2% and quick ratio of 79.7%, maintaining this working capital structure plays an important role in stabilizing short-term liquidity.

Quality of Earnings

The gap between Ordinary Income of ¥18.2B and Net Income of ¥10.4B reached 42.5%, primarily due to the ¥2.4B loss on disposal of fixed assets and ¥5.4B in income taxes and other taxes. The loss on disposal of fixed assets was a temporary factor associated with the review of stores and equipment and should be evaluated separately from recurring earnings power. Non-operating income was ¥3.1B, primarily comprising ¥2.3B in other non-operating income. While ¥0.2B in dividend income received can be considered recurring income, the sustainability of the remaining items is limited. The effective tax rate was 34.1%, broadly in line with the statutory effective tax rate, and no special factors were identified on the tax burden front. Comprehensive Income was ¥13.8B, exceeding Net Income of ¥10.4B, with an increase of ¥3.4B in valuation difference on securities contributing to the result. This should be noted as a source of fluctuation separate from the earnings power of the core business.

Earnings Forecast and Guidance

Progress against the full-year Company forecast was 75.0% for Revenue, compared with 71.8% for Operating Income, 64.6% for Ordinary Income, and 64.1% for Net Income, with progress at the earnings levels significantly below the standard progress rate of 75%. To achieve the full-year Operating Income forecast of ¥22.6B (+9.4% YoY), the Company would need Q4 Operating Income of ¥6.4B, equivalent to a required Operating Income margin of approximately 2.5%, above the 2.1% Operating Income margin for the Q3 cumulative period. Similarly, achieving the Ordinary Income and Net Income forecasts presupposes an improvement in profitability in Q4, making potential improvements in the cost structure the key to meeting the forecasts.

Shareholder Returns

The Q2 dividend was ¥35.00 per share, and the full-year dividend forecast is ¥70.00 per share. Based on forecast EPS of ¥190.16, the forecast Payout Ratio is approximately 36.8%, while the Payout Ratio relative to Q3 cumulative EPS of ¥124.19 is approximately 28.2%. Against forecast Net Income of ¥16.3B, the annual dividend payout is estimated at approximately ¥5.9B, indicating that dividend capacity is being maintained on an earnings basis. However, as OCF and capital expenditure have not been disclosed, dividend coverage based on free cash flow has not been evaluated.

Risk Factors

1. Profitability deterioration risk: The Operating Income margin of 2.1% is below the industry median of 3.2%, and price competition and increases in raw material and labor costs could place further pressure on already thin margins. The Operating Income margin required in Q4 is approximately 2.5%, above the Q3 cumulative level, and achieving this will require improvements in the cost structure.

2. Short-term liquidity risk: Both the current ratio of 98.2% and quick ratio of 79.7% are below 1x, indicating a high degree of dependence on short-term liabilities, primarily Accounts Payable of ¥74.7B. Changes in supplier terms or a slowdown in sales could lead to reduced funding flexibility.

3. Fixed asset-related risk: The Company operates a store-asset business model with property, plant and equipment of ¥363.4B and asset retirement obligations of ¥8.9B. In the current period, it recognized a ¥2.4B loss on disposal of fixed assets, equivalent to 23.0% of Net Income. Additional disposal losses and refurbishment investments associated with store renovations and closures could become factors affecting future earnings.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (retail)

Profitability and Returns

The Operating Income margin is below the industry median, while the Net Income margin is broadly in line with the industry median.

※Source: Company analysis

Key Takeaways from the Earnings Results

1. Revenue increased 3.3% YoY, while Operating Income declined 1.2% and Net Income declined 20.5%, highlighting that revenue growth has not translated into earnings growth.

2. Progress against the full-year forecast was 75.0% for Revenue, but only 64.6% for Ordinary Income and 64.1% for Net Income, creating a structure in which the presence or absence of an improvement in profitability in Q4 will determine the full-year outcome.

3. While short-term liquidity is somewhat low, with a current ratio of 98.2% and quick ratio of 79.7%, financial leverage and interest burden are moderate, as indicated by a debt-to-equity ratio of 0.78x and interest coverage ratio of 22.51x. Overall, the financial structure has both strengths and weaknesses.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,292–¥3,482 at ±1% in the cost of equity, and ¥3,368–¥3,396 at ±0.1 in ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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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 disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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