PLAZA HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥9.35B
• Operating Income: ¥28M
• Net Income: ¥-7M
• EPS: ¥-3.10

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

FY2026 Q2 results show a narrow operating profit but a bottom-line loss, with leverage and interest burden overshadowing topline growth. Revenue rose 13.7% YoY to 93.49, lifting gross profit to 35.34 and gross margin to 37.8%. Operating income was 0.28 (+4.0% YoY), translating to a slim operating margin of about 0.3%. Ordinary income declined 27.9% YoY to 0.27 as non-operating expenses (notably interest expense of 0.51) effectively offset non-operating income of 0.60. Net income fell to -0.07 (loss), with EPS at -3.10 JPY; total comprehensive income was -0.16. SG&A of 35.05 consumed nearly all gross profit; rent expense alone was 3.65 (approximately 3.9% of sales), indicating a heavy fixed-cost base. EBITDA was 1.63 (1.7% margin), insufficient to comfortably cover interest (interest coverage 0.55x on EBIT), highlighting debt service risk. The company generated positive operating cash flow of 5.21 despite the accounting loss, aided by depreciation (1.35) and likely working capital movements, and capex was contained at 1.92, implying estimated FCF around 3.29. Liquidity is adequate but not strong (current ratio 129.7%, quick ratio 93.4%), and financial leverage is high (D/E 4.40x) with substantial short-term loans (35.62) that outsize cash (23.59). Asset turnover of 0.825 is decent, but a slightly negative net margin and high leverage yield a negative ROE (-0.3%) and very low ROIC (0.4%). Margin trend analysis in basis points versus prior year cannot be quantified from disclosed data, but the slower growth in operating income versus revenue implies some margin pressure. Earnings quality is mixed: OCF exceeds net income (positive) but the OCF/Net Income ratio is not meaningful due to a small accounting loss. Forward-looking, the priority is deleveraging or refinancing on better terms, improving store-level profitability (gross margin and SG&A efficiency), and stabilizing interest coverage above 2.0x. Any weakening in consumer demand or foreign exchange-driven import costs could quickly tip the company deeper into losses given the thin operating margin. With dividends unreported, capital allocation appears focused on sustaining operations and managing debt. Data gaps (e.g., detailed SG&A breakdown, investing cash flows, dividend outflows) limit precision, but the overarching narrative is one of operational resilience on cash generation amid financial fragility from leverage and interest costs.

Profitability Analysis

ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-0.1%) × 0.825 × 5.40x ≈ -0.3%. The dominant drag on ROE is the negative net profit margin, despite reasonable asset turnover; high financial leverage amplifies sensitivity but cannot offset a negative margin. The most material component change versus last year cannot be decomposed precisely due to missing prior-period components, but the 27.9% YoY decline in ordinary income despite revenue growth suggests margin pressure and higher non-operating burden (interest). Business drivers include: (1) SG&A nearly matching gross profit (SG&A/revenue ≈ 37.5%), leaving a razor-thin operating margin (~0.3%); (2) interest expense of 0.51 largely absorbing operating profit. This margin compression appears structural rather than one-time, tied to fixed rent and labor costs and higher funding costs; sustainability hinges on gross margin improvement and SG&A efficiency. Concerning trend flags: operating income growth (+4.0%) lagged revenue growth (+13.7%), implying negative operating leverage in the period; detailed SG&A growth YoY is not disclosed, preventing a precise check of SG&A growth versus revenue.

Growth Assessment

Topline growth was solid at +13.7% YoY (93.49), likely driven by store traffic recovery and/or pricing, but conversion to profit was weak (operating income +4.0% YoY). Gross margin at 37.8% is healthy for specialty retail, but SG&A intensity (~37.5% of sales) capped operating margin at ~0.3%. Ordinary income (-27.9% YoY) and net loss (-0.07) indicate that non-operating costs (interest) offset operating gains. Non-operating income of 0.60 did not provide net support given 0.61 of non-operating expenses. EBITDA margin (1.7%) is low, constraining self-funding capacity for growth. With ROIC at 0.4%, returns are below cost of capital, indicating growth without margin uplift will likely dilute value. Outlook hinges on: (1) sustaining revenue momentum through same-store sales and merchandising; (2) improving gross margin via mix and sourcing; (3) SG&A controls (rent optimization, labor productivity); and (4) reducing interest burden via refinancing or deleveraging. Absent these, profit growth will likely lag revenue growth.

Financial Health

Liquidity: current ratio 129.7% (adequate but below the >150% comfort threshold), quick ratio 93.4% (below 100%, signals reliance on inventory). Solvency: D/E 4.40x exceeds the 2.0x warning threshold; explicit caution warranted. Interest coverage (EBIT/interest) is 0.55x, indicating earnings do not cover interest, heightening refinancing risk. Maturity structure: short-term loans of 35.62 exceed cash of 23.59; while current assets (70.75) cover current liabilities (54.53), the low quick ratio and high short-term debt imply rollover risk if credit conditions tighten. Long-term loans (33.87) are also significant, keeping total debt burden high. No off-balance sheet obligations were disclosed; however, rent expense of 3.65 suggests meaningful lease commitments typical for retailers (not quantified). Equity is thin at 20.99 relative to total assets of 113.38, consistent with high financial leverage.

Cash Flow Quality

OCF was 5.21 versus net income of -0.07; the OCF/Net Income ratio is mathematically negative (-74.49x) and not meaningful due to the small loss, but qualitatively OCF exceeding NI is a positive indicator, likely driven by non-cash charges (depreciation 1.35) and working capital tailwinds. Estimated FCF is approximately 3.29 (OCF 5.21 minus capex 1.92), indicating room to service debt or build liquidity in the near term. Financing CF was +3.65, suggesting additional net borrowing or other financing inflows, despite already high leverage. Without a working capital bridge, we cannot confirm the durability of OCF; potential signs to monitor include inventory build or receivables stretch, but no explicit manipulation flags emerge from the limited snapshot. Dividend cash outflows are unreported; hence FCF coverage of dividends cannot be assessed.

Dividend Sustainability

Dividend data (DPS and total dividends paid) are unreported, and the calculated payout ratio (-1742.5%) is not meaningful due to a net loss. With EBITDA margin at 1.7%, EBIT interest coverage at 0.55x, and D/E at 4.40x, conservative capital allocation is advisable until interest coverage normalizes. Estimated FCF of 3.29 is positive this period, but variability in working capital and high refinancing needs reduce visibility. Policy outlook: absent disclosed guidance, we assume a cautious stance on dividends with potential prioritization of debt reduction and liquidity. Confirmation requires management disclosure on dividend policy and leverage targets.

Risk Assessment

Business Risks:

• Thin operating margin (~0.3%) leaves little buffer against sales or gross margin volatility.
• High fixed-cost base (rent 3.65 and likely labor) increases operating leverage to negative in weak quarters.
• Consumer demand sensitivity for discretionary retail categories.
• Sourcing and FX risk if merchandise is import-heavy, potentially compressing gross margin.
• Inventory obsolescence risk impacting markdowns and gross margin.

Financial Risks:

• High leverage (D/E 4.40x) with interest coverage at 0.55x indicates debt service strain.
• Refinancing risk: short-term loans (35.62) exceed cash (23.59), implying rollover dependence.
• Potential covenant pressure if lenders require higher coverage or lower leverage.
• Low ROIC (0.4%) versus cost of capital implies value dilution if growth is debt-funded.

Key Concerns:

• Ordinary income down 27.9% YoY despite revenue growth suggests margin pressure.
• Negative net income and comprehensive income indicate continued earnings fragility.
• Quick ratio below 1.0 signals reliance on inventory to meet short-term obligations.
• Data limitations (no investing CF breakdown, dividend outflows, or SG&A detail) obscure cash needs and cost structure granularity.

Investment Implications

Key Takeaways:

• Topline growth (+13.7% YoY) did not translate to bottom-line improvement; net loss persisted.
• Operating margin (~0.3%) and EBITDA margin (1.7%) are too low to comfortably service interest (0.55x coverage).
• Leverage is elevated (D/E 4.40x) with sizable short-term borrowings versus cash, raising refinancing risk.
• OCF was positive (5.21) and capex modest (1.92), yielding positive estimated FCF (~3.29) this period.
• ROE (-0.3%) and ROIC (0.4%) indicate subpar returns; margin and leverage improvements are required.

Metrics to Watch:

• Same-store sales and gross margin trajectory (pricing/mix, markdown rates).
• SG&A ratio to sales and rent/labor efficiency initiatives.
• Interest coverage (target >2.0x) and refinancing terms for short-term loans.
• Inventory turnover and working capital changes (AR, AP, inventory).
• OCF sustainability and capex discipline.
• Debt/EBITDA trend and equity buffer (equity ratio).

Relative Positioning: Compared to domestic specialty retailers, the company exhibits weaker profitability (notably lower operating and EBITDA margins), higher financial leverage, and tighter interest coverage, offset by decent revenue growth and positive near-term OCF; overall positioning skews toward higher financial risk until margins and coverage normalize.

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