| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1379.8B | ¥1371.8B | +0.6% |
| Operating Income / Operating Profit | ¥57.3B | ¥60.2B | -4.8% |
| Ordinary Income | ¥58.9B | ¥62.9B | -6.3% |
| Net Income / Net Profit | ¥26.4B | ¥34.8B | -24.3% |
| ROE | 9.0% | 13.0% | - |
For the fiscal year ending February 2026, Revenue was ¥1379.8B (YoY +¥8.0B +0.6%), Operating Income was ¥57.3B (YoY -¥2.9B -4.8%), Ordinary Income was ¥58.9B (YoY -¥4.0B -6.3%), and Net Income was ¥26.4B (YoY -¥8.4B -24.3%). Results settled into a pattern of revenue growth with profit decline; the large drop in Net Income was mainly due to Special Losses of ¥25.8B including Impairment Losses of ¥22.4B, and ordinary earning power was broadly maintained. Revenue edged up supported by resilient same-store traffic and effects of store refurbishments, while SG&A cost increases—personnel, energy, rent—pushed the SG&A ratio up from 24.6% to 25.3% (+0.7pt), and cost increases exceeded gross margin improvement (+0.4pt), compressing Operating Income. Operating margin declined to 4.2% from 4.4% (-0.2pt) and Net Margin to 1.9% from 2.5% (-0.6pt). Excluding Special Losses, pre-tax profit could improve to around ¥64B, indicating core profitability is roughly flat.
[Revenue] Revenue of ¥1379.8B (YoY +0.6%) showed only modest growth. The Supermarket Business (single segment) accounts for the majority of sales, and resilient same-store visits plus assortment enhancement from store refurbishments supported top-line. Gross margin improved to 26.7% from 26.3% (+0.4pt) due to renegotiated purchasing terms and a favorable product mix (higher proportion of high-margin items). However, intensified price competition and heightened frugality limited meaningful increases in basket size, keeping top-line growth flat. Sales are domestic-only with no overseas operations; the mature domestic market and intense competition continue to constrain growth.
[Profitability] Operating Income was ¥57.3B (YoY -4.8%), with an Operating Margin of 4.2% (prior 4.4%, -0.2pt). While Gross Margin improved (+0.4pt), SG&A rose to ¥349.2B (prior ¥337.0B, +3.6%), outpacing revenue growth and lifting the SG&A ratio to 25.3% (prior 24.6%, +0.7pt). Main increases were salaries and allowances ¥167.8B (prior ¥157.1B, +6.8%), rent ¥44.2B (prior ¥42.8B, +3.3%), and depreciation ¥20.1B (prior ¥18.1B, +11.0%), reflecting higher personnel costs and increased depreciation from proactive capital investment, which pressured profitability. Ordinary Income of ¥58.9B (YoY -6.3%) was affected by higher non-operating expenses (interest expense ¥1.0B, prior ¥0.6B), widening the profit decline beyond the operating level. Pre-tax profit fell significantly to ¥38.9B (prior ¥60.0B, -35.1%), mainly due to Special Losses of ¥25.8B (including Impairment Losses ¥22.4B, loss on disposal of fixed assets ¥1.7B), which are viewed as one-off. Income taxes of ¥12.4B (effective tax rate 32.0%) were around normal levels. Net Income was ¥26.4B (prior ¥34.8B, -24.3%), heavily impacted by impairments. In conclusion, revenue rose while profits fell and Special Losses pressured the bottom line, but earnings up to the ordinary level remained in a roughly flat range.
[Profitability] Operating Margin 4.2% (prior 4.4%, -0.2pt), Net Margin 1.9% (prior 2.5%, -0.6pt), ROE 9.0% (prior 16.5%, -7.5pt) — all below prior-year levels. ROE deterioration is mainly due to the large Net Income decline (impact of Special Losses), but the build-up of equity (Net Assets ¥292.3B, prior ¥268.6B, +8.8%) and reduced financial leverage from lower interest-bearing debt (1.93x, prior 2.15x) also contributed. Gross Margin 26.7% (prior 26.3%, +0.4pt) improved, but a higher SG&A ratio 25.3% (prior 24.6%, +0.7pt) compressed operating leverage, leaving profitability structurally constrained.
[Cash Quality] Operating Cash Flow (OCF) ¥52.7B is 1.99x Net Income ¥26.4B, indicating good cash backing of profits. However, OCF/EBITDA was only 0.67x (EBITDA = Operating Income ¥57.3B + Depreciation ¥21.5B ≈ ¥78.8B), with working capital absorption (inventory increase -¥4.3B, accounts receivable increase -¥1.5B) and tax payments -¥22.9B reducing cash conversion efficiency.
[Investment Efficiency] Capital expenditures ¥48.4B are about 2.25x depreciation ¥21.5B, indicating an aggressive investment stance, pointing to store refurbishments, equipment renewals, and logistics efficiency improvements. Total asset turnover 2.44x (prior 2.38x) remained broadly steady, preserving asset efficiency.
[Financial Soundness] Equity Ratio 51.8% (prior 46.6%, +5.2pt), Interest-bearing Debt / EBITDA 0.69x, Interest Coverage approximately 60x (Operating Income ¥57.3B / Interest Expense ¥1.0B) — financial resilience is very strong. Long-term borrowings ¥54.2B (prior ¥72.4B, -25.1%) show steady de-leveraging. Current Ratio 110.3% (prior 112.9%), Quick Ratio 87.1% (prior 93.5%) indicate somewhat tight short-term liquidity but not structurally concerning.
Operating Cash Flow ¥52.7B (YoY +0.0%) remained flat. From OCF subtotal ¥76.2B, working capital was -¥19.9B (inventory +¥4.3B, trade receivables +¥1.5B, trade payables +¥0.7B), tax payments -¥22.9B, and other adjustments -¥1.2B (increase in contract liabilities, etc.). OCF is 1.99x Net Income ¥26.4B, showing good cash backing, but OCF/EBITDA at 0.67x is low, with inventory buildup and tax payments pressuring cash conversion. Investing Cash Flow -¥50.0B (prior -¥30.5B) was driven by purchase of tangible fixed assets -¥48.4B (prior -¥36.3B), reflecting continued active investment in store refurbishments and equipment renewals. Acquisition of investment securities -¥2.7B, proceeds from acquisition of subsidiary shares +¥5.6B, and lease deposits net +¥0.7B were ancillary. Free Cash Flow ¥2.6B (OCF ¥52.7B + Investing CF -¥50.0B) shrank sharply from ¥15.8B prior year, leaving limited capacity to accumulate cash due to expanded investment. Financing CF -¥35.5B (prior -¥14.5B) was driven by net reduction in long-term borrowings -¥28.2B (borrowings +¥34.5B, repayments -¥62.7B) and dividend payments -¥7.3B, implementing de-leveraging alongside shareholder returns. Cash and deposits ended at ¥101.5B (prior ¥134.4B, -¥32.9B), indicating investment and debt repayment were funded from OCF and cash on hand.
Earnings up to the ordinary level include non-operating income ¥3.1B (interest income ¥0.4B, dividend income ¥0.1B, other ¥0.7B) and non-operating expenses ¥1.5B (interest expense ¥1.0B, other ¥0.5B), leaving non-operating items minor at about 0.1% of sales. The large gap between Ordinary Income ¥58.9B and Pre-tax Profit ¥38.9B is primarily due to Special Losses of ¥25.8B (Impairment Losses ¥22.4B, loss on disposal of fixed assets ¥1.7B, valuation loss on investment securities ¥0.1B), indicating a temporary deterioration in earnings quality. Special Gains ¥5.8B (gain on sale of fixed assets ¥0.3B, other ¥5.5B) were recorded but were outweighed by losses. Comprehensive Income ¥30.5B versus Net Income ¥26.4B — the ¥4.1B difference arises from valuation differences on securities ¥2.0B and actuarial differences on retirement benefits ¥2.1B, showing limited unrealized profit/loss impact. OCF ¥52.7B materially exceeds Net Income ¥26.4B, mainly due to add-backs of non-cash charges: depreciation ¥21.5B and impairment loss ¥22.4B, supporting accrual quality. However, with OCF/EBITDA at 0.67x, working capital constraints and tax payments impair cash conversion efficiency, so vigilance over balance between profit sustainability and cash generation is required.
Against the company plan (Revenue ¥1380B, Operating Income ¥55B, Ordinary Income ¥55B, Net Income ¥26B), actuals were Revenue ¥1379.8B (achievement 99.9%), Operating Income ¥57.3B (104.2%), Ordinary Income ¥58.9B (107.1%), Net Income ¥26.4B (101.5%), landing broadly in line with plan and slightly ahead at operating and ordinary levels. Upside was driven by Gross Margin improvement and cost control, which absorbed Special Losses to secure plan-level Net Income. Next fiscal year, with Special Losses falling away, Net Income is expected to recover to ¥35B (YoY +32.6%), while Revenue ¥1380B (±0.0%), Operating Income ¥55B (YoY -4.0%), and Ordinary Income ¥55B (YoY -6.7%) are planned, reflecting delayed cost control leading to decreased ordinary profits. Full-year dividend forecast is undecided (prior year year-end ¥70 actual), and speculated to be determined after assessing results progress.
A year-end dividend of ¥70 (Payout Ratio 30.8%) was paid, totaling dividends of ¥7.3B. Dividend yield relative to Net Assets per Share 2,601.69円 is 2.7%, and DOE (Dividend on Equity) is 2.9%, both stable. Payout Ratio 30.8% is within a sustainable range, but dividend payments of ¥7.3B versus Free Cash Flow ¥2.6B gives FCF coverage of only 0.36x, meaning dividends were funded by drawing down cash and OCF. No share buybacks were executed; Total Return Ratio equals the payout ratio. Next fiscal year, with Special Losses dropping out and Net Income recovering, dividend capacity on an FCF basis should improve, but the balance between investment cash needs and debt repayment pace will be key to dividend sustainability.
SG&A Ratio Rise Risk: Salaries and allowances increased +6.8% YoY, with rent and depreciation also rising. Structural upward pressure on personnel costs—driven by minimum wage hikes and recruitment difficulty—along with persistent energy and rent costs are likely. SG&A ratio rose from 24.6% to 25.3% (+0.7pt), and if cost increases that exceed gross margin improvements (+0.4pt) become entrenched, operating leverage may be impaired and profitability could decline over the medium term. Price pass-through, automation, and operational efficiency to contain SG&A are urgent.
Recurrence Risk of Impairments / Store Closure Losses: This fiscal year recorded Impairment Losses ¥22.4B amid ongoing store portfolio review. Continued deterioration in store-level profitability or intensifying local competition could lead to additional impairments or closure losses, temporarily pressuring Net Income. Asset retirement obligations ¥7.6B (prior ¥2.5B) have risen materially, warranting attention to potential cash outflows related to future asset removals and refurbishments.
Short-term Liquidity Risk: Current Ratio 110.3% and Quick Ratio 87.1% point to somewhat tight short-term liquidity; cash and deposits ¥101.5B versus current liabilities ¥193.5B. Principal items are trade payables ¥82.4B and short-term borrowings ¥45.0B (including long-term borrowings due within one year). Ongoing generation of operating cash is a prerequisite. Inventory buildup (-¥4.3B) and accounts receivable increases (-¥1.5B) are tying up working capital, and deteriorating working capital efficiency could further strain short-term liquidity.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.2% | 4.6% (1.7%–8.2%) | -0.4pt |
| Net Margin | 1.9% | 3.3% (0.9%–5.8%) | -1.4pt |
Profitability is slightly below industry median; Net Margin is -1.4pt below median due to Special Loss impact.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 0.6% | 4.3% (2.2%–13.0%) | -3.7pt |
Revenue growth is well below the industry median of 4.3%, reflecting a mature trade area focused on existing stores with limited new openings.
※Source: Company aggregation
Progress toward normalization as Special Losses fall away: This fiscal year Special Losses of ¥25.8B including Impairment Losses ¥22.4B pressured Net Income, but these are judged to be one-off. Next year, with special losses falling away, Net Income is expected to recover to around ¥35B (YoY +32.6%), and ROE should normalize. The company plans a decline in Ordinary Income (¥55B, -6.7%), so progress on Gross Margin improvement (procurement terms, product mix optimization) and SG&A containment (automation, operational efficiency) will be key to earnings recovery.
De-leveraging and strengthening the financial base: Long-term borrowings were cut by -25.1% YoY, with Interest-bearing Debt / EBITDA 0.69x and Interest Coverage about 60x, indicating very strong financial resilience. Equity Ratio 51.8% (prior 46.6%, +5.2pt) places financial health among the top in the industry, and interest burden remains minor even in a rising-rate environment, limiting financial risk. There is ample financial headroom for future growth investment and shareholder returns.
Balance between investment and dividends: Capex ¥48.4B (about 2.25x depreciation) shows continued active store refurbishments and equipment renewals, and Free Cash Flow ¥2.6B fell short of dividends ¥7.3B. This fiscal year dividends were maintained by drawing cash and repaying debt, leaving FCF coverage at 0.36x. If investment efficiency improves and Special Losses fall away next year, FCF should recover and dividend sustainability improve. Smoothing investment cash flow and improving working capital efficiency are key to balancing shareholder returns with growth investment.
This report was automatically generated by AI analyzing XBRL financial statements. It does not constitute 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 own responsibility; consult a professional advisor as needed.