Pan Pacific International Holdings Corporation FY2026 FY Earnings Report

Quick View

Executive Summary

FY2026 delivered higher revenue and higher profit, with the three regions of Japan, North America, and Asia driving balanced growth. Revenue was ¥24452.6B (+8.8% YoY), Operating Income was ¥1748.4B (+7.7%), and Ordinary Income was ¥1775.1B (+12.0%). Net Income rose substantially to ¥1120.9B (+43.8%; Net Income attributable to owners of the parent was ¥1100.9B, +21.6%), supported by an increase in Net Income attributable to non-controlling interests and a reduction in extraordinary losses from the previous year. The Operating Income margin was 7.2%, remaining at the same level as the previous year, as SG&A efficiency offset a slight decline in the gross profit margin.

Factors Driving Earnings Changes

【Revenue】Revenue increased 8.8% YoY to ¥24452.6B. By segment, Japan continued to account for the majority at ¥20821.7B (85.2% of total, +9.0%), while North America generated ¥2779.4B (+7.1%) and Asia generated ¥994.2B (+8.7%), with all regions securing revenue growth. Growth rates were broadly in line across all three regions, confirming company-wide expansion rather than excessive dependence on any particular region.

【Profit and Loss】Operating Income increased 7.7% to ¥1748.4B. The decline in the gross profit margin to 31.4% (▲0.5pt YoY) was almost entirely offset by an improvement in the SG&A ratio to 24.3% (▲0.4pt YoY). Segment profit was led by Japan at ¥1658.3B (+4.9%), while North America at ¥35.0B (+53.2%) and Asia at ¥55.2B (+186.0%) showed clear profit recovery and contributed to overall profit growth. Ordinary Income grew 12.0%, exceeding Operating Income growth, partly due to the recognition of ¥43.0B in foreign exchange gains. Extraordinary losses of ¥177.2B, including impairment losses of ¥114.9B, were recognized as a temporary factor; however, they declined from ¥227.6B in the previous year, contributing to the increase in Net Income. Net Income rose 43.8% to ¥1120.9B, resulting in higher revenue and higher profit.

Segment Analysis

The Japan Business remained the core earnings driver, with revenue of ¥2082.2B (85.2% of total) and Operating Income of ¥1658.3B (8.0% margin). The North America Business remained at a low level, with revenue of ¥277.9B and Operating Income of ¥35.0B (1.3% margin), but was on a recovery trend, growing 53.2% YoY. The Asia Business generated revenue of ¥99.4B and Operating Income of ¥55.2B (5.5% margin), a substantial 186.0% YoY improvement that lifted its profit margin to the level second only to Japan. Compared with the company-wide profit margin of 7.2%, North America remains significantly below the overall level, leaving room for profitability improvement, while the pace of improvement in Asia is attracting attention as a factor that could raise the company-wide margin.

Key Financial Indicators

【Profitability】The Operating Income margin was 7.2%, unchanged from the previous year, while the Net Income margin improved to 4.6% on a basis attributable to owners of the parent. The gross profit margin of 31.4% declined slightly YoY, but the improvement in the SG&A ratio to 24.3% offset the decline, keeping operating-level profitability flat. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1609.4B, approximately 1.4 times consolidated Net Income, indicating good consistency between earnings and cash flow. 【Investment Efficiency】ROE was 15.2%, basic EPS was ¥36.84 (+21.5% YoY), and BPS was ¥235.79. 【Financial Soundness】The Equity Ratio was 46.0%, while cash and deposits were ¥2132.9B, maintaining a stable capital structure against total assets of ¥16023.9B.

Cash Flow Analysis

Operating Cash Flow (OCF) increased substantially by 22.0% YoY to ¥1609.4B, demonstrating cash generation that outpaced Net Income growth. In terms of working capital, the increase in inventories was a negative factor of ¥209.2B, while the ¥139.3B increase in trade payables partially offset it. Investing Cash Flow was negative ¥622.9B, primarily reflecting ¥478.2B in capital expenditures, indicating continued investment for business expansion. Financing Cash Flow was negative ¥818.1B, mainly due to dividend payments and other factors. Free Cash Flow was positive at ¥986.5B, indicating that cash generated from operating activities was sufficient to fund investment and shareholder returns.

Earnings Quality

The increase in Net Income was supported not only by Operating Income growth but also by the recognition of ¥43.0B in foreign exchange gains at the Ordinary Income level and the reduction in extraordinary losses, from ¥226.6B in the previous year to ¥177.2B. Thus, improvement in recurring earnings power and the easing of temporary factors jointly contributed to the result. Extraordinary losses included ¥114.9B in impairment losses, which are classified as temporary expenses. Comprehensive Income was ¥1273.4B, exceeding Net Income attributable to owners of the parent of ¥1100.9B, primarily due to a positive contribution of ¥129.2B from foreign currency translation adjustments. As OCF has remained above Net Income, there is no significant divergence between accounting earnings and cash generation, and earnings quality can be assessed as sound.

Earnings Forecasts and Guidance

The company forecasts next-period Revenue of ¥26870.0B (+9.9% YoY), Operating Income of ¥1790.0B (+2.4%), and Ordinary Income of ¥1753.0B (▲1.2%). Compared with the current-period results (Revenue +8.8%, Operating Income +7.7%, Ordinary Income +12.0%), the forecast assumes continued top-line growth while adopting a more conservative outlook for profit. In particular, the Ordinary Income forecast can be interpreted as assuming that the boost from foreign exchange gains and other factors in the current period will fade, making the expected slowdown in profit growth relative to revenue growth a key feature of the guidance.

Shareholder Returns

The Payout Ratio for the current period was 25.8%, and dividend sustainability can be assessed as high in light of OCF and FCF levels. For the next period, the company forecasts a dividend of ¥10.00 (annual dividend of ¥9.50 in the current period), indicating a planned dividend increase. The disclosed ratio covers dividends only; data for the Total Return Ratio, including share repurchases, has not been disclosed. Retained earnings were substantial at ¥7153.0B, providing a foundation for future shareholder return capacity through accumulated internal reserves.

Risk Factors

1. Dependence on the Japan Business: The Japan Business accounts for 85.2% of total revenue, creating a structure in which trends in domestic consumption and changes in the competitive environment have a relatively significant impact on overall performance.

2. Downward Trend in the Gross Profit Margin: The gross profit margin was 31.4%, down from the previous year. If the effects of product mix and pricing measures continue, the scope for absorbing the impact through SG&A efficiency may gradually diminish.

3. Recognition of Extraordinary Losses: The company recognized extraordinary losses of ¥177.2B in the current period, including ¥114.9B in impairment losses. The possibility that impairment risks related to store assets may arise intermittently in the future requires monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The company's profitability exceeds the industry median for both the Operating Income margin and the Net Income margin, placing it among the higher-performing companies in the industry.

Growth and Capital Efficiency

The Revenue growth rate also exceeds the industry median, although it does not reach the IQR upper limit of 13.0%, placing the company in the upper group within the industry.

※Source: Compiled by the company

Key Takeaways from the Earnings Results

1. While the structure in which Japan is the primary earnings driver remains unchanged, the recovery in profit in North America (Operating Income +53.2%) and Asia (+186.0%) is emerging as a factor supporting the company-wide margin. This represents a noteworthy structural change in the decision earnings data.

2. Maintaining the Operating Income margin at a flat level through an improved SG&A ratio despite a slight decline in the gross profit margin demonstrates cost management capabilities. However, the scope for absorption would be limited if the decline in the gross profit margin continues.

3. OCF has remained above Net Income and FCF has been positive at ¥986.5B, indicating that earnings quality is sufficient to provide funding for dividends and capital expenditures.

Theoretical Share Price (Reference Value)

Sensitivity: ¥276–¥292 at Cost of Equity ±1%, and ¥283–¥286 at ω±0.1.

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

---

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 discretion and responsibility, after consulting with a professional as necessary.

---End of Report---