| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥18265.3B | ¥16882.1B | +8.2% |
| Operating Income | ¥1375.2B | ¥1286.8B | +6.9% |
| Ordinary Income | ¥1403.6B | ¥1256.7B | +11.7% |
| Net Income | ¥956.5B | ¥768.1B | +24.5% |
| ROE | 13.4% | 12.3% | - |
Cumulative results for FY2026 Q3 showed Revenue ¥1兆8,265B (YoY +¥1,383B +8.2%), Operating Income ¥1,375B (YoY +¥88B +6.9%), Ordinary Income ¥1,404B (YoY +¥147B +11.7%), and Net Income ¥957B (YoY +¥188B +24.5%). The company continued a trend of revenue and profit growth, securing double-digit growth at the bottom-line level. Revenue grew across domestic, North America, and Asia over three quarters. Gross margin declined to 31.4% (down 0.5pt from 31.9% a year ago), but SG&A ratio improved to 23.8% (down 0.5pt from 24.3%) through efficiency measures, keeping Operating Margin broadly stable at 7.5% (down 0.1pt from 7.6%). Net Profit Margin rose to 5.2% (up 0.7pt from 4.5%), supported by improvement in non-operating items and a reduction in extraordinary items. Progress toward full-year guidance was ahead of schedule at 75.0% for Revenue, 79.0% for Operating Income, and 88.0% for Net Income.
[Revenue] Revenue was ¥1兆8,265B, up +8.2% YoY. By segment, Domestic Business recorded ¥1兆5,564B (84.7% of Revenue, +8.6%), North America Business ¥2,080B (11.4%, +5.0%), and Asia Business ¥724B (3.9%, +7.8%), with Domestic driving growth. Domestic growth was supported by both existing-store sales and new store openings amid healthy consumer trends and store network expansion. North America grew revenue but only by +5.0%, with local cost inflation remaining a drag on profitability. Asia grew +7.8% driven by ramp-up of new stores and capture of local demand. Cost of sales was ¥1兆2,538B, resulting in a Gross Margin of 31.4% (prior year 31.9%), a 0.5pt decline, suggesting impacts from stronger promotions and changes in procurement terms.
[Profitability] SG&A was ¥4,352B (prior year ¥4,100B, +6.1%), growing below the revenue growth rate of +8.2%, yielding an improved SG&A ratio of 23.8% (prior year 24.3%), reflecting operating leverage through dilution of fixed costs from scale expansion. Operating Income was ¥1,375B (+6.9%), with an Operating Margin of 7.5% (down 0.1pt from 7.6%), broadly flat. Non-operating items comprised Non-operating Income ¥84B (including ¥34B FX gains) and Non-operating Expenses ¥55B (including interest expense ¥47B and FX losses ¥35B), producing a net +¥28B contribution and expanding Ordinary Income to ¥1,404B (+11.7%). Extraordinary items were Extraordinary Gains ¥37B (including ¥7B gain on sale of fixed assets) and Extraordinary Losses ¥37B (including ¥12B loss on disposal of fixed assets and ¥7B impairment of investment securities), netting nearly neutral and indicating minimal one-off impacts. Income before income taxes was ¥1,403B, with income taxes ¥447B (effective tax rate 31.8%). After deducting Net Income attributable to non-controlling interests of ¥17B, Net Income attributable to owners of the parent was ¥957B (+24.5%). In summary, the company achieved revenue and profit growth across all profit levels.
Domestic Business: Revenue ¥1兆5,564B (YoY +8.6%), Operating Income ¥1,305B (YoY +4.8%), Operating Margin 8.4%; the core segment contributes roughly 95% of consolidated Operating Income. Growth was driven by new store openings and existing store sales, and profitability improved via SG&A efficiency. Consolidation of Kanemi Foods resulted in newly recognized goodwill of ¥17B.
North America Business: Revenue ¥2,080B (+5.0%), Operating Income ¥32B (+6.2%), Operating Margin 1.5%. Although revenue increased, profitability remains low. Inflationary pressure on labor, rent, and logistics costs persists, and profit improvement is still in progress. Purchase price allocation related to the Mikuni Restaurant Group combination was finalized this period, and goodwill was adjusted.
Asia Business: Revenue ¥724B (+7.8%), Operating Income ¥39B (up from ¥12B prior year, +222.3%), with Operating Margin improving substantially to 5.3%. Ramp-up of new stores and cost-efficiency measures drove a notable improvement in profitability. Overall, Domestic is the stable earnings source, Asia is on a recovery trend, and North America has significant room for improvement.
[Profitability] Operating Margin of 7.5% declined 0.1pt from 7.6% a year ago, but the 0.5pt drop in Gross Margin was offset by a 0.5pt improvement in SG&A ratio, keeping margins broadly flat. Net Profit Margin increased to 5.2% (up 0.7pt from 4.5%), aided by improved non-operating items and optimized tax burden. ROE stands at 13.4%, above the company's historical levels.
[Cash Quality] Operating Cash Flow (OCF) was ¥1,104B, which is 1.15x Net Income ¥957B and satisfactory; however, OCF/EBITDA (EBITDA = Operating Income + Depreciation ¥393B) is 0.62x and low, as increases in working capital—particularly inventory increase of ¥1,515B—are suppressing cash conversion. Inventory turnover days are approximately 71 days, calculated as Inventory ¥2,428B / (Cost of Sales ¥1兆2,538B ÷ 365) ≒ 71 days, exceeding the retail sector benchmark of 60 days and signaling inventory accumulation.
[Investment Efficiency] Total Asset Turnover is 1.17x, standard. Capital expenditures were ¥366B, which is 0.93x depreciation ¥393B, consistent with maintenance and replacement level.
[Financial Soundness] Equity Ratio is solid at Net Assets ¥7,152B / Total Assets ¥1兆5,585B = 45.9%. Current Ratio is Current Assets ¥5,643B / Current Liabilities ¥4,468B = 126.3%, indicating adequate short-term liquidity. Interest-bearing debt (short- and long-term borrowings plus corporate bonds) is approximately ¥2,241B, representing 1.27x of EBITDA (EBITDA ≒ Operating Income ¥1,375B + Depreciation ¥393B ≒ ¥1,768B). Interest coverage is healthy at Operating Income ¥1,375B / Interest Paid ¥47B = 29.3x, indicating minimal financial burden.
Operating Cash Flow was ¥1,104B (prior year ¥875B, +26.2%). Starting from Income before income taxes ¥1,403B, the subtotal was a healthy ¥1,573B, but increases in working capital significantly pressured cash flow. Main components included Inventory increase ¥1,515B (stock buildup), Trade Receivables increase ¥73B, and Trade Payables increase ¥841B, with inventory buildup being the primary drag on OCF. Income taxes paid were ¥480B. Investing Cash Flow was ▲¥468B, mainly due to Capital Expenditures ▲¥366B and Intangible Asset Investments ▲¥110B, net of ¥22B proceeds from disposals. Financing Cash Flow was ▲¥802B, driven by long-term borrowings repayments ▲¥557B, bond redemptions ▲¥207B, and dividend payments ▲¥245B, while funds were raised via long-term borrowings ¥400B and bond issuance ¥299B. Free Cash Flow (FCF) was Operating CF ¥1,104B + Investing CF ▲¥468B = ¥637B, providing capacity to cover dividends and debt repayments. Cash and Cash Equivalents increased by ¥78B from opening balance ¥1,758B to closing balance ¥1,836B; considering foreign exchange effects of ¥64B, the net change was ▲¥101B. Working capital pressure is the key weakness in cash conversion; inventory correction will be pivotal to improving next-period cash flows.
Operating Income ¥1,375B remains core earnings, and non-operating items were net +¥28B (Non-operating Income ¥84B, Non-operating Expenses ¥55B), representing only 0.15% of Revenue—indicating low dependence on non-core activities. Non-operating Income included ¥34B FX gains, while Non-operating Expenses included ¥35B FX losses, making FX impact nearly net neutral. Extraordinary items netted nearly zero (Extraordinary Gains ¥37B including ¥7B gain on sale of fixed assets; Extraordinary Losses ¥37B including ¥12B loss on disposal of fixed assets, ¥7B impairment of investment securities, and ¥2B impairment loss), implying minimal one-off inflation or deflation of profits. The gap between Ordinary Income ¥1,404B and Net Income ¥957B is primarily due to income taxes ¥447B (effective tax rate 31.8%), with no structural distortion. OCF/Net Income is 1.15x—qualitatively high—yet OCF/EBITDA is 0.62x and low, with inventory buildup increasing working capital and suppressing cash-based profitability. The accrual ratio (Net Income − OCF) / Total Assets is ▲1.0%, negative, indicating accounting profit is below cash generation, which can be attributed to temporary inventory factors; however, delayed inventory correction could lead to future markdowns or valuation losses, warranting ongoing monitoring.
Full-year guidance remains Revenue ¥2兆4,350B (YoY +8.4%), Operating Income ¥1,740B (YoY +7.2%), Ordinary Income ¥1,720B (YoY +8.5%), and EPS guidance ¥35.80 unchanged. Progress of Q3 cumulative results versus full-year guidance stands at Revenue 75.0% (standard pace 75%), Operating Income 79.0% (4pt ahead), and Net Income 88.0% (13pt ahead), with bottom-line progress notably ahead. The upfront realization of Operating Income is attributable to SG&A efficiency and strength in Domestic and Asia segments; the outsized Net Income progress reflects improvements in non-operating items and minimal extraordinary impacts. However, given the decline in Gross Margin and inventory accumulation, there is a possibility of Q4 cost recognition related to inventory adjustments or intensified promotions; the company’s decision to maintain guidance appears cautious. No forecast revisions have been announced; if inventory correction and North America profitability improvement proceed smoothly, upside to the full-year forecast is possible, whereas discount pressure toward year-end could suppress Gross Margin.
An interim dividend of ¥3.0 per share was paid. The company implemented a 1-for-5 stock split of common shares effective October 1, 2025, and dividends for the fiscal year ending June 2025 are presented on a pre-split basis. Full-year dividend guidance is ¥5.5 per share (post-split basis). Based on current Net Income ¥957B and average shares outstanding during the period of 2,987 million shares (after treasury stock deduction), the payout ratio is approximately 10–16%, indicating a very conservative level. Against FCF ¥637B, dividend payments of ¥245B imply an FCF coverage of 2.6x and ample cushion; given strong financial soundness, dividend sustainability is high. No share buyback disclosure was made; this analysis evaluates returns on a payout-ratio basis. While the company’s detailed dividend policy is unclear, given current payout levels and liquidity, there is significant scope for future dividend increases.
Inventory accumulation and Gross Margin pressure risk: Inventory stands at ¥2,428B with inventory turnover days of 71 days, exceeding the industry benchmark of 60 days, clearly signaling inventory buildup. Increased working capital is pressuring Operating CF, with OCF/EBITDA at 0.62x. If inventory correction is delayed, markdown sales or valuation losses could further erode Gross Margin and profitability.
Low profitability in North America segment: North America recorded Revenue ¥2,080B and Operating Income ¥32B, with an Operating Margin of 1.5%, an extremely low level. Continued inflationary pressure on labor, rent, and logistics costs could delay profit recovery and dilute consolidated profitability. Given North America represents 11.4% of Revenue, delays in margin improvement could put downside pressure on full-year results.
Concentration risk in the Japanese market: Domestic Business accounts for 84.7% of Revenue and roughly 95% of Operating Income, indicating very high dependence on the Japanese market. A deterioration in domestic consumer demand or intensified competition would have a significant impact on consolidated results, making limited geographic diversification a structural risk.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.5% | 3.9% (1.2%–8.9%) | +3.6pt |
| Net Profit Margin | 5.2% | 2.2% (0.2%–5.7%) | +3.1pt |
The company’s Operating and Net Profit Margins both substantially exceed industry medians, maintaining a high-profitability profile for a retailer.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 8.2% | 3.0% (-0.1%–9.2%) | +5.1pt |
The company’s Revenue growth of +8.2% outpaces the industry median of +3.0% by 5.1pt, placing its top-line expansion among the industry leaders.
※ Source: Company compilation
Strong profitability in the Domestic Business and consolidated ROE of 13.4% are high for the retail sector, highlighting continued effectiveness of SG&A efficiency and operating leverage. However, if the 0.5pt Gross Margin decline is driven by inventory buildup and promotional intensification, the pace of inventory correction will be key to future Gross Margin recovery and profit sustainability.
Although Operating CF exceeds Net Income, inventory buildup has driven OCF/EBITDA down to 0.62x and inventory turnover days to 71, above the industry benchmark. Delays in inventory adjustment could result in year-end markdowns or valuation losses, making normalization of working capital essential to restoring cash generation capacity.
Progress against full-year guidance is ahead at 79% for Operating Income and 88% for Net Income, especially indicating upside potential at the bottom line. Financial soundness is robust with an Equity Ratio of 45.9% and Debt/EBITDA 1.27x, and payout ratio in the teens suggests substantial distribution capacity. If Asia’s Operating Margin recovery to 5.3% continues and North America profitability improves, structural improvements in geographic diversification and consolidated margins may materialize.
This report is an AI-generated earnings analysis document created by analyzing XBRL earnings release data. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by our firm based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.