Pan Pacific International Holdings Corporation FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥573.28B
• Operating Income: ¥41.35B
• Net Income: ¥21.29B
• EPS: ¥9.53

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

Pan Pacific International Holdings (consolidated, JGAAP) delivered modest top-line growth and stable operating performance in FY2026 Q1, with revenue up 4.1% year over year to ¥573.3bn and operating income up 0.7% to ¥41.3bn. Gross profit rose to ¥176.8bn, implying a resilient gross margin of 30.8%, while the implied operating margin held at 7.2%. Ordinary income of ¥42.2bn slightly exceeded operating income, reflecting balanced financial items, and interest expense remained well covered. Net income surged 39.1% YoY to ¥28.5bn, lifting the net margin to 4.97%, aided by a normalized effective tax rate (estimated ~27–28%) versus a likely elevated comparison period. DuPont decomposition indicates calculated ROE of 4.42%, built from a 4.97% net margin, 0.384x asset turnover, and 2.32x financial leverage. EBITDA was ¥53.2bn (9.3% margin), with depreciation and amortization of ¥11.8bn (2.1% of sales), underscoring a capital-intensive but manageable asset base for a large-format retailer. Liquidity remains adequate, with a current ratio of 119.6% and quick ratio of 68.6%, reflecting expected inventory intensity (inventories at ¥224.9bn or ~43% of current assets). The balance sheet shows total assets of ¥1,493.2bn and total equity of ¥643.8bn, implying an equity ratio of roughly 43% (the disclosed 0% equity ratio appears unreported) and a liabilities-to-equity ratio of 1.38x. Operating cash flow of ¥8.35bn was light relative to net income (OCF/NI ~0.29x), likely due to seasonal working capital outflows and inventory build typical for discount retail. Free cash flow cannot be reliably assessed as investing cash flow/capex were not disclosed. Financing cash flow was an outflow of ¥21.0bn, suggesting debt repayment and/or shareholder returns, but dividend data were not disclosed. Overall profitability appears steady with some operating deleverage versus sales growth, but net profit benefited from lower below-the-line drag versus the prior year. Key watchpoints are inventory turns, same-store sales momentum, SG&A control, and cash conversion as the fiscal year progresses. Data gaps (notably cash and investing cash flows, equity ratio disclosure, share count, and dividends) limit precision, so conclusions rely on the available non-zero items and derived ratios.

Profitability Analysis

ROE_decomposition: Calculated ROE 4.42% = Net profit margin 4.97% × Asset turnover 0.384 × Financial leverage 2.32. This points to ROE driven primarily by healthy margins and moderate leverage, with asset turnover typical for large-format retail. margin_quality: Gross margin 30.8% reflects sustained merchandising and procurement discipline. Operating margin at 7.2% (¥41.3bn OI) was broadly flat YoY (+0.7% OI vs +4.1% sales), indicating mild operating deleverage from higher SG&A (implied SG&A ¥135.4bn; 23.6% of sales). Net margin improved to 4.97% on a normalized tax burden (~27–28% estimated) and manageable interest costs (interest expense ¥1.60bn; ~0.28% of sales). operating_leverage: Revenue grew 4.1% YoY while operating income grew 0.7%, signaling modest negative operating leverage in Q1, likely from wage inflation, utilities/logistics costs, and store-related opex. EBITDA margin of 9.3% and D&A at 2.1% of sales suggest capacity to absorb costs, but efficiency gains will be needed to re-accelerate OI growth if sales growth remains mid-single-digit.

Growth Assessment

revenue_sustainability: Top-line growth of 4.1% YoY is consistent with steady customer traffic and merchandising depth. Inventory at ¥224.9bn (~39% of quarterly sales) indicates ample stock to support demand, but also raises the bar for turn efficiency. profit_quality: Net income grew 39.1% YoY, outpacing sales and operating income; the delta appears driven by below-the-line improvements (tax/finance). With operating income up only 0.7%, sustaining profit growth will hinge on SG&A discipline and gross margin stability rather than financial items. outlook: Assuming mid-single-digit sales growth, stable gross margin around 31%, and measured SG&A growth, ordinary income can track sales. Reacceleration in operating income would require positive mix, shrink reduction, improved private label penetration, or easing cost pressures. FX and import costs remain swing factors for merchandise margins.

Financial Health

liquidity: Current ratio 119.6% and quick ratio 68.6% indicate adequate near-term liquidity for a retailer with inventory-heavy working capital. Working capital stands at ¥86.4bn. solvency: Total liabilities ¥887.0bn vs equity ¥643.8bn implies liabilities-to-equity of 1.38x and an inferred equity ratio near 43% (disclosed 0% appears unreported). Interest coverage is strong at 25.8x (EBIT/interest), indicating comfortable debt service capacity. capital_structure: Assets ¥1,493.2bn and equity ¥643.8bn yield financial leverage of 2.32x (assets/equity), consistent with the DuPont inputs. The structure is balanced for the business model, with room to fund growth while maintaining coverage metrics.

Cash Flow Quality

earnings_quality: OCF/Net income at 0.29x is weak for the quarter, suggesting working capital drag (likely inventories and payables timing). EBITDA of ¥53.2bn and EBIT of ¥41.3bn indicate underlying earnings power is intact, but cash conversion was soft. FCF_analysis: Free cash flow is not assessable this quarter due to unreported investing cash flow/capex (Investing CF shows as 0, which is an undisclosed item). Accordingly, FCF coverage and yield cannot be reliably computed. working_capital: Inventories are ¥224.9bn (~43% of current assets; ~39% of quarterly sales), underscoring the need for disciplined replenishment and markdown management. The OCF margin is 1.46% (¥8.35bn/¥573.28bn), consistent with a seasonal build; subsequent quarters should be monitored for normalization.

Dividend Sustainability

payout_ratio_assessment: EPS is ¥9.53; dividend per share and payout ratio are not disclosed (reported zeros indicate non-disclosure). Therefore, we cannot compute a reliable payout ratio. FCF_coverage: With investing cash flows/capex unreported, FCF coverage of dividends cannot be assessed for the quarter. policy_outlook: Given solid profitability, strong interest coverage, and moderate leverage, the capacity for shareholder returns appears intact; however, absent disclosed DPS and full cash flow data, no conclusion can be drawn about the near-term dividend trajectory or policy cadence.

Risk Assessment

Business Risks:

• Merchandise margin pressure from currency-driven import cost inflation and supplier pricing.
• Intense price competition in discount/general merchandise retail impacting traffic and basket size.
• Inventory management risk leading to markdowns and working capital strain.
• Labor cost inflation and staffing constraints affecting SG&A and store operations.
• Format expansion and integration execution risk for new stores or geographies.
• Supply chain disruptions affecting availability and logistics costs.

Financial Risks:

• Foreign exchange volatility affecting COGS on imported goods and overseas operations.
• Interest rate risk on variable-rate borrowings, albeit mitigated by high coverage.
• Cash conversion volatility due to seasonal or cyclical working capital swings.
• Potential tax rate fluctuations affecting net income leverage.
• Refinancing or liquidity risk if credit markets tighten, though current metrics are sound.

Key Concerns:

• Operating income growth trailing sales (+0.7% vs +4.1%), indicating mild deleverage.
• Weak OCF relative to net income (0.29x) in the quarter; need to see catch-up.
• High inventory as a share of current assets (~43%) requiring strong turn discipline.

Investment Implications

Key Takeaways:

• Stable operating performance with resilient gross margin (30.8%) and operating margin (~7.2%).
• Net income growth (+39.1% YoY) outpaced sales on below-the-line normalization; sustainability depends on operating drivers.
• Liquidity and solvency remain sound: current ratio 119.6%, interest coverage 25.8x, liabilities/equity 1.38x.
• Cash conversion was weak in Q1 (OCF/NI 0.29x), likely seasonal; monitor for rebound.
• Data gaps (investing CF, DPS, equity ratio disclosure, cash balance) limit precision of FCF and payout analysis.

Metrics to Watch:

• Same-store sales growth and traffic/basket trends.
• Gross margin trajectory and shrink/markdown levels.
• SG&A ratio to sales and labor cost inflation.
• Inventory turnover days and payable days (working capital cycle).
• OCF/Net income and OCF margin normalization over subsequent quarters.
• Capex and investing cash flows to derive FCF and payout capacity.
• Effective tax rate stabilization and any FX impacts on COGS.

Relative Positioning: Within domestic discount and general merchandise retail, the company exhibits above-average gross margins, solid operating margins, and strong interest coverage, supported by a balanced leverage profile; key differentiators remain merchandising strength and cost control, while near-term differentiators will hinge on inventory discipline and cash conversion.

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