| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥1933.7B | ¥1859.7B | +4.0% |
| Operating Income | ¥99.4B | ¥121.8B | -17.3% |
| Ordinary Income | ¥105.7B | ¥126.5B | -15.4% |
| Net Income | ¥69.5B | ¥82.0B | -15.1% |
| ROE | 7.0% | 9.0% | - |
The fiscal year ending February 2026 closed with Revenue of ¥1,933.7B (YoY +¥74.0B +4.0%), Operating Income of ¥99.4B (YoY -¥22.4B -17.3%), Ordinary Income of ¥105.7B (YoY -¥20.8B -15.4%), and Net Income attributable to owners of the parent of ¥69.5B (YoY -¥12.5B -15.1%), resulting in a year of higher sales but lower profitability. Revenue maintained a four-quarter consecutive growth trend, but Operating Margin deteriorated to 5.1% from 6.5% a year earlier (down 1.4 percentage points), indicating a notable decline in profitability. Net Income declined year-on-year despite the impact of non-recurring items, and the payout ratio of 28.0% remained at the prior-year level.
[Revenue] Revenue was ¥1,933.7B, up +4.0% YoY, capturing steady demand in the baby and children’s goods market. Segment disclosure is not provided, but growth is shown across the single business of sales of daily living products for babies and children. Cost of goods sold was ¥1,286.4B, representing a cost of sales ratio of 66.5% and a gross margin of 33.5%, maintained at the prior-year level; top-line expansion led to an absolute increase in gross profit (¥647.2B). [Profitability] Operating Income was ¥99.4B, a decrease of -17.3% YoY, with an Operating Margin of 5.1%, down about 1.4 points from 6.5% the prior year. The primary driver was an increase in SG&A, which rose to ¥547.8B (SG&A ratio 28.3%), outpacing revenue growth; cost inflation in personnel, logistics, and utilities pressured operating leverage. Non-operating income of ¥6.6B (dividends received ¥1.8B, interest income ¥1.3B, foreign exchange gains ¥0.7B, etc.) supported the ordinary profit level, resulting in Ordinary Income of ¥105.7B (YoY -15.4%). Special losses of ¥5.9B (impairment losses ¥5.5B, store closure losses ¥0.5B) were recorded, but Net Income attributable to owners of the parent remained ¥69.5B (YoY -15.1%). The impairment was a temporary factor centered on store assets. Comprehensive income was ¥96.1B, substantially exceeding Net Income due to ¥26.8B of other securities valuation gains. In conclusion, the company reported higher revenue but lower profit: sales growth continued, but higher costs weakened operating profitability, partially offset by non-operating income and tax effects.
[Profitability] Operating Margin was 5.1%, down about 1.4 points from 6.5% a year earlier; Gross Margin of 33.5% was maintained, but the rise in SG&A ratio to 28.3% compressed margins. Net Profit Margin was 3.6%, down from 4.4% the prior year. ROE was 7.0%, deteriorating 2.0 points from 9.0% the prior year; although it exceeds the industry median of 5.9%, it shows a downward trend versus the company's historical level. ROE decomposition: Net Profit Margin 3.6% × Total Asset Turnover 1.21x × Financial Leverage 1.62x — the decline was mainly driven by a drop in Net Profit Margin. ROA was 4.4%, down from 5.5% the prior year. [Cash Quality] Operating Cash Flow / Net Income was 1.53x, a high level indicating good cash conversion. OCF/EBITDA was 0.91x, and the cash conversion rate is below the industry median of 1.57, but Operating Cash Flow of ¥106.5B substantially exceeded Net Income of ¥69.5B, indicating solid quality. The accrual ratio was -1.9%, within a healthy range, showing small divergence between accounting profit and cash generation. [Investment Efficiency] Total Asset Turnover was 1.21x, nearly in line with the industry median of 1.17x. Capital expenditures were ¥25.9B versus depreciation of ¥17.1B, giving a CapEx/Depreciation ratio of 1.51x, indicating continued growth investment. Inventory turnover days were 104 days, well above the industry median of 66 days, indicating room to improve inventory efficiency. Accounts receivable turnover days were 12 days and accounts payable turnover days 35 days, leading to an operating working capital turnover days of 81 days; excess inventory lengthens the working capital cycle. [Financial Soundness] Equity Ratio was 61.6%, above the industry median of 50.2%, indicating a solid financial base. Current Ratio was 209% and Quick Ratio 144%, both high levels; cash and deposits of ¥724.9B far exceed current liabilities of ¥564.5B. Net Debt/EBITDA was -6.18x, reflecting a net cash position and minimal interest burden (Interest Coverage 621x). Financial Leverage was 1.62x, low, with low dependence on interest-bearing debt.
Operating Cash Flow was ¥106.5B, supported by pre-tax profit of ¥100.0B plus non-cash expenses including depreciation of ¥17.1B, and after changes in working capital and corporate tax payments remained at a solid level. Within working capital, increases in inventories (-¥7.7B) and trade receivables (-¥3.9B) were headwinds, but an increase in trade payables (+¥30.1B) contributed significantly, netting to push up Operating Cash Flow. The persistently high inventory turnover days of 104 implies potential future pressure on gross margins and risk of valuation losses, so correction is a key issue. Investing Cash Flow was -¥25.6B, reflecting growth investments centered on acquisition of tangible fixed assets. Free Cash Flow was ¥80.9B, ample and sufficient to cover shareholder returns of dividends ¥18.7B and share buybacks ¥8.0B. Financing Cash Flow was -¥26.7B, with major outflows including dividend payments -¥19.2B, share buybacks -¥8.0B, and lease liability repayments -¥0.3B. Cash and cash equivalents at period-end were ¥729.3B, up ¥54.6B from ¥674.7B at the beginning of the period, maintaining strong liquidity. Overall, cash conversion of profits is good and supports balance sheet soundness, but improving inventory efficiency is key to working capital management and shortening the cash cycle.
Against Ordinary Income of ¥105.7B, Net Income attributable to owners of the parent was ¥69.5B; non-operating income of ¥6.6B (0.3% of Revenue) and special items of -¥5.7B affected this outcome. Main items in non-operating income were dividends received ¥1.8B, interest income ¥1.3B, and foreign exchange gains ¥0.7B; financial and FX factors are the main drivers and have limited impact on recurring earnings. Special losses of ¥5.9B (impairment losses ¥5.5B, store closure losses ¥0.5B) were temporary factors centered on store assets and do not materially distort the sustainable earning power of the business. Comprehensive income of ¥96.1B exceeded Net Income by ¥26.6B, primarily due to ¥26.8B in other securities valuation differences, reflecting unrealized gains from a strong stock market. Operating Cash Flow/Net Income at 1.53x and OCF/EBITDA at 0.91x are high, and an accrual ratio of -1.9% is within a healthy range, indicating small divergence between accounting profit and cash generation — overall earnings quality is good. However, persistently high inventory turnover days of 104 present structural risks to earnings sustainability, including potential valuation losses or markdown-driven gross margin pressure.
Full-year guidance is Revenue ¥2,050.0B (YoY +6.0%), Operating Income ¥125.4B (YoY +26.1%), Ordinary Income ¥130.0B (YoY +23.0%), Net Income attributable to owners of the parent ¥83.8B, and EPS ¥139.78. Operating Margin is assumed to improve to about 6.1% from this period’s 5.1% (approximately a 1.0 percentage point improvement). Achievement assumes normalization of inventory turnover days, recovery of gross margin, and restraint in SG&A growth. Revenue is forecast to grow +6.0%, accelerating from +4.0% this period. Operating Income is expected to improve substantially by +26.1%, with inventory optimization leading to better product mix and execution of cost efficiencies being key. Dividend forecast is ¥16 per year, with a payout ratio of about 22.9%, down from 28.0% this period. Progress toward the full-year forecast at the end of this period is Revenue 94.3% and Operating Income 79.3%, implying planned margin improvement in H2.
The annual dividend was ¥32 (interim ¥16, year-end ¥16), an increase of ¥17 from ¥15 in the prior year. The payout ratio is 28.0%, well within a sustainable range (below 60%), and Free Cash Flow (¥80.9B) covers dividends by 4.3x, providing a substantial buffer. Share buybacks amounted to ¥8.0B; combined with dividends of ¥18.7B, total shareholder returns were ¥26.7B, with a Total Return Ratio of 38.4%. Free Cash Flow coverage of total returns is 3.0x, within a safe range. Supported by a strong balance sheet and cash generation, shareholder return sustainability is high. The full-year dividend forecast of ¥16 represents half of this period’s actual ¥32, which is presumed to be affected by the commencement of consolidated financial statement preparation from the fiscal year ending February 2026, making year-on-year comparisons difficult. There remains room for gradual enhancement of returns in line with business recovery, with capital allocation balanced against growth investments.
[Industry Position] (reference information — company analysis): Within the retail sector, the company’s Equity Ratio of 61.6% is 11.4 points above the industry median of 50.2%, placing it among the top for financial soundness. ROE of 7.0% slightly exceeds the industry median of 5.9% but shows a decline compared with the company’s historical level (9.0% last year). Operating Margin of 5.1% is roughly in line with the industry median of 4.6%, and Net Profit Margin of 3.6% is also near the industry median of 3.3%, indicating profitability around the industry average. Inventory turnover days of 104 are 38 days above the industry median of 66, placing inventory efficiency in the lower rank within the sector and highlighting room for improvement. Current Ratio of 209% substantially exceeds the industry median of 184%, indicating top-tier short-term liquidity. Revenue growth of +4.0% is roughly in line with the industry median of +4.3%, so top-line growth is industry-average. Overall, the company ranks highly on financial soundness and balance sheet stability within the industry, but improving inventory efficiency and profitability is the focus for enhancing competitiveness.
Key points from the results are as follows. First, balancing the persistently high inventory turnover days of 104 with profitability improvement is the major challenge. Inventory of ¥366.6B is excessive compared with the industry median, and normalization may incur markdown risks; full-year guidance assumes Operating Margin improvement to 6.1% from 5.1%, so concurrent achievement of inventory correction and gross margin improvement is a precondition. Second, the strong balance sheet and cash generation capacity provide a foundation for balancing stable shareholder returns and growth investment. Free Cash Flow of ¥80.9B sufficiently covers dividends of ¥18.7B and share buybacks of ¥8.0B; with Current Ratio 209% and Equity Ratio 61.6%, financial resilience is high and flexibility in capital allocation is ensured even under short-term performance volatility. Third, a trend improvement in Operating Margin is the key to medium-term shareholder value enhancement. The current period’s 5.1% declined from 6.5% the prior year, and although recovery to 6.1% is planned for the full year, historical trends indicate that sustainable margin improvement requires structural measures in SG&A efficiency and gross margin enhancement. Dividends were increased to ¥32 from ¥15 in the prior year, demonstrating a maintained shareholder return stance; gradual enhancement of Total Return Ratio in a recovery phase is expected.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from publicly disclosed financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.