NISHIMATSUYA CHAIN Co.,Ltd. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥148.19B
• Operating Income: ¥10.30B
• Net Income: ¥7.04B
• EPS: ¥117.37

Income Statement

Balance Sheet

Profitability Ratios

Share Information

Dividend 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

Verdict: Solid profitability with a cash-rich balance sheet and mid-single-digit operating margins, but limited visibility on cash flow and YoY dynamics due to disclosure gaps. Revenue for FY2026 Q3 reached 1,481.95, generating gross profit of 511.80 and operating income of 102.96, translating to a gross margin of 34.5% and an operating margin of about 7.0%. Ordinary income came in at 107.41 and net income at 70.40, implying a net margin of 4.8% and EPS (basic) of 117.37 yen. SG&A was 408.83, implying an SG&A ratio of roughly 27.6% and demonstrating decent operating discipline for a price-oriented retailer. Non-operating income of 4.68 was supported by dividend income (1.09) and interest income (0.96), while non-operating expenses were minimal at 0.23 and interest expense was negligible at 0.11. Interest coverage is extremely strong at 936x, underscoring de minimis financial risk from borrowing costs. Liquidity is robust with current assets of 1,209.07 versus current liabilities of 591.44, yielding a current ratio of 204% and quick ratio similarly at 204% given high cash holdings of 733.84. Total equity is 972.58 against total assets of 1,615.29, implying an equity-to-asset ratio of roughly 60% despite the XBRL equity ratio being unreported. ROE is calculated at 7.2%, driven by a 4.8% net margin, 0.917x asset turnover, and 1.66x financial leverage. Operating leverage appears contained, with a healthy spread between gross and operating margins (~2650 bps), suggesting SG&A control. Earnings quality cannot be confirmed because operating cash flow is unreported; the OCF/net income ratio is not calculable. Dividend sustainability looks comfortable with a calculated payout ratio of 30.6%, though FCF coverage cannot be assessed without cash flow data. There is insufficient data to comment on margin expansion or compression in basis points versus prior periods, which limits trend conclusions. Forward-looking, the company’s strong liquidity and low financing costs provide resilience amid input cost and FX volatility, but sustaining ROE above cost of capital will hinge on preserving gross margin and improving asset turnover.

Profitability Analysis

ROE decomposition: 7.2% = Net Profit Margin (4.8%) × Asset Turnover (0.917x) × Financial Leverage (1.66x). The most notable constraint is the sub-1.0x asset turnover, which is relatively low for a retailer and likely reflects a large cash balance (733.84) and potentially inventory intensity (inventories not disclosed) depressing turnover. Net margin of 4.8% is adequate for a discount/children’s retailer, supported by a strong 34.5% gross margin and disciplined SG&A ratio (~27.6%). Financial leverage at 1.66x is modest, consistent with a conservative balance sheet and high cash. Business drivers: gross margin likely benefited from product mix/private brand and controlled markdowns, while SG&A scale benefits are visible but not excessive; non-operating income slightly boosted ordinary profit via interest and dividends. Sustainability: margin levels appear sustainable absent sharp FX-driven COGS inflation or abnormal discounting; turnover improvement would require tighter working capital and/or accelerating sales growth. Flags: unable to compare SG&A growth vs revenue growth (YoY unreported), so no definitive view on operating leverage trend; non-operating items are small and not a concern.

Growth Assessment

With no YoY data disclosed, we cannot quantify growth rates or margin deltas. The current margin structure (GP 34.5%, OP ~7.0%, NP 4.8%) indicates a sound operating model. Profit composition is primarily operating-driven (OP 102.96 vs non-op income 4.68); earnings are not reliant on one-time gains. Late-cycle cost pressures (wages, utilities, logistics) and FX-driven import costs are the primary headwinds; pricing discipline and private-brand sourcing are likely offsets. Outlook hinges on maintaining traffic and basket size in a value-focused consumer environment; store rollout and same-store sales will be key. Without OCF/CapEx data, we cannot evaluate growth investment cadence or FCF reinvestment capacity, though the cash balance suggests ample optionality.

Financial Health

Liquidity is strong: current ratio 204.4% and quick ratio 204.4% (no warning; both well above benchmarks). Solvency is robust with implied equity-to-asset ratio around 60% (calculated) and a reported D/E ratio of 0.66x; interest expense is minimal. No warning on leverage thresholds (D/E < 2.0). Maturity mismatch risk appears low: cash (733.84) plus receivables (94.68) comfortably exceed current liabilities (591.44). Short-term and long-term loans are unreported; however, interest coverage of 936x suggests minimal effective debt burden. No off-balance sheet obligations were mentioned in the provided data.

Cash Flow Quality

Operating cash flow is unreported; OCF/NI is not calculable, so earnings quality cannot be validated via cash conversion. Free cash flow is also unreported, preventing assessment of coverage for dividends and capex. Working capital signals cannot be assessed due to missing inventory and payables turnover details; no explicit signs of working capital manipulation can be inferred from the snapshot. The sizable cash position provides a cushion, but absence of cash flow disclosure remains a key limitation.

Dividend Sustainability

The calculated payout ratio is 30.6%, which is conservative relative to typical retail benchmarks (<60%). FCF coverage is not calculable due to unreported OCF and capex. Balance sheet capacity (high cash, low interest burden) supports dividend continuity even under moderate profit volatility. Policy outlook cannot be inferred from disclosures; however, stable margins and current payout levels suggest room to maintain or modestly increase dividends if earnings are sustained.

Risk Assessment

Business Risks:

• Demand volatility in baby/children’s products affecting traffic and basket size
• Merchandise and markdown risk impacting the 34.5% gross margin
• Competition from general merchandisers and e-commerce
• Seasonality and weather-sensitive categories

Financial Risks:

• FX risk on imported goods affecting COGS and gross margin
• Inflationary pressures on wages, logistics, and utilities raising SG&A
• Data limitations on cash flow obscure cash conversion and FCF stability

Key Concerns:

• Sub-1.0x asset turnover (0.917x) constraining ROE
• Lack of OCF/FCF disclosure prevents verification of earnings quality
• Inventory data unreported, limiting visibility on stock health and working capital

Investment Implications

Key Takeaways:

• Solid operating margin (~7.0%) and net margin (4.8%) with disciplined SG&A
• Very strong liquidity (current ratio ~204%) and large cash balance (733.84)
• ROE at 7.2% is acceptable but held back by low asset turnover
• Earnings are primarily operating-driven; minimal reliance on non-operating gains
• Interest coverage is extremely strong (936x), implying negligible financing risk

Metrics to Watch:

• Same-store sales and traffic/basket trends
• Gross margin progression and FX/COGS sensitivity
• SG&A ratio versus sales to gauge operating leverage
• Operating cash flow, free cash flow, and capex
• Inventory levels and turnover (when disclosed)
• Dividend per share and payout policy communication

Relative Positioning: Within Japan’s value/children’s apparel and baby goods retail space, the company exhibits stronger-than-average liquidity and conservative leverage, mid-single-digit operating margins consistent with efficient operators, and a conservative payout ratio; the main relative gap is asset turnover efficiency, which tempers ROE versus best-in-class peers.

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