ZENSHO HOLDINGS CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

In addition to higher revenue and earnings, this was a high-quality set of results in which profit growth significantly exceeded revenue growth, suggesting the emergence of operating leverage. Revenue was ¥3,248.1B (+16.8% YoY), Operating Income was ¥248.2B (+57.5%), Ordinary Income was ¥237.6B (+52.6%), and Net Income was ¥151.6B (+89.4%). The primary drivers were higher revenue and earnings in the core revolving sushi business (GlobalHamazushi) and processed foods business (GlobalPreparedFood), while the gross margin was maintained at 57.4% and the SG&A ratio improved to 49.8%, supporting profit growth.

Factors Affecting Performance

【Revenue】Revenue was ¥3,248.1B, representing a +16.8% YoY increase. By segment, GlobalHamazushi grew substantially to ¥935.6B (+32.2%), HeadofficeAndSupport to ¥1,324.9B (+21.6%), and GlobalSukiya to ¥811.8B (+22.7%), driving company-wide revenue growth. Meanwhile, Retail (¥195.8B, +1.2%) and Other categories (¥130.3B, -3.4%) remained sluggish.

【Profit and Loss】Operating Income increased to ¥248.2B (+57.5%), expanding at a pace exceeding revenue growth, and the Operating Margin reached 7.6%. GlobalHamazushi generated Operating Income of ¥88.1B (+70.4%, 9.4% margin), while GlobalPreparedFood generated ¥85.7B (+10.3%, 17.8% margin), with these high-margin businesses supporting company-wide earnings. In contrast, GlobalFastfood generated ¥6.0B (-32.3%), while Retail recorded a loss of ¥-1.7B, indicating continued variability in profitability. Extraordinary Losses of ¥15.3B, primarily ¥9.2B in losses on disposal of fixed assets, declined from ¥36.5B in the previous year, resulting in a substantial increase in Net Income to ¥151.6B (+89.4%). In conclusion, these were high-quality results characterized by higher revenue and earnings, with earnings growth exceeding revenue growth.

Segment Analysis

The profitability gap between segments is clear. GlobalPreparedFood (17.8% margin) and GlobalHamazushi (9.4% margin) are high-margin businesses at the center of company-wide earnings, while GlobalSukiya (2.9%), GlobalFastfood (2.1%), and Retail (-0.9%) remain low-profitability businesses. GlobalSukiya showed a significant improvement, with Operating Income of ¥23.7B, up +408.9% YoY, and appears to be in the process of improving profitability. HeadofficeAndSupport generated profit of ¥17.2B, contributing to the company-wide results through a return to profitability from the previous year. Going forward, revitalizing low-profitability businesses will be key to improving the company-wide margin.

Key Financial Indicators

【Profitability】The Operating Margin was 7.6% and the Net Profit Margin was 4.7%, both representing significant improvements from the same period of the previous year. While maintaining a gross margin of 57.4%, the SG&A ratio declined to 49.8%, indicating the emergence of operating leverage accompanying revenue growth.【Cash Flow Quality】The difference between Ordinary Income of ¥237.6B and Net Income of ¥151.6B was primarily attributable to Extraordinary Losses of ¥15.3B and Income Taxes and Other of ¥70.8B. Non-operating income and expenses were small relative to revenue, and most earnings were generated by the core business.【Investment Efficiency】ROE was 4.3%, and the Equity Ratio was 35.7%. Basic EPS increased +87.6% to ¥91.20 (¥48.61 in the previous year), while BPS increased to ¥1,758.27 (¥1,665.94 in the previous year).【Financial Soundness】Total Assets were ¥9,941.8B and Net Assets were ¥3,550.6B. The Equity Ratio of 35.7% remained broadly at the same level as the previous year (35.5%). Although the balance of interest-bearing debt was substantial, comprising Long-term Borrowings of ¥2,382.2B and Bonds of ¥400.0B, the company maintained ample on-hand liquidity with Cash and Deposits of ¥1,232.8B.

Cash Flow Analysis

As detailed disclosure of the statement of cash flows is not available, funding trends are analyzed based on changes in the balance sheet. Cash and Deposits were ¥1,232.8B, a slight decrease from ¥1,280.5B in the previous year. As indicated by increases in Property, Plant and Equipment (¥3,715.7B) and Goodwill (¥167.9B, +66.3% YoY), funds appear to have been invested in business investments and acquisitions. Short-term Borrowings increased YoY, suggesting that a portion of working capital and investment funding may have been supplemented through borrowings. Long-term Borrowings increased from the previous year to ¥2,382.2B, indicating that growth investments are also being supported through debt. The substantial increase in Net Income (+89.4%) directly contributed to the accumulation of retained earnings, which increased to ¥1,538.8B.

Earnings Quality

The core of earnings was Operating Income of ¥248.2B. Non-operating Income of ¥15.1B and Non-operating Expenses of ¥25.6B were both small relative to revenue, indicating that the recurring earnings structure was driven by operating activities. Non-operating income included Interest Income of ¥7.5B and Foreign Exchange Gains of ¥1.1B, while Interest Expense of ¥19.8B was recorded as an expense. Extraordinary Losses of ¥15.3B, primarily ¥9.2B in losses on disposal of fixed assets, declined substantially from ¥36.5B in the previous year, mitigating the reduction in Net Income caused by temporary factors. The difference between Ordinary Income of ¥237.6B and Net Income of ¥151.6B was primarily attributable to Income Taxes and Other of ¥70.8B, with the effective tax rate remaining broadly within a normal range. Accordingly, the current period’s earnings growth can be assessed as being supported not by temporary factors but by an improvement in the profitability of the core business.

Earnings Forecast and Guidance

Progress against the full-year plan is favorable. Against the full-year outlook of Revenue of ¥1,402.0B, Operating Income of ¥102.0B, and Ordinary Income of ¥94.6B, progress in Q1 was 23.2% for Revenue, 24.3% for Operating Income, and 25.1% for Ordinary Income, broadly in line with the standard progress rate of 25%. Against forecast EPS of ¥321.99, EPS for the quarter was ¥91.20, representing progress of approximately 28.3% and running ahead of plan. Although the earnings forecast was revised during the quarter, the dividend forecast was not revised. If growth in the high-margin businesses continues, the likelihood of achieving the full-year plan is considered high.

Shareholder Returns

The company’s annual dividend forecast is ¥80.00. This represents an increase from the previous year’s actual dividend of ¥35.00, indicating a trend toward higher dividends. Based on the full-year Net Income plan attributable to owners of the parent—although not disclosed directly, an approximate Net Income can be calculated from the company’s forecast EPS of ¥321.99 and the assumed number of shares—the Payout Ratio is estimated from the disclosed figures to be broadly in the low 20% range, a conservative level. Treasury Stock amounted to 4,271 thousand shares, equivalent to approximately 2.7% of the 160,733 thousand issued shares, and no large-scale share buyback was identified. Shareholder returns are centered on dividends alone, while the low Payout Ratio indicates flexibility for future dividend increases and the allocation of funds toward growth investments.

Risk Factors

1. Variability in segment profitability: Low profitability continues at GlobalFastfood (Operating Margin of 2.1%, -32.3% YoY) and Retail (same: -0.9%), constraining further improvement in the company-wide Operating Margin of 7.6%.

2. Monitoring items related to working capital and asset composition: Goodwill increased +66.3% YoY to ¥167.9B, while Intangible Assets amounted to ¥2,389.0B, accounting for 24.0% of Total Assets. It will be important to monitor the recovery of invested capital going forward.

3. Higher interest burden: Interest Expense increased to ¥19.8B from ¥15.9B in the previous year. Given the debt structure comprising Long-term Borrowings of ¥2,382.2B and Bonds of ¥400.0B, any increase in expenses resulting from changes in the interest-rate environment should be monitored.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (retail)

Profitability and Returns

The company’s Operating Margin and Net Profit Margin both significantly exceed the industry median, placing its profitability among the top tier of the industry.

Growth and Capital Efficiency

The Revenue Growth Rate also substantially exceeds the industry median, demonstrating top-tier growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. In addition to double-digit revenue growth, Operating Income increased significantly by +57.5%, substantially outpacing revenue growth, and the Operating Margin improved to 7.6%. The emergence of operating leverage through the maintenance of the gross margin and a decline in the SG&A ratio has been confirmed.

2. While the high-margin GlobalHamazushi and GlobalPreparedFood businesses drove company-wide earnings growth, GlobalFastfood and Retail remained low-profitability businesses. The profitability gap between segments remains a structural area of focus for the company-wide margin.

3. Progress against the full-year plan was 23.2% for Revenue, 24.3% for Operating Income, and 25.1% for Ordinary Income, indicating standard progress. The reduction in Extraordinary Losses (from ¥36.5B in the previous year to ¥15.3B in the current period) contributed to the increase in Net Income.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥2,219–¥2,354 at Cost of Equity ±1%, and ¥2,271–¥2,306 at ω±0.1.

Notes:

• Net Income is significantly compressed relative to Operating Income due to tax burden, acquisition-related expenses, and non-controlling interests, among other factors (Net Income ÷ Operating Income 53%). This value reflects that compression at face value; if these factors are temporary, normalized earnings power may be higher than this.
• Net Assets as of the quarter-end are used, resulting in a timing difference from the full-year forecast.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value is not intended to forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. 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 professionals as necessary.

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