Quick View
| Metric | Current Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥75.9B | ¥69.1B | +9.8% |
| Operating Income | ¥3.2B | ¥2.6B | +22.2% |
| Ordinary Income | ¥3.3B | ¥2.7B | +23.4% |
| Net Income | ¥1.8B | ¥1.3B | +30.3% |
| ROE | 2.4% | 1.9% | - |
Executive Summary
Revenue and earnings increased this quarter. In addition to higher revenue driven by price revisions and the recovery in customer visits, an improvement in the SG&A ratio pushed up Operating Income. Revenue was ¥75.9B (+9.8% YoY), Operating Income was ¥3.2B (+22.2%), Ordinary Income was ¥3.3B (+23.4%), and Net Income was ¥1.8B (+30.3%). While the Operating Margin improved to 4.3% from 3.8% in the same period last year, progress against the full-year plan was 24.1% for Revenue, 20.3% for Operating Income, and 14.0% for Net Income, all below the 25% level implied by simple straight-line progress, indicating that the plan is weighted toward the second half.
Factors Affecting Performance
【Revenue】Revenue increased 9.8% YoY to ¥75.9B. Although disclosure by segment is unavailable, the recovery in customer traffic at existing stores and the penetration of price revisions appear to have contributed.
【Profit and Loss】Cost of sales increased to ¥24.0B (cost ratio: 31.7%, compared with 30.4% in the same period last year), resulting in a Gross Margin of 68.3%, down -1.3pt from 69.6% in the same period last year. Meanwhile, SG&A expenses were ¥48.6B (SG&A ratio: 64.1%), an improvement of -1.6pt from 65.7% in the same period last year. As the improvement in the SG&A ratio exceeded the decline in the Gross Margin, the Operating Margin improved to 4.3% (3.8% in the same period last year). Operating Income was ¥3.2B (+22.2%) and Ordinary Income was ¥3.3B (+23.4%). Although an Extraordinary Loss of ¥0.3B (including an impairment loss of ¥0.1B) was recorded as a temporary factor, the decline in the effective tax rate to 41.5% (46.0% in the same period last year) also supported Net Income growth, resulting in Net Income of ¥1.8B (+30.3%). The company achieved higher revenue and earnings by absorbing rising costs through SG&A expense reductions and an improved tax burden.
Key Financial Indicators
【Profitability】The Operating Margin improved to 4.3% (3.8% in the same period last year), and the Net Profit Margin improved to 2.3% (1.9% in the same period last year). However, the Gross Margin was 68.3%, down from 69.6% in the same period last year, indicating the impact of rising costs.【Cash Flow Quality】Although the effective tax rate improved to 41.5% (46.0% in the same period last year), it remains high. Non-operating income and expenses were limited to income of ¥0.4B and expenses of ¥0.3B, respectively, indicating a high degree of reliance on core operations.【Investment Efficiency】ROE was 2.4%, while the total asset turnover ratio increased to 0.61x (0.51x in the same period last year), indicating improved asset efficiency through both asset reduction and revenue growth.【Financial Soundness】The Equity Ratio was 58.0% (equivalent to 53.1% in the same period last year), the Current Ratio was 123.9%, and interest coverage based on Operating Income was 155.8x, indicating substantial financial capacity.
Cash Flow Analysis
As the company does not disclose a cash flow statement, its funding trends are assessed based on changes in the balance sheet. Cash and deposits were ¥33.8B, down -27.6% from ¥46.7B in the same period last year. Together with Current Liabilities of ¥37.9B, down -21.9% from ¥48.5B in the same period last year, this suggests that cash outflows associated with liability reduction, such as the repayment of short-term borrowings, were the primary factor. Property, plant and equipment increased +5.0% to ¥59.6B from ¥56.8B in the same period last year, indicating that maintenance and renewal investment in stores is continuing. The composition of Accounts Receivable of ¥7.2B, Accounts Payable of ¥10.2B, and Inventories of ¥3.0B represents a working capital structure in which trade payables exceed trade receivables, a structure that tends to contribute to cash generation from operating activities.
Earnings Quality
Non-operating income and expenses were limited in scale, at income of ¥0.4B and expenses of ¥0.3B, respectively, and remained below 1% of Revenue, indicating low reliance on non-operating factors. The Extraordinary Loss of ¥0.3B (including an impairment loss of ¥0.1B) was a temporary factor and is not of a nature that would significantly impair recurring earnings power. The difference between Ordinary Income of ¥3.3B and Net Income of ¥1.8B was primarily attributable to income taxes of ¥1.2B (effective tax rate: 41.5%). Although the effective tax rate improved from 46.0% in the same period last year, it remains high, and the structural constraint imposed by the heavy tax burden on the conversion of Operating Income into Net Income continues.
Earnings Forecast and Guidance
Against the full-year plan (Revenue of ¥315.0B, Operating Income of ¥16.0B, Ordinary Income of ¥16.0B, and Net Income of ¥12.5B), Q1 progress was 24.1% for Revenue, 20.3% for Operating Income, 20.6% for Ordinary Income, and 14.0% for Net Income, all below the 25% level implied by simple straight-line progress. The full-year plan assumes an Operating Margin of 5.1% (¥16.0B/¥315.0B), requiring further earnings improvement from the Q1 actual result of 4.3%. The annual dividend forecast is ¥15.00, with no revision as of the end of this quarter.
Shareholder Returns
The company’s annual dividend plan is ¥15.00, with no revision as of the end of this quarter. The Payout Ratio against forecast EPS of ¥65.4 is approximately 22.9%. Together with financial indicators such as interest coverage based on Operating Income of 155.8x and an Equity Ratio of 58.0%, the company appears to have sufficient financial capacity to pay the dividend.
Risk Factors
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Rising raw material and energy costs: The Gross Margin was 68.3%, down -1.3pt from 69.6% in the same period last year, reflecting the impact of rising costs. Future trends in food ingredient and energy prices will continue to affect the Gross Margin.
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Persistently high tax burden: The effective tax rate improved somewhat to 41.5% (46.0% in the same period last year) but remains high and is a factor constraining Net Income growth.
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Asset retirement obligations: Asset retirement obligations were ¥9.8B, accounting for 18.8% of total liabilities. Future cash outflows associated with store closures and restoration obligations are a point of consideration in the company’s financial structure.
Industry Benchmark (For Reference; Compiled by the Company)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.3% | 3.3% (0.9%–7.7%) | +0.9pt |
| Net Profit Margin | 2.3% | 2.2% (0.3%–6.1%) | +0.1pt |
Both the Operating Margin and Net Profit Margin exceed the industry median, placing the company’s profitability in the middle-to-upper range among peers.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 9.8% | 7.5% (0.4%–14.5%) | +2.3pt |
The Revenue Growth Rate exceeds the industry median but does not reach the IQR upper bound of 14.5%, placing growth in the middle-to-upper range within the industry.
Source: Compiled by the Company
Key Points from the Earnings Results
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The Operating Margin improved to 4.3% (3.8% in the same period last year), while the Gross Margin declined to 68.3% from 69.6% in the same period last year. This reflects a structure in which rising costs were absorbed through an improvement in the SG&A ratio (64.1%, compared with 65.7% in the same period last year).
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Full-year progress was 24.1% for Revenue, 20.3% for Operating Income, and 14.0% for Net Income, below the level implied by simple straight-line progress. Accelerating the pace of earnings improvement in the second half is therefore necessary to achieve the plan.
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Although the effective tax rate improved to 41.5% (46.0% in the same period last year), it remains high. If the tax burden is normalized, this could provide additional upside potential for Net Income.
Theoretical Share Price (Reference Value)
The following is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥436 |
| base | ¥470 |
| bull | ¥488 |
| Calculation Assumption | Value |
|---|---|
| Book Value per Share (BPS) | ¥376 |
| Adjusted Forecast EPS | ¥67.2 |
| Cost of Equity r | 9.77% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 1.00%) |
| Persistence Coefficient of Residual Income ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 22.9% |
| Forecast EPS Confidence Adjustment | ×1.028 (based on the industry’s historical guidance achievement rate) |
| Implied PBR / PER | 1.25x / 7.0x |
Sensitivity: ¥456–¥484 at Cost of Equity ±1%, and ¥468–¥474 at ω±0.1.
Notes:
- Net assets as of the end of the quarter are used (there is a timing gap relative to the full-year forecast).
- Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.
(Calculation model: Residual Income Model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future share price)
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and after consulting a professional as necessary.
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AI Financial Analysis
Executive Summary
FY2027 Q1 was a solid top-line and operating-profit quarter, although profitability remains thin for a restaurant operator and first-quarter progress toward the full-year net-income plan is modest. Revenue increased 9.8% YoY to ¥7.588bn. Operating income rose faster than sales, increasing 22.2% to ¥324m. Ordinary income increased 23.4% to ¥330m. Net income rose 30.3% to ¥175m. The operating margin expanded 43bp YoY to 4.3% from 3.8%. The net margin improved 37bp to 2.3% from 1.9%. Gross margin, however, contracted by 121bp to 68.3%, indicating that sales growth did not fully offset higher food-material or other direct costs. SG&A expenses increased 7.1% YoY to ¥4.861bn, slower than revenue growth, and the SG&A ratio declined 165bp to 64.1%. This favorable operating leverage was the principal driver of operating-margin expansion. Ordinary income exceeded operating income by only ¥6m, so non-operating items were not a material source of earnings. Profit before tax was reduced to ¥300m by ¥30m of extraordinary losses, including ¥10m of impairment losses and ¥20m of losses on disposal or abandonment of non-current assets. The effective tax rate was elevated at 41.5%, reducing the tax burden factor to 0.583 and limiting conversion of pre-tax profit into net income. Balance-sheet liquidity remains adequate, with cash of ¥3.385bn and a current ratio of 123.9%, but cash declined 27.6% YoY. Q1 revenue represents 24.1% of the ¥31.5bn full-year forecast, broadly consistent with the 25% seasonal benchmark. Operating-income progress is 20.3% versus the ¥1.6bn plan, 4.7 percentage points below a straight-line pace, while net-income progress is only 14.0% versus the ¥1.25bn plan, 11.0 points below the benchmark. The latter shortfall makes delivery of the full-year net-income target more dependent on stronger earnings conversion in subsequent quarters.
Profitability Analysis
The reported annualized ROE is 9.8%, decomposed into a 2.3% net profit margin, 2.453x annualized asset turnover, and 1.72x financial leverage. The company therefore generates its return primarily through relatively high annualized asset turnover rather than through a high earnings margin. Financial leverage is moderate and is not the dominant source of the reported ROE. Revenue growth of 9.8% exceeded SG&A growth of 7.1%, improving the SG&A ratio to 64.1% from 65.7% and producing positive operating leverage. This was sufficient to raise the operating margin to 4.3% from 3.8%, despite gross-margin pressure. Cost of sales increased 14.2% YoY, faster than revenue, driving gross-margin compression to 68.3% from 69.6%. The 4.3% EBIT margin remains below the 5% efficiency threshold identified in the quality alert, leaving earnings sensitive to further food-cost, labor-cost, utility-cost, or traffic volatility. Interest coverage was very strong at 155.84x, and the five-factor DuPont interest-burden factor of 0.927 indicates that interest expense is not materially dilutive. Conversely, the tax-burden factor of 0.583 is weak because the effective tax rate reached 41.5%, above the 40% alert level. Extraordinary losses of ¥30m, equal to 9.1% of ordinary income, also constrained the transition from ordinary income to pre-tax and net income. The operating-margin improvement is encouraging, but sustainability depends on preserving SG&A discipline while recovering gross margin.
Growth Assessment
The 9.8% YoY revenue increase demonstrates positive near-term demand momentum. Operating income grew 22.2%, more than twice the sales-growth rate, reflecting favorable fixed-cost absorption and tighter SG&A intensity. Net income growth of 30.3% also exceeded sales growth, although the absolute net margin remains only 2.3%. The full-year forecast calls for revenue growth of 7.1% to ¥31.5bn, so Q1 sales growth is ahead of the implied full-year growth rate. The full-year operating-income forecast of ¥1.6bn implies 5.6% YoY growth, lower than Q1's 22.2% increase; this indicates that the company is not relying on Q1's operating-profit growth rate continuing unchanged. Q1 operating income has achieved 20.3% of the annual plan, below the standard 25% pace but not by more than 10 percentage points. Q1 net income has achieved 14.0% of the annual plan, materially below the 25% benchmark, partly reflecting the elevated tax burden and extraordinary losses. The forecast requires a stronger second-to-fourth-quarter net-income conversion rate than in Q1. Continued sales growth alone will not be sufficient if direct costs continue to rise faster than revenue. The central operating variable is whether the company can maintain SG&A leverage while restoring gross-margin resilience.
Financial Health
Liquidity is adequate rather than abundant. Current assets of ¥4.691bn exceeded current liabilities of ¥3.788bn by ¥904m, matching reported working capital of ¥904m. The current ratio was 123.9%, above 1.0x, and the quick ratio was 115.9%, above 1.0x; therefore, there is no immediate current-liability coverage warning. Cash and deposits of ¥3.385bn covered 89.4% of current liabilities and provide a meaningful liquidity buffer. Accounts receivable were ¥716m and inventories were ¥302m, representing modest portions of current assets. Total liabilities were ¥5.191bn against total equity of ¥7.181bn, and the reported debt-to-equity ratio of 0.72x is conservative relative to the 2.0x risk threshold. Interest expense was only ¥2m in Q1, consistent with strong interest coverage. Cash and deposits nevertheless fell by ¥1.288bn, or 27.6% YoY, and this reduction should be monitored because it narrows flexibility for store investment and unforeseen operating pressures. Asset-retirement obligations were ¥976m, equivalent to 18.8% of total liabilities. This directly addresses the HIGH_ARO_RATIO alert: the obligation is material because the business operates premises requiring restoration at lease termination or closure. The obligation is structurally consistent with a store-based restaurant footprint, but it raises the fixed-liability burden and could become more consequential if underperforming locations require accelerated closures. Property, plant and equipment totaled ¥5.962bn, or 48.2% of total assets, underscoring the capital intensity of the operating model.
Notable B/S Changes
Cash and deposits: -¥1.288bn (-27.6% YoY) to ¥3.385bn - liquidity remains supported by a 123.9% current ratio and ¥904m of working capital, but the cash decline should be monitored for its implications for operating flexibility and store-related funding needs.
Cash Flow Quality
Cash-flow quality cannot be quantified because operating cash flow, investing cash flow, financing cash flow, capital expenditure, and free cash flow figures are not provided. Accordingly, OCF-to-net-income conversion, free-cash-flow coverage of dividends, and working-capital cash conversion cannot be assessed. The ¥1.288bn YoY decline in cash and deposits is a balance-sheet outcome that warrants monitoring, but it does not by itself establish weak operating cash generation. Earnings contain ¥30m of extraordinary losses, including ¥10m of impairment, which are non-recurring charges rather than operating cash-flow measures. The improved operating margin and lower SG&A ratio support underlying earnings quality, while the 41.5% effective tax rate and extraordinary losses reduced Q1 net-income conversion.
Dividend Sustainability
The company forecasts FY2027 DPS of ¥15.00. Against forecast EPS of ¥65.40, the implied dividend-only payout ratio is 22.9%, well below the 60% sustainability benchmark. The planned dividend therefore appears conservatively sized relative to forecast earnings. No dividend revision was announced. The low forecast payout ratio provides earnings headroom if profitability is modestly below plan. Assessment of dividend coverage by free cash flow cannot be made from the provided figures. Given the 27.6% YoY decline in cash and the capital-intensive store asset base, cash retention and future restoration or store-investment needs remain relevant to dividend capacity.
Risk Assessment
Business risks include Margin risk: cost of sales increased 14.2% YoY versus 9.8% revenue growth, compressing gross margin by 121bp. Further food-material, labor, utility, or promotional-cost inflation could reverse the Q1 operating-margin gain., Restaurant demand risk: maintaining sales growth depends on customer traffic and average spend, both of which are exposed to consumer spending conditions, local competition, weather, and value-oriented pricing pressure., Fixed-cost and location risk: the 64.1% SG&A ratio indicates a high operating-cost base. While Q1 showed positive operating leverage, lower sales productivity could quickly pressure profitability., Store portfolio risk: Q1 included ¥20m of losses on disposal or abandonment of non-current assets and ¥10m of impairment losses, indicating continuing exposure to site-level asset rationalization..
Financial risks include Cash-buffer risk: cash and deposits declined ¥1.288bn YoY to ¥3.385bn. Liquidity remains adequate, but a continued decline would reduce flexibility for operating investment and liabilities associated with the store network., Asset-retirement obligation risk: asset-retirement obligations of ¥976m equal 18.8% of total liabilities. This is the root cause of the HIGH_ARO_RATIO alert and reflects material future restoration obligations linked to leased or operated locations., Tax-conversion risk: the 41.5% effective tax rate generated a low 0.583 tax-burden factor, causing net income to lag pre-tax earnings more than under a normal tax burden., Low-margin risk: the 4.3% EBIT margin triggers the LOW_OPERATING_EFFICIENCY alert because a small adverse movement in gross margin or SG&A can have a disproportionate effect on profit..
Key concerns include Full-year net-income progress is 14.0%, 11.0 percentage points below the standard Q1 progress rate of 25%, despite Q1 revenue growth being ahead of the full-year sales-growth assumption., The gross-margin decline needs to stabilize; SG&A leverage alone may not sustainably offset direct-cost inflation., The material asset-retirement obligation increases the economic cost of store closures or lease exits., The absence of cash-flow and capital-expenditure data limits assessment of free-cash-flow durability, cash conversion, and the funding capacity for dividends and store assets..
Investment Implications
Key takeaways include Q1 delivered revenue growth of 9.8% and operating-income growth of 22.2%, supported by SG&A discipline., Operating margin improved 43bp to 4.3%, but remains below the 5% operating-efficiency threshold., Gross margin declined 121bp as cost of sales grew faster than revenue, making input-cost management a priority., Annualized ROE of 9.8% is supported principally by annualized asset turnover of 2.453x rather than high margins or aggressive leverage., The forecast ¥15 DPS implies a modest 22.9% dividend-only payout ratio based on forecast EPS, while cash-flow coverage cannot be assessed from the available figures..
Metrics to watch include Gross margin and cost-of-sales growth relative to sales growth, SG&A ratio and operating margin, Quarterly progress versus the ¥31.5bn revenue, ¥1.6bn operating-income, and ¥1.25bn net-income forecasts, Cash and deposits after the ¥1.288bn YoY decline, Asset-retirement obligations and further impairment or asset-abandonment losses, Effective tax rate and net-income conversion from ordinary income.
Regarding relative positioning, The company presents a moderately leveraged, liquid balance sheet with strong interest coverage and high annualized asset turnover. Relative to stronger consumer-service operators, however, the 4.3% operating margin and 2.3% net margin leave less room to absorb cost inflation or demand volatility. The lack of reported goodwill and the low 0.8% intangible-assets-to-assets ratio indicate that the balance sheet is not materially dependent on acquisition-related intangible values.