ANRAKUTEI Co.,Ltd FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥15.24B
• Operating Income: ¥536M
• Net Income: ¥528M
• EPS: ¥67.22

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

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

Anrakutei Co., Ltd. (TSE:7562) reported FY2026 Q2 consolidated results under JGAAP with modest top-line growth but pronounced margin compression. Revenue rose 1.7% YoY to ¥15.24bn, while operating income fell 28.3% YoY to ¥0.54bn, indicating negative operating leverage as costs grew faster than sales. Net income declined 41.2% YoY to ¥0.31bn, reflecting weaker operating results and a normalizing tax burden. DuPont analysis shows ROE of 4.03%, driven by a thin net margin of 2.03%, asset turnover of 0.620x, and financial leverage of 3.19x. Gross profit was ¥9.41bn with a reported gross margin of 61.7%, suggesting cost of sales pressure was contained but SG&A inflation (labor, utilities, and rent) likely eroded operating profit. EBITDA was ¥0.90bn, implying a 5.9% EBITDA margin and an interest coverage of 8.1x based on operating income, indicating adequate but not ample headroom against financing costs. Liquidity is solid: the current ratio is 145.6% and the quick ratio is 135.4%, supported by working capital of ¥3.34bn. Balance sheet leverage is moderate with a debt-to-equity ratio of 2.19x; total equity of ¥7.69bn implies an equity ratio around 31% of assets (using available totals), despite the equity ratio field being unreported. Operating cash flow of ¥0.34bn exceeds net income (OCF/NI = 1.11x), supporting earnings quality through cash conversion; however, free cash flow cannot be assessed due to unreported investing cash flows. Inventory of ¥0.75bn against first-half cost of sales suggests manageable inventory intensity consistent with restaurant operations. EPS was ¥67.22; DPS is nil, indicating a conservative stance on shareholder returns amid margin pressure. The effective tax rate metric is unreported, but the provided income tax expense and profit trajectory imply a tax burden in the 40%+ range for the period. Overall, the quarter reflects stable demand but significant cost drag, compressing profitability and keeping ROE below the cost of equity range common for the sector. The company remains liquid and serviceable on interest, but operating improvements are required to safeguard full-year earnings. Data limitations (notably cash, investing CF, equity ratio, and share counts) constrain some inferences; analysis focuses on disclosed non-zero figures and derived estimates from them. Near-term outlook hinges on labor and energy cost normalization, pricing power, and traffic recovery. Risk management around cost control and store productivity will be pivotal for restoring margin and ROE.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 2.03%
• asset_turnover: 0.620x
• financial_leverage: 3.19x
• calculated_ROE: 4.03%
• commentary: ROE is subdued, primarily constrained by a low net margin. Asset turnover is reasonable for a restaurant operator, while leverage provides a modest boost to equity returns. margin_quality:
• revenue: 15240000000
• gross_profit: 9407493000
• gross_margin_reported: 61.7%
• operating_income: 536000000
• operating_margin_implied: 3.5%
• EBITDA: 897701000
• EBITDA_margin: 5.9%
• net_income: 310000000
• net_margin: 2.03%
• insight: Despite a high reported gross margin, operating and net margins compressed meaningfully YoY, indicating SG&A inflation (labor, utilities, and other overhead) outpaced limited pricing/mix gains. operating_leverage:
• revenue_growth_YoY: 1.7%
• operating_income_growth_YoY: -28.3%
• assessment: Negative operating leverage: small sales growth alongside a large decline in operating income signals rising fixed/semi-fixed costs and/or insufficient price pass-through.

Growth Assessment

revenue_sustainability: Top-line grew 1.7% YoY, suggesting stable demand but limited pricing/traffic momentum. Sustainability depends on same-store traffic recovery, price/mix initiatives, and store network optimization. profit_quality: OCF exceeded net income (1.11x), supporting earnings quality; however, declining operating income and net income indicate profits are under cost pressure and not yet on a structurally improving path. outlook: With margins under pressure and only modest sales growth, near-term growth in profits will likely rely on cost normalization (labor and energy), procurement efficiencies, and disciplined SG&A rather than aggressive expansion. Any incremental pricing must be balanced against price sensitivity in casual dining.

Financial Health

liquidity:

• current_assets: 10659537000
• current_liabilities: 7318635000
• current_ratio: 145.6%
• quick_ratio: 135.4%
• working_capital: 3340902000
• commentary: Liquidity is comfortable with a healthy buffer to meet near-term obligations. solvency:
• total_assets: 24564000000
• total_liabilities: 16826639000
• total_equity: 7689000000
• equity_ratio_estimate: ≈31.3% (derived from equity/total assets)
• debt_to_equity: 2.19x
• interest_coverage: 8.1x (Operating income / Interest expense)
• assessment: Moderate leverage with adequate interest service capacity. Maintaining or improving operating earnings is important to keep coverage comfortable. capital_structure: Liabilities represent roughly two-thirds of assets, with equity covering about one-third. Absent reported cash and detailed debt mix, net leverage cannot be assessed, but overall structure appears balanced for a restaurant chain under JGAAP.

Cash Flow Quality

earnings_quality:

• OCF: 343292000
• net_income: 310000000
• OCF_to_NI: 1.11x
• insight: Cash conversion is sound this quarter, indicating limited accrual-driven earnings. FCF_analysis:
• investing_CF: Unreported
• free_cash_flow: Not assessable due to unreported investing cash flows and capex
• commentary: Without capex detail, structural FCF generation cannot be determined. Given the asset intensity of restaurants, maintenance capex needs are likely material. working_capital:
• inventories: 752787000
• observations: Inventory levels appear reasonable relative to first-half cost of sales, suggesting no visible build-up. Receivables and payables dynamics are not disclosed, limiting deeper analysis.

Dividend Sustainability

current_policy:

• DPS: ¥0.00
• payout_ratio: 0.0%
• commentary: No dividend is being paid for the period, aligning with a focus on margin recovery and balance sheet resilience. coverage_analysis:
• FCF_coverage: Not assessable due to unreported FCF
• earnings_coverage: N/A as no dividend is declared
• insight: With no dividend burden and positive OCF, liquidity is preserved; any future distributions would require clearer visibility on sustainable FCF. policy_outlook: Given sub-COE ROE (~4%) and margin pressure, retention of earnings appears prudent until profitability improves. Formal guidance on shareholder returns was not provided in the data.

Risk Assessment

Business Risks:

• Cost inflation in food/raw materials impacting store-level margins
• Labor shortages and rising wage pressure in Japan reducing operating margins
• Energy and utility cost volatility elevating SG&A
• Intense competition in casual dining and yakiniku segments pressuring pricing and traffic
• Execution risk in price adjustments potentially affecting demand
• Food safety and supply chain disruption risks
• Economic sensitivity of discretionary dining out

Financial Risks:

• Moderate leverage (Debt-to-equity 2.19x) increases sensitivity to earnings declines
• Interest rate and refinancing risk affecting interest expense and coverage
• Limited visibility on cash balances and capex due to unreported items
• Potential lease and off-balance commitments typical in the sector (under JGAAP) impacting fixed cost base

Key Concerns:

• Negative operating leverage with operating income down 28.3% YoY on modest sales growth
• Low ROE at 4.03%, below typical sector cost of equity
• Insufficient disclosure on investing cash flows and cash position, constraining FCF assessment

Investment Implications

Key Takeaways:

• Stable revenue (+1.7% YoY) but sharp margin compression indicates cost pressure outpacing growth
• ROE at 4.03% is constrained by a low net margin (2.03%) despite reasonable asset turnover
• Liquidity is solid (current ratio 145.6%); interest coverage of 8.1x remains adequate
• Earnings quality is acceptable with OCF/NI at 1.11x, but FCF is not assessable
• Equity ratio is estimated at ~31%, suggesting a balanced but not conservative capital base
• Dividend remains suspended (DPS ¥0), preserving cash amid margin headwinds

Metrics to Watch:

• Same-store sales growth (traffic vs. average check) and promotional intensity
• Store-level labor cost ratio and utility cost trends
• SG&A as a percentage of sales and progress on cost containment
• OCF/Net income ratio and capex levels to gauge FCF
• Net debt/EBITDA and interest coverage trajectory
• Inventory days and any build-up signaling demand softening

Relative Positioning: Within Japanese casual dining/yakiniku peers, Anrakutei currently exhibits lower ROE and compressed operating margins but maintains adequate liquidity and serviceable leverage; operational improvement and cost control are needed to close the profitability gap.

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