SAIZERIYA (7581) FY2026 Q2 Earnings Report

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Executive Summary

The Company posted increases in both revenue and earnings this period, driven by revenue expansion in the Japan segment and improved selling, general and administrative expense efficiency. Profitability improved, with the growth rate of operating income exceeding the revenue growth rate. Revenue was ¥142.85B (+17.5% YoY), operating income was ¥8.65B (+39.9%), ordinary income was ¥8.83B (+36.3%), and net income attributable to owners of the parent was ¥5.64B (+20.7%). The gross margin declined to 57.2% from 58.1% in the previous year; however, the SG&A ratio declined to 51.2% from 53.0%, resulting in an expansion of the operating margin to 6.1% from 5.1%.

Factors Affecting Performance

【Revenue】Revenue increased 17.5% YoY to ¥142.85B. The Japan segment showed the strongest growth at ¥96.12B (+20.4%), accounting for 67.3% of consolidated revenue. Asia generated ¥46.73B (+11.9%), while Australia generated ¥6.15B (+13.6%), resulting in revenue growth both domestically and overseas.

【Profit and Loss】Operating income was ¥8.65B (+39.9% YoY), while ordinary income was ¥8.83B (+36.3%). Although the gross margin declined by approximately 90bp YoY, the SG&A ratio declined by approximately 180bp, resulting in efficiency gains that more than offset the gross margin deterioration. Japan segment profit increased 422.8% YoY to ¥3.37B as fixed-cost absorption progressed, making it the primary driver of consolidated earnings growth. In contrast, Asia segment profit declined 3.9% YoY to ¥5.13B, and Australia segment profit declined 6.9% to ¥0.20B, indicating a profitability disparity among regions. Impairment losses of ¥0.25B and other items were recorded as extraordinary losses, but their scale was limited. The gap between profit before tax of ¥8.46B and net income of ¥5.64B was primarily attributable to income taxes of ¥2.82B. In conclusion, the Company achieved higher revenue and earnings.

Segment Analysis

Of total segment profit of ¥8.698B, Asia was the largest earnings contributor at ¥5.129B, representing 59% of the total. This figure is after deducting ¥0.043B in the elimination of intersegment transactions, resulting in consolidated operating income of ¥8.654B. Asia's segment profit margin was 11.0%, the highest among the three regions; however, while external customer revenue increased 11.9% YoY, segment profit declined 3.9%, resulting in higher revenue but lower earnings. Japan recorded external customer revenue of ¥96.12B (+20.4% YoY) and segment profit of ¥3.37B (+422.8%, with a 3.5% profit margin), representing a significant improvement and the primary driver of consolidated earnings growth. Australia recorded revenue of ¥6.15B (+13.6%, including intersegment revenue) and profit of ¥0.20B (-6.9%, with a 3.3% profit margin), resulting in lower earnings. Regional impairment losses were ¥0.096B in Japan and ¥0.155B in Asia, reflecting declining profitability at underperforming stores.

Key Financial Indicators

【Profitability】The operating margin improved to 6.1% from 5.1% in the same period of the previous year, as operating leverage took effect: the decline in the SG&A ratio to 51.2% from 53.0% more than offset the decline in the gross margin to 57.2% from 58.1%. The net profit margin was 3.9%. 【Cash Quality】Operating cash flow (OCF) was ¥14.05B, equivalent to 2.49 times net income of ¥5.64B, indicating strong cash support for reported earnings. 【Investment Efficiency】ROE (annualized) was 8.9%, comprising a 3.9% net profit margin, approximately 1.48x total asset turnover, and approximately 1.53x financial leverage. This indicates a structure that does not rely excessively on leverage. Capital expenditures of ¥9.34B slightly exceeded depreciation and amortization expense of ¥9.02B, indicating a phase of investment to expand the store base. 【Financial Soundness】The equity ratio was high at 65.4%. Interest-bearing debt was limited to ¥6.00B in long-term borrowings, while cash and deposits of ¥68.09B substantially exceeded current liabilities of ¥37.73B, ensuring ample liquidity.

Cash Flow Analysis

Operating cash flow was ¥14.05B, up 21.5% YoY, increasing broadly in line with the 20.7% growth in net income. An increase in inventories of ¥2.39B was a factor that reduced OCF from a working capital perspective, but overall, the Company maintained solid cash conversion. Investing cash flow was an outflow of ¥9.89B, primarily consisting of ¥9.34B in capital expenditures, reflecting investment to expand the store and equipment base. Financing cash flow was an outflow of ¥6.73B, including ¥1.00B in share repurchases and ¥1.49B in dividend payments. Free cash flow (OCF + investing cash flow) was positive at ¥4.16B. OCF exceeded the combined ¥10.83B in capital expenditures and dividend payments, enabling the Company to pursue growth investment and shareholder returns through internally generated funds. Cash and cash equivalents increased by ¥0.94B during the period to ¥68.09B.

Quality of Earnings

Ordinary income was ¥8.83B versus operating income of ¥8.65B, indicating a limited ¥0.18B contribution from non-operating items. Non-operating income of ¥0.63B, equivalent to 0.4% of revenue, included ¥0.30B in interest income and ¥0.10B in foreign exchange gains; each was small relative to revenue. Profit before tax of ¥8.46B reflected extraordinary income of ¥0.05B and extraordinary losses of ¥0.42B. The primary extraordinary losses were the temporary items of ¥0.25B in impairment losses related to underperforming stores and ¥0.11B in losses on disposal of fixed assets. The difference between ordinary income and net income was primarily attributable to income taxes of ¥2.82B, resulting in an effective tax rate in the approximately 33% range. OCF substantially exceeded net income, indicating strong cash backing for current-period earnings from an accrual perspective and supporting an assessment of high-quality earnings.

Earnings Forecast and Guidance

The cumulative Q2 progress rates against the full-year Company forecasts were 48.1% for revenue (¥142.85B/¥297.00B), 47.5% for operating income (¥8.65B/¥18.20B), 48.3% for ordinary income (¥8.83B/¥18.30B), and 47.8% for net income (¥5.64B/¥11.80B). The deviation from the standard 50% progress rate was limited in all cases, and first-half results were broadly consistent with the full-year plan. The full-year forecast assumes revenue growth of +15.7% and operating income growth of +17.4%, incorporating a normalization of the growth rate in the second half compared with the first-half operating income growth of +39.9%. The earnings forecast was revised during the quarter.

Shareholder Returns

The interim dividend as of Q2 was ¥0. OCF of ¥14.05B exceeded the combined ¥9.34B in capital expenditures and ¥1.49B in dividend payments, ensuring capacity for shareholder returns from a cash flow perspective. Total shareholder returns, comprising ¥1.49B in dividend payments and ¥1.00B in share repurchases, amounted to ¥2.49B. The Total Return Ratio against cumulative Q2 net income of ¥5.64B was 44.1%. The full-year Company dividend forecast is ¥30 per share. Based on average shares outstanding during the period of approximately 49.13 million shares, the estimated annual dividend amount is approximately ¥1.47B, resulting in an expected payout ratio of approximately 12.5% against the full-year net income forecast of ¥11.80B. Low interest-bearing debt and substantial cash holdings provide financial support for dividend sustainability.

Risk Factors

1. Higher revenue but lower earnings in the Asia Business: External customer revenue in Asia increased 11.9% YoY, while segment profit declined 3.9%. Continued deterioration in costs, pricing, or store operating efficiency could constrain consolidated profit growth.

2. Decline in the gross margin: The consolidated gross margin was 57.2%, down approximately 90bp from 58.1% in the same period of the previous year. The Company is highly sensitive to fluctuations in food costs, labor costs, logistics expenses, and foreign exchange rates. Whether margin expansion can continue through SG&A efficiency improvements alone is a key point of attention.

3. Scale of asset retirement obligations and lease liabilities: Asset retirement obligations were ¥8.55B, representing 13.1% of total liabilities. Lease liabilities totaled ¥23.13B on a current and non-current basis, substantially exceeding borrowings of ¥6.00B. The potential future cash outflows associated with maintaining, renewing, and closing stores require monitoring, together with the risk of additional impairment losses if store profitability declines.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

As comparable median data for assessing the Company's relative position within the industry could not be confirmed, the assessment is limited to absolute levels.

Growth and Capital Efficiency

Similarly, median data could not be confirmed, and this information is provided for reference as an absolute growth rate.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Operating income increased +39.9% against revenue growth of +17.5%, confirming operating leverage as the SG&A ratio declined by approximately 180bp. Progress in fixed-cost absorption in the Japan segment was the primary driver of consolidated earnings growth.

2. Profitability disparities among regions have widened. While Japan's segment profit increased 5.2-fold, Asia recorded lower earnings despite revenue growth, while maintaining the highest profit margin. The differing earnings structures of the two regions are a structural feature observed in the earnings results.

3. OCF was 2.49 times net income, and free cash flow was positive at ¥4.16B, confirming cash support for earnings and the capacity for capital allocation, namely the ability to fund both capital expenditures and shareholder returns through internal funds.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥2,480–¥2,629 at ±1% cost of equity, and ¥2,552–¥2,553 at ω±0.1.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end were used (there is a timing difference from the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market price or a recommendation of any specific investment action and does not predict or guarantee future stock prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 responsibility and, where necessary, after consulting with a professional advisor.

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