IDOM Inc. FY2026 FY Earnings Report

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Executive Summary

Despite higher revenue, profit growth slowed due to the impact of SG&A expenses, interest burden, and extraordinary losses. Operating income increased only slightly, while net income attributable to owners of the parent declined. Revenue was ¥5627.7B (+13.3% YoY), operating income was ¥202.1B (+1.6%), ordinary income was ¥186.1B (-2.7%), and net income attributable to owners of the parent was ¥119.1B (-11.4%, EPS ¥118.66). In addition to operating income growth of only +1.6% against revenue growth of +13.3%, interest expenses and extraordinary losses, including impairment losses, pushed down lower-line profit.

Factors Affecting Performance

【Revenue】Revenue was ¥5627.7B, representing double-digit growth of +13.3% YoY. The Japan segment, centered on expanding its domestic store network and inventory, generated revenue of ¥5537.5B (+12.3%) and accounted for 98.4% of total revenue, making it the core driver of growth. The “Other” category, which includes the U.S. business, expanded significantly to revenue of ¥90.3B compared with ¥37.8B in the previous year, although its scale remains small.

【Profit and Loss】Operating income was ¥202.1B, up only +1.6% YoY and significantly below the revenue growth rate. The gross profit margin declined to 17.1% from approximately 17.9% in the previous year, while the SG&A ratio remained high at 13.5%; consequently, operating leverage did not materialize. Ordinary income was ¥186.1B (-2.7%). Non-operating expenses of ¥18.1B, including interest expenses of ¥12.9B, exceeded non-operating income of ¥2.0B, resulting in further deterioration at the ordinary income level. Extraordinary losses of ¥11.2B, including impairment losses of ¥4.5B, were recognized as temporary factors, resulting in net income attributable to owners of the parent of ¥119.1B (-11.4%). In conclusion, the results represented higher revenue but lower profit.

Segment Analysis

The Japan segment reported revenue of ¥5537.5B (¥4929.0B in the previous year, +12.3%) and segment income of ¥201.4B (¥200.2B in the previous year, +0.6%), with its profit margin declining to 3.6% from 4.1% in the previous year. Despite higher revenue, profit remained almost flat, and the decline in operating leverage for the Group as a whole was primarily attributable to the slowdown in profitability of this core segment. The “Other” category, including the U.S. business, reported revenue of ¥90.3B (¥37.8B in the previous year, +139%) and segment income of ¥0.04B (a loss of ¥0.87B in the previous year), turning profitable, although its scale and contribution to profit remain limited.

Key Financial Indicators

【Profitability】The operating margin was 3.6%, down from 4.0% in the previous year, while the net profit margin, based on income attributable to owners of the parent, was 2.1%, down from 2.7% in the previous year. ROE was 13.2%. 【Cash Flow Quality】Operating cash flow was ¥110.6B, representing 0.93x net income attributable to owners of the parent of ¥119.1B, indicating that cash generation was somewhat weak relative to profit. 【Investment Efficiency】Total assets expanded to ¥2635.7B from ¥2200.4B in the previous year. Total asset turnover remained at approximately the 2x level, indicating that asset efficiency has been maintained despite the expansion in scale; meanwhile, the gross profit margin of 17.1% was the primary factor depressing ROE. 【Financial Soundness】The equity ratio was 34.0%, down 2.7pt from 36.1% in the previous year. Interest-bearing debt has accumulated, primarily consisting of ¥700.0B in long-term borrowings and ¥70.0B in bonds. Current assets were ¥1916.2B against current liabilities of ¥821.1B, resulting in a current ratio of 233%; however, inventories accounted for ¥1190.3B, or more than 60% of current assets, indicating a structure that does not depend on quick assets.

Cash Flow Analysis

Operating cash flow was ¥110.6B, a significant improvement from negative ¥200.4B in the previous year. However, an examination of working capital components shows that an increase in inventories of ¥47.9B and an increase in trade receivables of ¥79.4B reduced cash flow, while an increase in trade payables of ¥38.9B provided a partial offset. Consequently, OCF remained at a level of ¥174.5B before deducting income taxes paid of ¥53.0B and other items. Investing cash flow was negative ¥115.1B, reflecting continued investment primarily consisting of capital expenditures of ¥100.7B. Financing cash flow was positive ¥125.0B, as funding of ¥200B through long-term borrowings and ¥40B through bond issuance exceeded repayments of ¥65.5B, thereby offsetting the investment shortfall. Free cash flow (OCF + investing CF) was negative ¥4.5B, indicating that the Company was in a growth investment phase involving increases in inventories and trade receivables during the period.

Quality of Earnings

Recurring earnings power was centered on operating income of ¥202.1B. Non-operating income of ¥2.0B was minor at 0.04% of revenue, while most of the ¥18.1B in non-operating expenses consisted of interest expenses of ¥12.9B, with the interest burden associated with increased interest-bearing debt pushing down ordinary income. Extraordinary losses of ¥11.2B, including impairment losses of ¥4.5B and losses on disposal of property, plant and equipment of ¥1.3B, were temporary factors. Deducting income taxes of ¥55.3B, representing an effective tax rate of approximately 31.6%, from profit before tax of ¥175.1B resulted in net income attributable to owners of the parent of ¥119.1B. Comprehensive income was ¥119.7B, with only a small difference from net income attributable to owners of the parent of ¥119.1B. As the impact of foreign currency translation adjustments was also limited at -¥0.2B, there was no significant qualitative difference between net income and comprehensive income. On the other hand, OCF remained at 0.93x net income, reflecting the accrual impact of increases in inventories and trade receivables; therefore, the speed of profit conversion into cash warrants monitoring.

Earnings Forecast and Guidance

For the following period, the Company forecasts revenue of ¥6290.0B (+11.8%), operating income of ¥240.0B (+18.8%), ordinary income of ¥224.0B (+20.1%), net income of ¥140.0B (+20.6%), and EPS of ¥141.42. The planned operating margin is approximately 3.8%, representing an expected improvement from the current-period result of 3.6%. The plan calls for profit growth exceeding revenue growth and assumes a reversal of the declining operating leverage observed during the current period.

Shareholder Returns

The dividend for the current period totaled ¥35.6, comprising an interim dividend of ¥15.43 and a year-end dividend of ¥20.17, resulting in a payout ratio of 30.0%. No share repurchases were conducted, with actual treasury share acquisitions at zero; accordingly, the total return ratio was 30.0%, at the same level as the payout ratio. The dividend forecast for the following period is ¥21.06, representing a change from the current-period result of ¥35.6. Future disclosures regarding changes in the dividend composition will warrant attention.

Risk Factors

1. Expansion in Inventory Levels: Inventories were ¥1190.3B, an increase of approximately +¥3.9B from ¥1145.9B in the previous year, and accounted for 45.2% of total assets. The increase in inventories has weighed on OCF, with the ¥47.9B increase in inventories contributing negatively against OCF subtotal of ¥174.5B. Inventory valuation and turnover trends may affect future cash-generating capacity.

2. Decline in Operating Leverage: Operating income increased +1.6% YoY compared with revenue growth of +13.3% YoY, representing a substantial gap in growth rates. The gross profit margin declined to 17.1% from approximately 17.9% in the previous year. SG&A expenses, including personnel expenses of ¥178.1B and rent expenses of ¥139.7B, represent a significant fixed-cost burden, and revenue growth has not translated sufficiently into profit growth.

3. Interest Burden and Leverage: Interest-bearing debt has increased primarily through ¥700.0B in long-term borrowings and ¥70.0B in bonds. Interest expenses of ¥12.9B significantly exceeded interest income of ¥1.2B. The equity ratio declined to 34.0% from 36.1% in the previous year, increasing the relative sensitivity of ordinary income to changes in interest rates.

Industry Benchmarking (For Reference; Compiled by the Company)

Profitability and Returns

The operating margin was slightly above the industry median, while the net profit margin was slightly below the median, indicating a relatively greater burden at the non-operating and extraordinary income/loss levels.

Growth and Capital Efficiency

The revenue growth rate was significantly above the industry median and exceeded the upper bound of the IQR, representing a high level of growth.

Source: Compiled by the Company

Key Takeaways from the Financial Results

1. While the top line grew +13.3%, operating income increased only +1.6%, and net income attributable to owners of the parent declined -11.4%. The divergence between revenue growth and profit growth reflects the decline in the gross profit margin and the increase in the interest burden.

2. Inventories of ¥1190.3B accounted for 45.2% of total assets and contributed to OCF remaining at 0.93x net income. Inventory trends represent a structural point of observation that will influence future cash-generating capacity.

3. The plan for the following period calls for higher revenue and profit, with revenue growth of +11.8%, operating income growth of +18.8%, and an improved profit margin. The plan assumes a shift away from the decline in operating leverage observed during the current period. Whether the plan is achieved is expected to depend on progress in improving inventory efficiency.

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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, after consulting with professionals as necessary.

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