HIDAY HIDAKA Corp. FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, Revenue was ¥622.5B (¥556.3B prior year; +¥66.2B +11.9%), Operating Income was ¥65.8B (¥55.1B; +¥10.7B +19.4%), Ordinary Income was ¥65.9B (¥56.5B; +¥9.4B +16.5%), and Net Income was ¥47.3B (¥40.9B; +¥6.4B +15.6%), recording increases at all stages. Operating margin improved to 10.6% (prior year 9.9% +0.7pt) and net margin improved to 7.6% (prior year 7.4% +0.2pt), indicating enhanced profitability.

Drivers of Performance

Revenue of ¥622.5B (+11.9%) achieved double-digit growth. Recovery in dining-out demand and improvements in customer visits and average spend at existing stores appear to have driven growth. Sales were domestic only (no overseas sales), with the national store network providing the growth base. Cost of goods sold was ¥192.0B, yielding gross profit of ¥430.6B and gross margin of 69.2% (prior year 70.3% -1.1pt), with increases in raw material prices and utilities compressing gross margin. SG&A was ¥364.7B (+8.6%), and SG&A ratio improved to 58.6% (prior year 60.3% -1.7pt). Main expense increases—salaries and allowances ¥181.2B (+8.8%), rents ¥50.2B (+4.5%), utilities ¥29.2B (+6.9%)—grew less than revenue, enabling economies of scale and resulting in Operating Income of ¥65.8B (+19.4%), outpacing revenue growth. Non-operating income was ¥1.0B and non-operating expenses ¥1.0B, making non-operating items negligible; Ordinary Income of ¥65.9B essentially matched Operating Income, indicating core-business-driven profitability. Extraordinary losses totaled about ¥1.1B (impairment loss ¥0.4B and loss on retirement of fixed assets ¥0.7B), so one-off factors were limited. Profit before tax was ¥65.5B and corporate taxes were ¥18.2B (effective tax rate 27.8%), resulting in Net Income of ¥47.3B. The divergence between Ordinary Income and Net Income (~28%) was primarily due to tax burden. In conclusion, the results show revenue and profit growth with operating leverage achieved by absorbing revenue expansion through improved SG&A efficiency.

Key Financial Metrics

Profitability: Operating margin 10.6% (prior year 9.9%), Net margin 7.6% (prior year 7.4%) continued to improve. Gross margin 69.2% was -1.1pt YoY due to cost pressures, but a -1.7pt improvement in SG&A ratio to 58.6% (prior year 60.3%) absorbed this. Cash quality: Operating Cash Flow (OCF) ¥60.5B is 1.28x Net Income of ¥47.3B, indicating strong cash backing for profits. Free Cash Flow was ¥35.6B (OCF ¥60.5B - Investing CF ¥24.8B), covering dividend payments of ¥18.0B by about 1.98x. Investment efficiency: ROE remained high at 19.0%; Total Asset Turnover was 1.82x (Revenue ¥622.5B ÷ Total Assets ¥341.9B), indicating efficient asset use. Capital expenditure was ¥22.4B, about 1.48x depreciation ¥15.2B, showing continued growth investment. Financial soundness: Equity Ratio 72.7% (prior year 75.1%), Current Ratio 215%, Cash and Deposits ¥122.2B maintained ample liquidity, interest-bearing debt is almost non-existent and financial leverage is conservative at 1.37x. Asset retirement obligations ¥17.6B account for about 19% of total liabilities ¥93.2B, requiring attention to the relative size of provisions for future store exit costs.

Cash Flow Analysis

Operating Cash Flow was ¥60.5B (prior year ¥53.7B; +12.7%), showing steady expansion, with a multiple of 1.28x relative to Net Income ¥47.3B, indicating high-quality profit generation. OCF subtotal (before working capital changes) was ¥82.8B; OCF landed at ¥60.5B after corporate tax payments ¥22.8B, increases in trade receivables ¥4.1B, inventory increases ¥0.4B, and increases in trade payables ¥2.1B. Investing CF was -¥24.8B, primarily capital expenditure ¥22.4B; purchases of securities ¥10.0B were partly offset by sales of securities ¥15.0B. Free Cash Flow was ¥35.6B (OCF ¥60.5B - Investing CF ¥24.8B). Financing CF was -¥58.0B; in addition to dividends paid ¥18.0B, share buybacks ¥40.0B were executed, making total shareholder returns about ¥58.0B, approximately 1.63x Free Cash Flow, representing aggressive returns using abundant cash balances. Cash and cash equivalents decreased ¥22.4B from opening ¥134.8B to closing ¥112.4B, but liquidity remains at a high level.

Quality of Earnings

Earnings quality is healthy and core-business-driven. Operating Income ¥65.8B and Ordinary Income ¥65.9B differ minimally; non-operating income ¥1.0B (interest income ¥0.3B, dividend income ¥0.1B, etc.) and non-operating expenses ¥1.0B are both immaterial, so nearly all profits are generated from core operations. Extraordinary losses totaled about ¥1.1B (impairment loss ¥0.4B and loss on retirement of fixed assets ¥0.7B), indicating limited one-off factors. OCF ¥60.5B is 1.28x Net Income ¥47.3B, showing strong cash backing; the accrual ratio ((Net Income - OCF) / Total Assets) is about -3.9%, a healthy negative value indicating profits are not overly dependent on accrual accounting items. Adding depreciation ¥15.2B, approximate EBITDA is about ¥81.0B, and the OCF/EBITDA ratio is about 0.75x. While tax payments and working capital fluctuations somewhat suppress cash conversion, earnings quality remains high.

Outlook & Guidance

The company's plan for the full year is Revenue ¥670.0B (+7.6%), Operating Income ¥68.0B (+3.3%), Ordinary Income ¥68.0B (+3.2%), and Net Income ¥45.0B (-4.9%). Progress ratios are approximately 92.9% for Revenue, 96.8% for Operating Income, 96.9% for Ordinary Income, and 105.1% for Net Income, indicating results have already exceeded assumptions for the second half and suggesting upside to the plan. Operating margin on the plan is about 10.1%, below the current-period actual 10.6%, reflecting conservative assumptions incorporating raw material and labor cost increases and higher new-store investment costs. Forecast EPS is ¥124.99 versus actual EPS ¥130.74, already exceeded, and the dividend forecast of ¥26 (annualized) implies a halving from actual dividends ¥52 (interim ¥23 + year-end ¥29). While revenue growth is expected to continue, margin compression and dividend level adjustment suggest a cautious approach to balancing growth and profitability in the next fiscal year.

Shareholder Returns

Dividends of interim ¥23 and year-end ¥29 totaling ¥52 per annum were paid, with a payout ratio of 40.8% (total dividends ≈ ¥18.0B ÷ Net Income ¥47.3B), at an appropriate level. Dividend coverage relative to Free Cash Flow ¥35.6B is about 1.98x, indicating high sustainability. Additionally, ¥40.0B of share buybacks were executed, making total shareholder returns ≈ ¥58.0B and Total Return Ratio ≈ 123% (Total return ¥58.0B ÷ Net Income ¥47.3B), exceeding profits. This aggressive return is supported by ample cash and deposits of ¥122.2B; however, continuing returns at the same level would require further improvement in cash generation. Next fiscal year dividend forecast of ¥26 (annual) implies a halving from this year's ¥52, suggesting a revision of dividend policy or conservative forecasting. Continuation of share buybacks depends on next fiscal year performance and cash flow, with capital efficiency and growth investment balance as focal points.

Risk Factors

• Risk of increases in raw material/food prices and utilities: Gross margin declined -1.1pt YoY, indicating ongoing cost pressure. If food inflation continues next fiscal year, improvements in SG&A efficiency may not fully offset it.
• Labor cost increases and labor shortage risk: Salaries and allowances ¥181.2B (about 50% of SG&A) increased +8.8% YoY; wage pressure and labor shortages could push up SG&A ratio. The next fiscal year guidance anticipating a decline in operating margin underscores that labor cost management is a key issue.
• Deterioration of cash flexibility due to high Total Return Ratio: This fiscal year Total Return Ratio was 123% with shareholder returns exceeding profit, and cash and deposits decreased by about ¥22.4B. Continuing returns at this level would deplete cash balances and make balancing growth investment and financial flexibility a challenge.

Industry Benchmark (Reference, Company Analysis)

Industry positioning (reference; company analysis): Within the retail sector, Operating margin 10.6% substantially exceeds the industry median 4.6% (IQR 1.7-8.2%) and ranks in the upper tier. ROE 19.0% also far exceeds the industry median 5.9% (IQR 2.6-12.0%), highlighting strong capital efficiency. Equity Ratio 72.7% is above the industry median 50.2% (IQR 40.1-63.6%), indicating robust financial health relative to peers. Total Asset Turnover 1.82x greatly exceeds the industry median 1.17x (IQR 0.85-1.55), reflecting efficient asset utilization. Dividend payout ratio 40.8% is somewhat above the industry median 27% (IQR 20-34%), and including share buybacks the high Total Return Ratio places the company among the more aggressive returners in the industry. Detailed comparative data on operating working capital days and inventory turnover days are limited, but in line with the characteristics of dining-out formats, inventory turnover tends to be fast and receivables turnover short.

Points of Note in the Financial Results

• Sustainability of the trend of improving operating margin and SG&A efficiency: Operating margin improved from 9.9% to 10.6% (+0.7pt), aided by a -1.7pt decrease in SG&A ratio. Fixed cost dilution from revenue expansion is evident; if existing stores remain robust and new-store investments are monetized, further margin improvement is possible. However, next fiscal year guidance projects a decline in operating margin, making responsiveness to cost and labor pressures critical.
• Balancing ROE at the 19% level with aggressive shareholder returns: While maintaining high ROE, the company paid dividends with a payout ratio of 40.8% and conducted ¥40.0B of share buybacks, resulting in a Total Return Ratio of 123% and returns exceeding earnings. Although supported by ample cash, sustaining this level of returns will require further Free Cash Flow expansion, and balancing growth investment is a key focus.
• Cash generation capacity and quality of the investment cycle: OCF/Net Income is 1.28x and capital expenditure/depreciation ratio is 1.48x, indicating continued growth investment. While Free Cash Flow ¥35.6B covers dividends and buybacks, changes in investment pace or return levels from next fiscal year onward could affect liquidity headroom.

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This report is an AI-generated financial analysis document based on XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from publicly available financial statements. Investment decisions are your own responsibility; please consult a professional advisor as necessary.