KYOTO KIMONO YUZEN HOLDINGS Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.03B
• Operating Income: ¥167M
• Net Income: ¥-410M
• EPS: ¥10.47

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

Kyoto Kimono Yuzen Holdings reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥3.03bn, up 13.2% YoY, indicating a notable top-line recovery. Despite this growth, operating income was flat YoY at ¥167m, pointing to margin pressure and limited operating leverage in the period. Net income also held steady at ¥150m, translating to a net profit margin of 4.95%. Gross profit of ¥1.57bn implies a gross margin of 51.7%, which is robust for an apparel-related business, though the flat operating income suggests SG&A inflation or higher marketing costs offsetting gross profit gains. EBITDA was ¥167.3m, nearly equal to operating income given minimal D&A of ¥0.30m, resulting in a 5.5% EBITDA margin. DuPont metrics show ROE of 6.31%, driven by moderate margins (4.95%), subdued asset turnover (0.421x), and meaningful financial leverage (3.03x). ROA is approximately 2.1%, signaling modest efficiency on the asset base. Liquidity is tight but positive with a current ratio of 106.8% and quick ratio of 85.5%, supported by working capital of ¥337m. Capital structure is leveraged with total liabilities of ¥5.30bn against equity of ¥2.38bn (liabilities-to-equity of ~2.23x), though interest coverage is comfortable at 18.4x given low interest expense. Operating cash flow was negative at ¥169m despite positive earnings, yielding an OCF/NI ratio of -1.13, which raises near-term cash conversion concerns and suggests working capital outflows. Financing cash flow was an outflow of ¥289m, and investing cash flow is unreported, limiting free cash flow assessment. The company did not pay a dividend (DPS ¥0; payout 0%), which is consistent with the need to preserve liquidity given the cash burn in H1. Inventory of ¥1.06bn is sizable relative to assets and revenue, making sell-through and markdown risk a key focus area. Overall, profitability is stable but not expanding, liquidity is narrow, leverage is elevated but serviceable, and cash flow conversion is the main near-term pressure point. Data limitations include unreported cash balance, equity ratio, investing cash flows, and share data, which constrain precision in valuation and cash runway analysis. The outlook hinges on sustaining revenue growth momentum while protecting margins and normalizing working capital to restore positive operating cash flow.

Profitability Analysis

ROE_decomposition: ROE 6.31% = Net margin 4.95% × Asset turnover 0.421 × Financial leverage 3.03. ROA is ~2.08% (150/7,205). Returns are supported more by leverage than by asset productivity, with margins mid-single-digit. margin_quality: Gross margin 51.7% (¥1,567m gross profit on ¥3,032m revenue) appears healthy, but operating margin is only ~5.5% (¥167m OI), indicating notable SG&A burden. Minimal D&A (¥0.30m) means EBITDA margin ~5.5% offers little buffer. Net margin is 4.95%, aided by low interest (¥9.1m) and low taxes this period. operating_leverage: Revenue grew 13.2% YoY while operating income was flat, implying negative operating leverage in H1. This suggests higher fixed costs, promotional intensity, or wage/rent increases offsetting scale benefits. Ordinary income (¥164m) close to operating income indicates limited non-operating drag or lift.

Growth Assessment

revenue_sustainability: Top-line growth of 13.2% YoY is solid, suggesting recovery in demand and/or successful sales initiatives. Sustainability will depend on store traffic, event-driven demand (e.g., coming-of-age), and pricing power without excessive discounting. profit_quality: Stable operating and net income despite higher sales indicates margin compression. The low effective tax in the period supported net profitability; normalized tax could slightly reduce net margin. Interest burden is modest and not a major profit headwind. outlook: If revenue momentum persists and SG&A growth moderates, operating leverage could turn positive in H2. Key swing factors are sell-through of sizable inventory (¥1.06bn), markdown discipline, and the ability to convert sales growth into cash. A return to positive OCF is crucial to underpin growth without increasing leverage.

Financial Health

liquidity: Current ratio 106.8% and quick ratio 85.5% indicate tight but manageable liquidity. Working capital stands at ¥336.8m. Operating CF was negative (¥169m), which, absent disclosed cash, heightens short-term liquidity monitoring needs. solvency: Total liabilities ¥5.30bn versus equity ¥2.38bn (approx. liabilities/equity 2.23x). Implied equity ratio is about 33% (2,379/7,205), though reported equity ratio is unreported. Interest coverage is strong at 18.4x, suggesting adequate debt service capacity at current earnings. capital_structure: Leverage (assets/equity 3.03x) is meaningful. With ordinary income near operating income and low interest expense, balance sheet risk is centered more on working capital swings than on coupon burden.

Cash Flow Quality

earnings_quality: OCF/Net income is -1.13, indicating poor cash conversion in H1 despite positive earnings. Given minimal D&A, accrual intensity is likely tied to working capital movements rather than non-cash charges. FCF_analysis: Investing CF is unreported; hence FCF cannot be reliably computed. Using OCF as a proxy, cash burn of ¥169m and financing outflows of ¥289m imply a draw on cash or debt facilities, but period-end cash is unreported. working_capital: Inventories are ¥1.06bn; inventory management and sell-through are critical. Absent receivable/payable detail, the negative OCF suggests inventory build and/or receivable growth outpaced payables. Monitoring inventory days and collection terms is key.

Dividend Sustainability

payout_ratio_assessment: No dividend (DPS ¥0; payout 0%) despite positive earnings (EPS ¥10.47) aligns with a conservative stance amid cash outflow from operations. FCF_coverage: FCF coverage is not meaningful given unreported investing CF and negative OCF. Near-term cash generation does not support distributions. policy_outlook: Given tight liquidity and focus on restoring cash conversion, dividend resumption appears contingent on sustained positive OCF and stabilization of working capital. Management may prioritize balance sheet resilience over payouts.

Risk Assessment

Business Risks:

• Demand volatility tied to event-driven kimono purchases and discretionary spending
• Markdown and inventory obsolescence risk given ¥1.06bn inventory
• Store traffic fluctuations and competitive promotional environment
• Cost inflation in labor and rents pressuring SG&A
• Seasonality around ceremonial events impacting quarterly results

Financial Risks:

• Negative operating cash flow creating liquidity strain
• Elevated leverage (liabilities/equity ~2.23x) increasing sensitivity to shocks
• Potential refinancing or covenant risk if cash generation weakens
• Exposure to interest rate normalization, albeit current interest burden is low
• Tax normalization risk given low effective tax in the period

Key Concerns:

• Sustained negative OCF despite positive earnings
• Flat operating income despite double-digit revenue growth
• Tight quick ratio (85.5%) with sizable inventory reliance

Investment Implications

Key Takeaways:

• Revenue up 13.2% YoY to ¥3.03bn, but profit growth stalled (OI ¥167m, NI ¥150m).
• Gross margin solid at 51.7%, yet SG&A absorption limits operating margin to ~5.5%.
• ROE 6.31% driven by leverage (3.03x) rather than high asset productivity (ATO 0.421x).
• Liquidity is narrow (CR 106.8%, QR 85.5%); OCF negative at -¥169m.
• Interest coverage healthy at 18.4x; solvency supported by implied equity ratio ~33%.
• No dividend, consistent with preserving cash amid weak cash conversion.

Metrics to Watch:

• Operating cash flow and working capital trends (inventory and receivables turnover)
• Operating margin trajectory and SG&A ratio
• Sell-through rates and markdowns given ¥1.06bn inventory
• ATO (revenue/assets) and store productivity indicators
• Interest coverage and any changes in interest-bearing debt
• Tax rate normalization impacts on net margin

Relative Positioning: Versus domestic specialty apparel/ceremonial wear peers, the company exhibits solid gross margins but middling operating margins, higher reliance on leverage for ROE, tighter liquidity, and weaker cash conversion in the first half.

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