| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3000.9B | ¥2691.6B | +11.5% |
| Operating Income / Operating Profit | ¥-8.5B | ¥-35.0B | +75.7% |
| Profit Before Tax (Taxable Income) | ¥65.5B | ¥47.8B | +37.0% |
| Net Income / Net Profit | ¥17.1B | ¥22.6B | -24.0% |
| ROE | 1.8% | 2.6% | - |
For the six months ended March 2026 (Q2 cumulative), revenue was ¥3000.9B (YoY +¥309.3B +11.5%), operating income was ¥-8.5B (YoY +¥26.5B +75.7%), ordinary/recurring profit (Profit Before Tax) was ¥65.5B (YoY +¥30.3B +92.9%), and net income was ¥17.1B (YoY -¥5.4B -24.0%). Revenue growth for the third consecutive period was driven by new consolidation of subsidiary Seagrass (¥200.4B) and expansion of existing businesses. Operating loss narrowed substantially from ¥-35.0B in the prior year to ¥-8.5B (75.7% improvement) but remained in the red, with an operating margin of -0.3% (improved +1.0pp from -1.3%) and not yet returning to profitability. Profit Before Tax improved relative to operating stage to ¥65.5B despite being negative at the operating level, supported by increased financial income (¥17.4B, YoY +¥13.3B). Net income was compressed to ¥17.1B (from ¥22.6B prior year) due to high tax burden: corporate taxes and other ¥48.3B (effective tax rate 73.8%) applied to pre-tax profit of ¥65.5B. EPS was ¥15.73 (from ¥7.45 YoY +111.1%), reflecting a substantial increase in profit attributable to owners of the parent of ¥22.3B despite the decline in net income. Total assets increased to ¥3509.3B (YoY +¥387.0B), and total equity increased to ¥936.0B (YoY +¥64.9B), while goodwill surged to ¥1208.2B (¥+289.5B), reaching 129% of equity. Operating Cash Flow (OCF) was ¥287.1B, approximately 12.9x net income, and free cash flow was ¥-20.4B after M&A investments of ¥307.6B.
[Revenue] Revenue was ¥3000.9B (YoY +11.5%), marking the third consecutive period of revenue growth. The primary contributors were the new consolidation of Seagrass Holdco Pty Ltd. (an Oceania steak-restaurant chain) in Q1, adding ¥200.4B in revenue, and double-digit growth in existing core businesses: Ootoya at ¥369.2B (+17.9%), Other Businesses ¥455.1B (+18.0%), and Colowide MD ¥35.5B (+30.0%). Conversely, Atom declined to ¥304.3B (-14.3%) due to underperformance at existing stores. By region, revenues comprised Japan ¥2446.3B, North America ¥190.3B, Asia ¥180.8B, and Oceania ¥183.5B, raising overseas sales ratio to about 18.5%. Cost of sales was ¥1213.5B (+9.0%) and gross margin improved to 59.6% (from 58.2% prior year, +1.4pp), reflecting product-mix improvements and price revisions.
[Profitability] SG&A expenses were ¥1662.2B (+12.7%), outpacing revenue growth and worsening the SG&A ratio to 55.4% (from 54.8% prior year, +0.6pp). Inflationary pressure on personnel, rent, and logistics costs and cost absorption for newly consolidated subsidiaries pushed up fixed cost ratios. Operating loss narrowed to ¥-8.5B (from ¥-35.0B prior year) but remained negative, with an operating margin of -0.3% (improved +1.0pp). Other operating expenses included impairment losses of ¥32.3B (prior year ¥31.7B), continuing to weigh on results due to restructuring of unprofitable stores/brands. Financial income of ¥17.4B (prior year ¥4.1B) expanded due to increased foreign exchange gains, while financial expenses worsened to ¥46.0B (prior year ¥33.4B) from higher interest on increased borrowings; net financial expense was ¥-28.6B (prior year -¥29.3B) and remains substantial. Corporate taxes and others of ¥48.3B (effective tax rate 73.8%) on profit before tax of ¥65.5B produced an unusually high tax burden, compressing net income to ¥17.1B (-24.0%). Profit attributable to owners of the parent was ¥22.3B (+78.7%), a significant increase; this divergence from net income was driven by loss attributable to non-controlling interests of ¥-5.2B (reversing from prior year +¥10.1B). In summary, results were revenue-up but profit-down, with operating-stage losses narrowing and profit attributable to owners of the parent substantially increasing, yielding different evaluation perspectives.
Colowide MD posted revenue ¥35.5B (+30.0%) and segment profit ¥50.8B, the largest contributor to profit, aided by strengthened merchandising and increased internal sales to other segments. Atom reported revenue ¥304.3B (-14.3%) and segment profit ¥0.2B, turning from -¥0.6B prior year to slight profitability but low margin; declines were due to reduced customer traffic at existing formats such as Steak Miyu. Reins reported revenue ¥912.9B (+3.0%) and segment profit ¥47.8B, with slight revenue and profit growth; core formats like Gyu-Kaku and On-Yasai remained steady but overseas franchising lagged. Kappa Create posted revenue ¥723.5B (flat) and segment profit ¥3.5B, a sharp decline from ¥15.2B prior year, reflecting delayed recovery in customer traffic at Kappa Sushi and intensified price competition. Ootoya achieved revenue ¥369.2B (+17.9%) and segment profit ¥17.9B, driven by strong domestic company-operated stores and overseas franchise expansion. Seagrass, newly consolidated, recorded revenue ¥200.4B and segment profit ¥25.8B, supporting group performance from Q1. Other segments posted revenue ¥455.1B (+18.0%) and segment profit ¥20.1B, led by expansion in catering and Western confectionery businesses. Inter-segment sales of ¥1015.7B (prior year ¥1019.5B) were eliminated on consolidation, resulting in consolidated operating income of ¥-8.5B after corporate adjustments.
[Profitability] ROE was 2.8% (from 2.0% prior year, +0.8pp), low but improving, supported by increased profit attributable to owners of the parent and moderate growth in equity. Operating margin was -0.3% (from -1.3%), still negative though the deficit narrowed. Gross margin improved to 59.6% (+1.4pp), partially offset by deteriorated SG&A ratio of 55.4% (+0.6pp). Net margin was 0.6% (from 0.8% prior year, -0.2pp) decreased due to high tax burden, while profit attributable to owners of the parent margin recovered to 0.7% (from 0.5% prior year, +0.2pp). [Cash Quality] OCF was ¥287.1B, about 12.9x net income of ¥17.1B, driven by depreciation/amortization of ¥273.0B and efficiency in working capital, producing robust cash generation. Accruals (Net Income - OCF) were -¥270.0B, large negative, indicating cash collection substantially exceeded accounting profit and high earnings quality. [Investment Efficiency] Total asset turnover was 0.86x (prior year 0.86x), unchanged; efficiency gains were limited given changes in asset composition (goodwill increase). ROA (Profit Before Tax / Total Assets) was -0.1%, still negative, indicating a need to improve overall asset profitability. [Financial Soundness] Equity Ratio was 24.0% (from 24.8% prior year, -0.8pp), low, deteriorated by increased interest-bearing debt related to M&A and goodwill growth. D/E ratio was 2.75x (from 2.20x prior year), indicating higher financial leverage. Current ratio was 0.86x (current assets ¥918.8B / current liabilities ¥1065.5B), below 1.0, warranting caution on short-term liquidity, though cash and equivalents of ¥631.9B provide a buffer. Goodwill of ¥1208.2B equals 129% of equity and 34% of total assets, posing impairment risk to balance sheet resilience.
OCF was ¥287.1B (YoY -0.3%), essentially flat. Subtotal before working capital changes was ¥352.5B (prior year ¥334.3B), primarily non-cash items added to profit before tax of ¥65.5B: depreciation/amortization ¥273.0B and impairment losses ¥32.3B. Working capital changes included increase in trade receivables -¥22.0B and inventory increase -¥12.4B (cash absorption), partially offset by increase in trade payables ¥14.8B. Corporate tax payments -¥32.1B, interest paid -¥38.6B, and lease payments -¥157.6B were ongoing cash outflows, indicating that interest burden and lease structure are pressuring OCF. Investing Cash Flow (ICF) was -¥307.6B (prior year -¥216.1B), driven by capital expenditures -¥122.0B, acquisitions of subsidiaries -¥186.6B, and business transfers -¥2.7B. Proceeds from sales of property, plant and equipment ¥7.1B and deposits recoveries ¥12.9B partially offset outflows. Free Cash Flow was -¥20.4B (OCF ¥287.1B − ICF ¥307.6B), slightly negative as M&A investments exceeded OCF. Financing Cash Flow (FCF) was -¥67.7B (prior year +¥179.5B), with gross borrowings ¥491.7B and repayments -¥368.2B net change, bond issuance ¥30.4B and redemption -¥63.2B, lease repayments -¥157.6B, and dividend payments -¥10.6B as main items. Cash and equivalents decreased from ¥715.4B at the beginning of the period to ¥631.9B at period-end, a reduction of ¥83.5B; considering foreign exchange effects +¥4.7B, the net decrease was -¥88.2B. OCF remains stable, but continued investment phase suggests free cash flow will remain negative for the near term.
Earnings quality is assessed as high. OCF of ¥287.1B is about 12.9x net income of ¥17.1B, and significant non-cash charges—depreciation ¥273.0B and impairment losses ¥32.3B—explain why accounting profit understates cash generation. Accruals (Net Income − OCF) were -¥270.0B, indicating cash collection substantially exceeded accounting profit, a healthy structure. Distinguishing recurring vs. one-off items: of other operating expenses ¥42.9B, impairment losses ¥32.3B (prior year ¥31.7B) are one-off but have been recorded repeatedly and could be considered ongoing restructuring costs for unprofitable stores. Financial income ¥17.4B largely comprises FX gains and other temporary elements, having surged from ¥4.1B prior year and its sustainability is limited. Corporate taxes and others ¥48.3B (effective tax rate 73.8%) appear temporarily high due to valuation of deferred tax assets etc.; normalization could substantially improve bottom-line profit. Comprehensive income was ¥72.1B (of which profit attributable to owners of the parent was ¥77.0B), exceeding net income by ¥54.9B, with ¥51.9B of translation differences on foreign operations forming the bulk, reflecting foreign subsidiaries benefiting from JPY weakness on the balance sheet. Loss attributable to non-controlling interests of ¥-5.2B (reversed from prior year profit ¥10.1B) indicates losses in some overseas subsidiaries and contributes to divergence from profit attributable to owners of the parent. Financial income composition shows FX gains as the main element of the ¥17.4B, and thus not a stable recurring base. Overall, given stable OCF and large non-cash expenses, earnings quality is good; adjusted profit excluding one-offs (impairment, FX, high tax burden) would likely be materially higher.
Full-year guidance remains revenue ¥3516.4B, net income ¥39.8B (YoY +19.6%), EPS ¥19.56, and dividend ¥0 per share unchanged. Q2 cumulative revenue ¥3000.9B represents 85.3% of full-year guidance, a high progress rate. Net income ¥17.1B is 43.0% of full-year guidance ¥39.8B, implying ¥21.3B net income expected in H2. Based on profit attributable to owners of the parent ¥22.3B in the Q2 cumulative, progress against full-year net income guidance ¥39.8B is 56.0%, indicating somewhat front-loaded performance. High revenue progress reflects concentration of Seagrass consolidation contributions in the first half; H2 is expected to be driven by organic growth and seasonality (year-end/new-year demand). Operating income for the six months was ¥-8.5B, but full year is assumed to return to profit, contingent on H2 fixed-cost absorption and end of impairment cycle. With full-year EPS guidance ¥19.56 vs. actual ¥15.73 (Q2 cumulative), an incremental ¥3.83 EPS is expected in H2. Dividend guidance ¥0 (vs. prior year ¥5) reflects a payout reduction to preserve financial capacity and prioritize investments. Assumptions include improved profitability at overseas subsidiaries (Seagrass etc.) in H2, continued recovery at domestic existing stores, containment of cost inflation, and normalization of tax burden; interest rate rises and sharp FX fluctuations are risks. At Q2, upside/downside to plan is limited and full-year attainment probability is judged relatively high.
Dividend at year-end was ¥5 per share, restoring payouts from prior year ¥0. Payout ratio (based on profit attributable to owners of the parent) is 67.1%, but based on net income it appears about 151% and thus superficially high. This divergence arises from the gap between profit attributable to owners of the parent ¥22.3B and net income ¥17.1B (non-controlling interests loss ¥5.2B), indicating substantive dividend capacity for parent shareholders is preserved. Total dividends ¥5.3B are well covered by OCF ¥287.1B. Free cash flow was ¥-20.4B, but this negative position reflects one-off M&A investments ¥307.6B; at the OCF level dividend payment capacity is not an issue. Given cash and equivalents ¥631.9B and retained earnings deficit of -¥217.5B (accumulated deficit), dividends have been paid relying on cash holdings. Full-year guidance assumes dividend ¥0, a return to zero payout from prior year ¥5, signaling a policy shift to prioritize debt reduction and continued investment. No share buybacks were executed (CF impact -¥0.0B), so total shareholder return ratio is about 67.1% driven by dividends only. Priority remains eliminating retained losses and strengthening financial health; near-term focus is on internal reserves and debt reduction. Note that preferred share dividends (First/Second/Third totaling ¥5.6B) are paid separately, constraining residual distributable profit available to common shareholders after preferred dividends.
Financial leverage and liquidity risk: High financial leverage with D/E ratio 2.75x and current ratio 0.86x requires caution for short-term funding. Bonds and borrowings total ¥1458.0B (short-term ¥382.8B, long-term ¥1075.2B). Lease liabilities total ¥405.6B (short-term ¥165.8B, long-term ¥239.8B). Cash and equivalents ¥631.9B provide a buffer, but if OCF weakens, refinancing risk becomes material at maturity concentrations. In a rising rate environment, financial expenses (¥46.0B vs. prior year ¥33.4B) could rise further, and combined with operating deficits, interest coverage (Operating Income / Interest Paid) could remain negative.
Goodwill impairment risk: Goodwill ¥1208.2B equals 129% of equity ¥936.0B and 34% of total assets ¥3509.3B, at record highs. Seagrass acquisition increased goodwill by ¥289.5B, and goodwill of ¥476.4B is concentrated in a single segment. Impairment losses of ¥32.3B are continuing; if future performance falls short of assumptions, additional impairments could materially erode equity. Estimated goodwill/EBITDA multiple is about 3.6x, implying a long mid-term payback, and sensitivity analysis suggests impairment risk increases with a +1% discount rate.
Cost inflation and operating leverage: SG&A was ¥1662.2B (+12.7%), outpacing revenue growth +11.5%, and rising fixed cost ratios hinder operating margin improvement. Continued inflation in personnel, rent, and logistics, combined with slower existing-store sales or intensified competition that impedes price pass-through, could prolong or deepen operating losses. Unless the upward trend in SG&A ratio (55.4% vs. 54.8% prior year) reverses, achieving operating profitability will be difficult. Lease payments of ¥157.6B add to fixed-cost structure and can pressure cash flows in an economic downturn.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 2.8% | 5.9% (2.6%–12.0%) | -3.1pt |
| Operating Margin | -0.3% | 4.6% (1.7%–8.2%) | -4.9pt |
| Net Margin | 0.6% | 3.3% (0.9%–5.8%) | -2.8pt |
Profitability lags industry medians across metrics, with operating losses being the primary cause and placing ROE and margins in the lower tier of the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 11.5% | 4.3% (2.2%–13.0%) | +7.2pt |
Revenue growth substantially exceeds the industry median (+4.3%), driven by M&A and expansion of existing operations, placing the company among industry leaders in growth.
※ Source: Company compilation
Narrowing operating loss and substantial increase in profit attributable to owners of the parent: Operating loss narrowed to ¥-8.5B from ¥-35.0B prior year (75.7% improvement), indicating movement toward profitability. Profit attributable to owners of the parent rose to ¥22.3B (+78.7%), supported by reversal of non-controlling interests and gross margin improvement. Full-year guidance forecasts net income ¥39.8B (+19.6%), premised on H2 fixed-cost absorption and an end to impairment charges. If operating-level profitability is achieved, sustained improvement in ROE and margins could follow. Key items to monitor: reversal in SG&A ratio (a decline from 55.4% in H2) and normalization of tax burden (correction of effective tax rate 73.8%), which could materially raise final profit above plan.
Strong OCF and continued M&A investment: OCF of ¥287.1B, about 12.9x net income, and depreciation ¥273.0B support ample cash generation. OCF sufficiently covers capital expenditure ¥122.0B, and M&A investment (subsidiary acquisitions ¥186.6B including Seagrass) has driven revenue growth +11.5% (above industry median +4.3%). Free cash flow ¥-20.4B is slightly negative but reflects temporary investment phase; realization of post-acquisition synergies and operating margin improvement could drive medium-term FCF turn to positive and improved ROIC. Lease liabilities ¥405.6B and financial expenses ¥46.0B are burdensome, but OCF stability partially mitigates financial risk.
Goodwill ¥1208B and management of financial leverage: Goodwill reached 129% of equity and 34% of assets, the highest level historically. Ongoing impairment losses ¥32.3B pose tail risk that could materially erode equity depending on future performance. With D/E 2.75x and current ratio 0.86x, leverage is high and short-term liquidity requires attention, though cash and equivalents ¥631.9B provide a buffer. Shift to a full-year dividend of ¥0 signals prioritization of financial health—debt reduction and elimination of accumulated deficit. Key metrics to watch include the goodwill/EBITDA multiple trend and improvement in interest coverage (Operating Income / Financial Expenses); achieving operating profitability and reducing interest burden would improve financial soundness and enable potential expansion of shareholder returns.
This report is an AI-generated earnings analysis produced by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.