COLOWIDE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥141.47B
• Operating Income: ¥3.37B
• Net Income: ¥1.79B
• EPS: ¥7.13

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

Colowide (7616) delivered FY2026 Q2 consolidated results under IFRS showing continued top-line recovery and improved bottom-line profitability from a low base. Revenue reached 1,414.67 (100M JPY), up 7.0% YoY, reflecting steady demand normalization and likely contribution from pricing and traffic recovery across restaurant formats. Gross profit was 764.63 (100M JPY), implying a solid gross margin of 54.1%, indicative of improved product mix and/or price pass-through against food cost inflation. SG&A was 728.92 (100M JPY), leaving operating income at 33.67 (100M JPY) and an operating margin of roughly 2.4%, still thin but gradually trending better. EBITDA was 151.72 (100M JPY), corresponding to a margin of 10.7%, suggesting some operating leverage materializing, though fixed cost absorption remains a key challenge. Net income increased to 13.18 (100M JPY), +242.7% YoY, with a low effective tax rate of 15.0% likely aided by loss carryforwards. DuPont analysis shows ROE at 1.5% (net margin 0.9%, asset turnover 0.420x, financial leverage 3.84x), highlighting that leverage, rather than margin strength, is the main driver of equity returns at present. The balance sheet shows total assets of 3,365.65 (100M JPY) and equity of 875.63 (100M JPY), with an equity ratio reported at 23.1% and a liabilities-to-equity profile of 2.57x, underscoring a still-leveraged capital structure common in lease-intensive F&B chains. Retained earnings remain negative at -229.22 (100M JPY), reflecting accumulated historical losses, although ongoing profitability should gradually repair equity. Cash and equivalents stand at 715.37 (100M JPY), providing a liquidity cushion, even as current liability details are unreported. Operating cash flow was strong at 116.22 (100M JPY) and 8.82x net income, supported by D&A of 118.05 (100M JPY) and likely working capital benefits. However, total free cash flow defined as OCF plus investing CF was negative at -43.43 (100M JPY) due to investing outflows of -159.65 (100M JPY), implying continued store investments or M&A/asset renewals beyond maintenance capex. Financing CF was a sizable inflow of 225.45 (100M JPY), signaling reliance on external funding to support investment and shareholder returns. The calculated payout ratio is 40.4%, but FCF coverage of dividends is negative (-8.16x), indicating dividends are not covered by total FCF this period when including investment spending. Key data limitations include unreported ordinary income, interest expense, and breakdowns of current liabilities and lease obligations, which constrain precision on interest coverage, current ratios, and lease-adjusted leverage. Overall, the quarter reflects recovery in revenue and EBITDA, incremental operating leverage, solid OCF, and ongoing balance-sheet risk from leverage and negative retained earnings.

Profitability Analysis

ROE is 1.5%, driven by net margin of 0.9%, asset turnover of 0.420x, and financial leverage of 3.84x per the provided DuPont metrics. Operating margin is approximately 2.4% (33.67/1,414.67), still thin for the sector and indicating sensitivity to cost pressures and sales fluctuations. EBITDA margin of 10.7% suggests decent cash earnings capacity relative to revenue, aided by scale and add-backs from IFRS lease accounting. Gross margin at 54.1% is robust, implying effective pricing and mix management, but the spread between gross and operating margin (roughly 51.7 ppt) highlights a heavy SG&A/fixed-cost burden typical of multi-brand restaurant networks. The YoY net income surge (+242.7%) reflects recovery from a low base and a favorable tax rate; sustainability depends on continued SSS growth and cost control. Limited disclosure on non-operating items caps visibility on underlying financial income/expenses. Overall profitability is improving but remains constrained by high operating leverage and a still-elevated fixed-cost structure.

Growth Assessment

Revenue grew 7.0% YoY to 1,414.67 (100M JPY), signaling ongoing recovery in dining demand and potential benefit from pricing actions. The improvement in EBITDA to 151.72 (100M JPY) and positive operating income indicates better scale efficiency, though margins remain modest. Net income growth (+242.7% YoY) is from a low base and assisted by a low effective tax rate (15.0%), which may not persist at the same level over the medium term. Revenue sustainability will hinge on same-store sales, store refurbishment, digital/CRM initiatives, and menu engineering to offset food and wage inflation. Profit quality appears supported by cash earnings (OCF 116.22 vs NI 13.18), but persistence depends on maintaining gross margin and further SG&A productivity. Outlook: gradual improvement is plausible if traffic and average check trends hold, with upside from further normalization and brand portfolio optimization; however, macro sensitivity remains elevated.

Financial Health

Total assets are 3,365.65 (100M JPY) and total equity 875.63 (100M JPY). The reported equity ratio is 23.1%, while a simple equity-to-asset calculation yields about 26%, suggesting definitional differences (e.g., equity attributable to owners vs total equity including NCI). Liabilities total 2,251.18 (100M JPY), for a debt-to-equity of 2.57x, indicating a leveraged profile consistent with IFRS 16 lease recognition and bank borrowings. Cash & equivalents are 715.37 (100M JPY), providing liquidity, but current liabilities are unreported, preventing calculation of current/quick ratios. Negative retained earnings of -229.22 (100M JPY) highlight still-weak cumulative capital position, though improving profitability should gradually rebuild retained earnings. Interest-bearing debt is unreported; interest coverage cannot be assessed. Financing CF inflow of 225.45 (100M JPY) suggests continued dependence on external funding to support investments and shareholder returns. Overall solvency and liquidity appear adequate but not robust, with leverage a central consideration.

Cash Flow Quality

OCF was 116.22 (100M JPY), 8.82x net income, reflecting strong cash conversion driven by D&A (118.05) and likely working capital tailwinds. EBITDA of 151.72 (100M JPY) compares to OCF of 116.22, implying an OCF/EBITDA conversion of ~77%, healthy for the sector. Investing CF was -159.65 (100M JPY), exceeding maintenance capex (-58.64), indicating expansion capex, refurbishments, or acquisitions/long-term assets. Free cash flow, defined as OCF + Investing CF, was -43.43 (100M JPY), i.e., total cash burn after investments. On a maintenance basis (OCF - Capex), free cash flow would be positive at roughly 57.58 (100M JPY), but this is not the reporting definition used here. Working capital specifics are limited due to missing current liability details; however, accounts receivable are 155.12 and inventories 43.49 (100M JPY), manageable relative to revenue scale. The quality of earnings appears sound given cash generation versus accrual profits, though reliance on financing to fund growth capex is evident.

Dividend Sustainability

The calculated payout ratio is 40.4% against net income of 13.18 (100M JPY), implying moderate payout on an earnings basis. However, FCF coverage is -8.16x using the definition OCF + Investing CF, indicating dividends are not covered by total free cash flow this period due to sizable investment outflows. Dividends paid in CF were -9.51 (100M JPY), though DPS and total dividends per XBRL are unreported; timing differences and inclusion of non-controlling interests may cause discrepancies versus the calculated payout ratio. With OCF positive but total FCF negative, dividend sustainability near term depends on either moderating investment outflows or continued access to financing (financing CF was +225.45). Policy outlook likely targets stable dividends, but coverage by internally generated FCF (post-investment) is currently insufficient under the reported definition.

Risk Assessment

Business Risks:

• Same-store sales volatility due to consumer sentiment and competitive intensity in casual dining/izakaya formats
• Food and beverage cost inflation pressuring gross margins despite pricing actions
• Labor cost inflation and staffing shortages impacting service quality and SG&A
• High operating leverage from a large fixed-cost base amplifying earnings sensitivity
• Execution risk in store refurbishments, format optimization, and brand portfolio management
• Potential impairment risk on long-lived assets and unidentified intangibles (goodwill not disclosed)

Financial Risks:

• Elevated leverage (liabilities/equity 2.57x; financial leverage 3.84x) increases sensitivity to earnings shocks
• Negative free cash flow after investments necessitating continued external funding
• Limited visibility on interest expense and lease liabilities constrains assessment of interest coverage and lease-adjusted leverage
• Negative retained earnings indicate a still-weak cumulative capital buffer
• Refinancing and interest rate risk as Japan normalizes monetary policy, albeit from low levels

Key Concerns:

• Thin operating margin (~2.4%) leaves limited buffer against cost shocks
• Dividend coverage by total free cash flow is negative in the period
• Data gaps on current liabilities, interest expense, and ordinary income reduce transparency of liquidity and coverage metrics

Investment Implications

Key Takeaways:

• Top-line recovery continued with 7.0% YoY revenue growth to 1,414.67 (100M JPY)
• Gross margin resilient at 54.1%; operating margin remains thin at ~2.4%
• ROE at 1.5% is primarily leverage-driven amid low net margins
• OCF strong at 116.22 (100M JPY), but total FCF negative due to heavy investing CF
• Balance sheet leveraged (equity ratio reported 23.1%; liabilities/equity 2.57x) with negative retained earnings
• Dividend payout ratio moderate on earnings (40.4%) but not covered by total FCF

Metrics to Watch:

• Same-store sales growth and average check/traffic trends
• Operating margin and EBITDA margin progression
• OCF to EBITDA conversion and working capital movements
• Capex and investing CF (including M&A) versus OCF to gauge FCF trajectory
• Net debt and lease-adjusted leverage (net debt/EBITDA; interest coverage once disclosed)
• Tax rate normalization as loss carryforwards are utilized
• Equity ratio and retained earnings recovery

Relative Positioning: Within Japan’s listed restaurant peers, Colowide shows recovering sales and EBITDA but operates with thinner operating margins and higher leverage than many large casual dining peers; equity accretion is ongoing from a low base with ROE currently subdued and driven chiefly by leverage rather than core profitability.

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