| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥169.8B | ¥157.5B | +7.8% |
| Operating Income / Operating Profit | ¥10.8B | ¥12.7B | -14.3% |
| Ordinary Income | ¥11.4B | ¥13.6B | -15.8% |
| Net Income (attributable to owners of parent) | ¥7.5B | ¥9.3B | -19.7% |
| ROE | 2.3% | 2.8% | - |
FY2026 Q1 results showed Revenue ¥169.8B (YoY +¥12.3B +7.8%), Operating Income ¥10.8B (YoY -¥1.8B -14.3%), Ordinary Income ¥11.4B (YoY -¥2.1B -15.8%), and Net Income attributable to owners of parent ¥7.5B (YoY -¥1.8B -19.7%). The quarter was characterized by higher revenue but lower profits: topline expanded steadily, however increases in raw material costs, labor costs and SG&A weighed on profitability. Cost of sales rose to ¥86.0B (+8.6%), outpacing revenue growth, and gross margin declined to 49.3% from 49.7% a year ago (down 0.4pt). Selling, general and administrative expenses were ¥72.9B (+11.1%), rising faster than sales growth and worsening the SG&A ratio to 42.9% from 41.7% (up 1.2pt). The operating margin fell to 6.4% from 8.0% a year earlier (down 1.6pt), indicating a reversal of operating leverage. EPS was ¥4.56 (prior year ¥5.78), down 21.1%.
[Revenue] Revenue was ¥169.8B, up +7.8% YoY. In the single foodservice segment, recovery in traffic at existing stores and new store openings appear to have contributed to topline expansion. However, as a single-segment company, regional and format breakdowns are not disclosed, so detailed growth drivers are unclear. Gross profit was ¥83.7B (+7.0%), and gross margin was 49.3%, down 0.4pt from 49.7% in the prior year period. Increases in procurement prices for raw materials and edible oils pressured gross margin, but price revisions and menu-mix improvements helped avoid a large deterioration.
[Profitability] SG&A was ¥72.9B, up +11.1% YoY, exceeding sales growth of +7.8%. The SG&A ratio deteriorated to 42.9% from 41.7% a year ago (up 1.2pt), and Operating Income fell to ¥10.8B (-14.3%). Operating margin was 6.4%, down 1.6pt from 8.0% a year ago, indicating negative operating leverage. The increase in SG&A is estimated to be mainly due to higher labor costs, recruitment-related expenses, rising energy costs, and promotional expenses. Non-operating income was ¥2.9B (prior year ¥3.3B) and non-operating expenses were ¥2.3B (prior year ¥2.4B), changing only marginally, resulting in Ordinary Income of ¥11.4B (-15.8%). Extraordinary gains/losses were both ¥0.0B (prior year: extraordinary income ¥0.2B, extraordinary loss ¥0.2B), i.e., negligible, so non-recurring items had almost no impact. Corporate taxes were ¥4.0B (prior year ¥4.2B), and the effective tax rate rose slightly to 34.5% (prior year 31.2%), but tax payments decreased slightly due to lower pre-tax profit. Net Income attributable to owners of parent was ¥7.5B (-19.7%), and net margin declined to 4.4% from 5.9% a year ago (down 1.5pt). In conclusion, this was a revenue-up/profit-down quarter, with cost inflation and higher SG&A compressing profits.
[Profitability] Operating margin was 6.4%, down 1.6pt from 8.0% a year ago, and net margin was 4.4%, down 1.5pt from 5.9% a year ago. Gross margin of 49.3% worsened by 0.4pt from 49.7% a year ago, and SG&A ratio of 42.9% rose 1.2pt from 41.7% a year ago. ROE was 2.3% (annualized approx. 9.2%), down from 2.9% (annualized approx. 11.6%) a year ago, primarily driven by the decline in net margin. [Cash Quality] Days Sales Outstanding (DSO) extended to 94 days, indicating working capital retention that could weaken operating cash generation. Inventories were ¥10.6B and light relative to sales, suggesting limited cash pressure from inventory. [Investment Efficiency] Total asset turnover was 0.36x (annualized approx. 1.44x) and ROIC annualized approx. 3.3%, indicating low capital efficiency. Goodwill was ¥34.3B, representing 10.6% of net assets, a healthy level with limited impairment risk at present. [Financial Soundness] Equity Ratio was 68.9%, slightly up from 68.3% a year ago, indicating a solid financial base. Current ratio was 235.4% and quick ratio 222.0%, showing very high liquidity. Interest-bearing debt was ¥1.5B (current ¥0.4B + non-current ¥1.1B), extremely small, resulting in D/E of 0.005x and interest coverage of 63.8x, so interest burden is minimal. Cash and deposits amounted to ¥111.5B, ensuring ample liquidity to cover short-term liabilities of ¥78.8B.
The statement of cash flows is not disclosed, but funding trends are analyzed from balance sheet movements. Cash and deposits were ¥111.5B, down ¥21.3B from ¥132.8B a year ago. Accrued corporate taxes and similar liabilities decreased to ¥3.5B from ¥7.0B a year ago (down ¥3.5B), and mid-period tax payments appear to be a primary cause of cash reduction. Provision for bonuses decreased to ¥2.2B from ¥4.3B a year ago (down ¥2.0B), so seasonal payment of prior-period bonuses also contributed to cash outflows via a reduction in current liabilities. Trade receivables increased to ¥43.5B from ¥38.6B a year ago (up ¥4.9B), and the extended DSO of 94 days suggests lengthening collection periods that may have pressured working capital. Long-term borrowings decreased to ¥1.1B from ¥1.7B a year ago (down ¥0.7B), indicating some deleveraging. Details of capex and dividends are unknown, but relative to operating cash generation, tax payments, working capital increases, and repayment of existing borrowings likely drove outflows. From a free cash flow perspective, abundant cash balances and low interest-bearing debt indicate strong capacity to cover routine investment and dividends.
Earnings quality is generally good. Extraordinary income/losses were both ¥0.0B and negligible, so the Ordinary Income of ¥11.4B is almost entirely attributable to recurring business operations. Of non-operating income ¥2.9B, interest and dividends received were ¥0.1B and limited; the breakdown of other non-operating income ¥0.6B is unknown but small in scale. Of non-operating expenses ¥2.3B, interest expense was ¥0.2B and minimal; the remainder ¥0.5B is unspecified but does not include large non-recurring items. Comprehensive income was ¥7.9B, ¥0.4B higher than Net Income of ¥7.5B, mainly due to a ¥0.5B increase in foreign currency translation adjustments. Net unrealized gains on available-for-sale securities were zero, and actuarial adjustments related to retirement benefits were -¥0.1B and negligible. The gap between comprehensive income and net income is limited, and there is no significant boost from accumulated other comprehensive income. From an accruals perspective, the increase in trade receivables (+¥4.9B) suggests some timing lag in cash realization of sales, so the quality of revenue recognition warrants monitoring.
Full Year guidance remains: Revenue ¥726.0B (YoY +10.8%), Operating Income ¥50.0B (YoY +6.0%), Ordinary Income ¥50.4B (YoY +1.1%), and Net Income attributable to owners of parent ¥27.2B. No revisions were made during the period. Q1 progress rates were: Revenue 23.4%, Operating Income 21.7%, Ordinary Income 22.7%, Net Income attributable to owners of parent 27.5%. Compared with the standard progress of 25%, revenue is slightly ahead while operating and ordinary income are modestly behind. Net income progress exceeds the standard, possibly due to a somewhat lower effective tax rate in Q1. The full-year expected operating margin is 6.9% (Q1 actual 6.4%), assuming margin improvement from Q2 onward. Defending gross margin and restraining SG&A growth will be key to achieving the full-year targets.
Annual dividend forecast is ¥8.00 per share, unchanged from the prior year ¥8.00. Company-planned EPS is ¥17.04, implying a payout ratio of approximately 47%, a sustainable level. At the end of Q1, the payout ratio calculated by annualizing Q1 EPS (Q1 EPS ¥4.56 × 4 = ¥18.24) against annual dividend ¥8.00 indicates about 44%, showing sufficient capacity for dividends given profit progress. No share buybacks were disclosed; shareholder returns are via dividends only. Given low interest-bearing debt (¥1.5B), high liquidity (cash ¥111.5B, current ratio 235%), and stable operating cash generation, the ability to continue dividends is judged to be high. Although operating profit progress is slightly lagging this term, if margin recovery is achieved for the full year, dividend safety should be maintained.
Cost inflation risk: Increases in raw material prices, edible oils, energy costs and labor are pressuring gross margin of 49.3% (YoY -0.4pt) and SG&A ratio of 42.9% (YoY +1.2pt). While price changes and mix improvements avoided a major deterioration in Q1, continued cost inflation could further depress operating margin from 6.4% (YoY -1.6pt). Monitor commodity markets and labor market trends; the speed of price pass-through and operational efficiency improvements will be key to protecting profits.
Working capital retention risk: DSO extended to 94 days and trade receivables increased by ¥4.9B YoY. Lengthening collection periods strain working capital and reduce operating cash generation. Although cash balance is ample at ¥111.5B, delayed improvement in DSO could reduce capital efficiency and shrink investment capacity. Review of collection terms and strengthening of credit management are required.
Low capital efficiency risk: ROE (annualized approx. 9.2%) and ROIC (annualized approx. 3.3%) remain low. The drop in net margin to 4.4% (YoY -1.5pt) is the main cause, and the company is not generating returns commensurate with invested capital. If margin improvement does not materialize, shareholder value creation may remain weak and weigh on valuation. Recovery of gross margin and control of SG&A are essential.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.4% | 3.4% (0.8%–7.7%) | +3.0pt |
| Net Margin | 4.4% | 2.2% (0.5%–6.2%) | +2.2pt |
Within the retail sector, profitability is above the median and the company sits in the upper group.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 7.8% | 7.7% (0.8%–14.6%) | +0.1pt |
Revenue growth is in line with the industry median, maintaining a standard growth pace.
※Source: Company compilation
Sustainability of margin recovery: Q1 saw revenue up but profits down, with operating margin at 6.4% (YoY -1.6pt). Full-year guidance assumes a 6.9% operating margin. Whether gross margin defense and containment of SG&A growth materialize from Q2 onward is the focal point. Given structural cost pressures, continuous monitoring of price pass-through, operational efficiency measures, and menu-mix effects is necessary.
Path to improved capital efficiency: With ROE annualized approx. 9.2% and ROIC annualized approx. 3.3%, capital efficiency is low. Correcting working capital retention as reflected by DSO of 94 days and improving net margin can create upside in capital efficiency. Normalization of receivables collection and margin recovery would support shareholder value creation.
Financial soundness and dividend continuity: Equity Ratio 68.9%, cash ¥111.5B, interest-bearing debt ¥1.5B indicate a robust financial base and high capacity to sustain dividends with a payout ratio around 47%. Short-term profit progress is slightly delayed, but if margin recovery occurs for the full year, continued stable dividends are feasible.
This report was automatically generated by AI 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 company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.