HANDSMAN CO.,LTD FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥8.25B
• Operating Income: ¥129M
• Net Income: ¥126M
• EPS: ¥9.22

Income Statement

Balance Sheet

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

Handsman Co., Ltd. (single-entity, JGAAP) reported FY2026 Q1 revenue of ¥8.253bn, down 4.5% YoY, with a sharper decline in operating income to ¥129m (-43.5% YoY), indicating material margin compression. Gross profit was ¥2.760bn, implying a gross margin of 33.4%, but the operating margin fell to 1.6%, reflecting higher SG&A intensity and/or deleverage on lower sales. Ordinary income of ¥192m suggests some non-operating support (e.g., non-operating income) offsetting modest interest expense of ¥3m, resulting in strong interest coverage of about 43x. Net income was ¥126m (-33.5% YoY), with EPS of ¥9.22 for the quarter. The provided DuPont metrics indicate a quarterly ROE of 0.71% based on net margin of 1.53%, asset turnover of 0.326x, and financial leverage of 1.42x; annualized, this would imply a low single-digit ROE, signaling subdued profitability. The balance sheet shows total assets of ¥25.333bn, total liabilities of ¥7.562bn, and total equity of ¥17.828bn; while the reported equity ratio is shown as 0.0%, the balance sheet implies an equity ratio near 70% (equity/assets), indicating a conservative capital structure. Liquidity appears robust with current assets of ¥10.033bn versus current liabilities of ¥5.400bn, for a current ratio of 1.86x and working capital of ¥4.633bn. Debt-to-equity of 0.42x (liabilities/equity) further underscores limited financial leverage and ample solvency headroom. Cash flow statement items are not disclosed in the dataset (zeros indicate unreported), constraining direct assessment of operating cash flow and free cash flow quality for the quarter. Depreciation and amortization are also unreported, preventing an EBITDA view; however, the steep drop in operating income relative to the modest revenue decline suggests meaningful operating leverage and fixed cost pressure. The implied effective tax rate is approximately 44% (income tax of ¥99m against pretax of roughly ¥225m), despite the reported effective tax rate placeholder showing 0.0%. Inventory data are unreported, limiting analysis of merchandise turns and working capital dynamics, which are key for a home improvement retail model. Dividend per share is shown as 0 with a 0% payout ratio—likely a timing/non-disclosure artifact for Q1 rather than policy guidance—so dividend capacity should be evaluated once full-year cash flows are available. Overall, Q1 highlights soft top-line trends and pronounced margin compression, but the company retains strong balance sheet flexibility and low financial risk. Near-term performance will hinge on demand normalization, pricing and mix discipline, and SG&A containment to restore operating margins.

Profitability Analysis

roe_decomposition: Reported quarterly ROE is 0.71%, driven by a net profit margin of 1.53%, asset turnover of 0.326x, and financial leverage of 1.42x. Annualizing the quarterly ROE suggests approximately 2.8–3.0% if conditions persist, below typical cost of equity for retail, implying value creation headwinds unless margins recover. margin_quality: Gross margin is 33.4%, but operating margin is only 1.6%, pointing to elevated SG&A as a percentage of sales. Operating income fell 43.5% YoY on a 4.5% sales decline, evidencing deleveraging and likely cost inflation (labor, utilities) and/or promotional pressure. Ordinary income margin is about 2.3% (¥192m/¥8.253bn), aided by non-operating items that partially offset weak operating profitability. operating_leverage: The magnitude of operating income decline relative to revenue (-43.5% vs -4.5%) indicates high fixed cost intensity. With D&A unreported, we cannot separate cash vs non-cash costs, but the pattern is consistent with negative operating leverage in Q1. Restoring sales density or reducing fixed costs would have an outsized impact on EBIT.

Growth Assessment

revenue_sustainability: Revenue declined 4.5% YoY to ¥8.253bn. For a home improvement retailer, Q1 can be seasonally sensitive to weather and local demand; sustainability will depend on traffic, ticket size, and pricing power against competitive promotions. profit_quality: Net income declined 33.5% YoY to ¥126m, with a 1.53% net margin. The gap between gross and operating margins suggests SG&A pressure. Ordinary income outperformed operating income, indicating some reliance on non-operating contributions, which may be less sustainable than core operating improvements. outlook: Absent disclosed guidance, near-term recovery hinges on stabilizing comps, improved mix, and cost control. If revenue normalizes and cost initiatives take hold, EBIT margins could rebound from 1.6%, but continued inflationary costs and competitive pricing remain headwinds. Watch subsequent quarters for margin reversion toward historical norms.

Financial Health

liquidity: Current assets ¥10.033bn vs current liabilities ¥5.400bn imply a current ratio of 1.86x and working capital of ¥4.633bn, signaling solid short-term liquidity. Quick ratio is shown as 1.86x due to inventory being unreported. solvency: Total liabilities of ¥7.562bn against equity of ¥17.828bn yield a liabilities-to-equity (debt-to-equity proxy) of 0.42x, indicating conservative leverage. Based on balance sheet figures, the implied equity ratio is approximately 70% despite the reported 0.0% placeholder. capital_structure: Interest expense is modest at ¥3m and EBIT/interest coverage is about 43x, implying low refinancing risk and ample cushion to absorb earnings volatility. The company retains capacity to fund operations and selective investments without undue balance sheet strain.

Cash Flow Quality

earnings_quality: With OCF unreported, direct OCF-to-net income analysis is not possible for the quarter. However, the sharp EBIT decline vs modest sales contraction suggests earnings are sensitive to fixed costs; cash conversion will depend on working capital movements, especially inventory and payables. fcf_analysis: Free cash flow is not disclosed. Capex and D&A are unreported, limiting visibility on maintenance vs growth investment. Given low leverage and strong liquidity, the balance sheet can absorb near-term FCF variability. working_capital: Inventories are unreported, preventing analysis of turns and inventory build. Working capital is ¥4.633bn, but without inventory and receivables/payables granularity, we cannot assess cash tied in stock or seasonal swings.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0, which likely reflects timing/non-disclosure for Q1 rather than a definitive policy. Based on EPS of ¥9.22 for Q1, a notional payout would be modest if any dividend were declared. fcf_coverage: FCF coverage cannot be assessed as OCF and capex are unreported. Liquidity and low leverage suggest capacity, but prudence is warranted until full-year cash flows are available. policy_outlook: Dividend outlook depends on full-year profit trajectory and investment needs. Given current margin pressure and lack of disclosed cash flows, preserving financial flexibility may remain a priority near term; any payout decisions would likely track earnings normalization.

Risk Assessment

Business Risks:

• Demand variability in home improvement and DIY categories, including weather and seasonality effects
• Competitive pricing pressure from national chains and e-commerce, impacting margins
• Cost inflation (labor, utilities, logistics) compressing SG&A leverage
• Product mix shifts toward lower-margin categories
• Store-level fixed cost burden leading to negative operating leverage on sales dips
• Local economic conditions in core trading areas affecting traffic and ticket size

Financial Risks:

• Potential working capital swings (inventory and payables) not visible due to limited disclosures
• Earnings sensitivity to sales volatility given low operating margin headroom
• Tax rate volatility (implied ~44% in Q1) affecting net income predictability
• Limited visibility on capex profile and depreciation, complicating cash flow forecasting

Key Concerns:

• Operating income down 43.5% on a 4.5% sales decline, indicating high operating leverage
• Operating margin only 1.6% in Q1, leaving little buffer for shocks
• Absence of cash flow and inventory disclosure hinders assessment of cash conversion and stock health

Investment Implications

Key Takeaways:

• Top line contracted 4.5% YoY, with significant margin compression at the operating level
• Interest coverage remains strong (~43x) given low interest burden
• Balance sheet is conservative with implied equity ratio ~70% and liabilities/equity 0.42x
• Quarterly ROE of 0.71% is subdued; annualized return likely below cost of equity without margin recovery
• Limited disclosure on cash flow and inventory constrains quality-of-earnings assessment

Metrics to Watch:

• Same-store sales and pricing/mix trends to gauge revenue recovery
• Operating margin trajectory and SG&A as a percentage of sales
• Inventory levels and turnover once disclosed, to assess working capital discipline
• OCF and FCF once reported, including capex cadence
• Effective tax rate normalization relative to historical levels

Relative Positioning: Within Japanese home improvement retail, Handsman currently exhibits weaker profitability momentum (sharp EBIT decline) but superior balance sheet resilience (low leverage, strong liquidity), positioning it defensively from a solvency perspective yet cyclically exposed on earnings.

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