DAIICHI CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥58.57B
• Operating Income: ¥1.31B
• Net Income: ¥979M
• EPS: ¥86.85

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

Verdict: Strong top-line momentum but sharp margin compression led to a weak earnings finish for FY2025 Q4 on a standalone JGAAP basis. Revenue rose 13.0% YoY to 585.7, while operating income fell 31.7% to 13.08 and net income declined 31.3% to 9.79. Gross profit totaled 132.49, implying a gross margin of 22.6%. Operating margin was 2.2%, and net margin was 1.7%. Using reported YoY rates, prior-year revenue is estimated at 518.3 and prior-year operating income at 19.16, implying operating margin compressed by roughly 147 bps YoY (from about 3.7% to 2.2%). Net margin compressed by about 108 bps YoY (from ~2.75% to 1.67%). Ordinary income decreased 34.2% YoY to 12.87, while profit before tax was 19.58, suggesting material extraordinary gains lifted PBT versus ordinary activities. EBITDA was 20.76 (3.5% margin), and depreciation was 7.68, indicating capital intensity linked to store assets and equipment. Cash conversion was healthy: operating cash flow of 17.03 exceeded net income (OCF/NI 1.74x), and free cash flow was positive at 7.27 after 9.57 of capex. Liquidity is solid with a current ratio of 173% and quick ratio of 155%, underpinned by 79.4 in cash and deposits. Leverage is conservative with total liabilities/equity at 0.54x and minimal interest burden (interest coverage ~3000x). Dividend affordability appears sound: an estimated payout ratio of 35.1% is covered by FCF 2.1x, and buybacks of 1.44 were financed within cash generation. ROE declined to 5.7%, driven mainly by weaker net margin despite decent asset turnover of 2.14x and modest leverage (1.59x). The presence of extraordinary income boosting PBT means underlying profitability is weaker than headline pre-tax figures imply. Looking ahead, sustaining double-digit revenue growth with cost discipline will be critical to restore margins amid wage and utility cost pressures typical for supermarkets. Overall, the quarter shows resilient sales and cash flow but notable profitability headwinds that need management action to normalize.

Profitability Analysis

ROE decomposition (DuPont): ROE 5.7% = Net Profit Margin 1.7% × Asset Turnover 2.142 × Financial Leverage 1.59x. The biggest change driver YoY is the net profit margin, which compressed by ~108 bps (from ~2.75% to 1.67%), outweighing any benefit from higher asset turnover supported by +13% revenue growth. Business drivers: food retail inflation/price competition likely limited gross margin expansion, while SG&A intensity rose (labor cost inflation, utilities, logistics), pushing operating margin down ~147 bps YoY to ~2.2%. Non-operating items were small, and ordinary income fell 34.2% YoY; extraordinary gains lifted PBT above ordinary income, indicating that underlying recurring profitability was even softer than PBT suggests. Sustainability: revenue-driven asset turnover may stay healthy if sales momentum continues, but margin pressure from wages and energy could persist absent price optimization and efficiency gains. Watch for SG&A growth outpacing revenue—a concerning trend implied by operating profit decline despite double-digit sales growth.

Growth Assessment

Revenue growth of +13.0% YoY to 585.7 is robust for a regional supermarket operator, indicating solid traffic/ticket growth or store openings/renovations. However, profit growth was negative: operating income -31.7% YoY and net income -31.3% YoY, signaling limited operating leverage and cost headwinds. Gross margin held at 22.6%; the key issue is SG&A intensity, which compressed operating margin to ~2.2%. Non-operating contributions were small; extraordinary items increased PBT, so recurring profit growth is weaker than headline PBT. Outlook: revenue appears sustainable near term if store network and merchandising remain solid, but restoring margins will require cost control, shrink reduction, labor scheduling optimization, and selective price/mix improvements. Near-term earnings are more sensitive to SG&A management than to sales growth.

Financial Health

Liquidity is strong: current ratio 173.4% and quick ratio 154.9%, with cash and deposits of 79.4 comfortably exceeding current liabilities tied to payables (31.33). No warning on current ratio (<1.0) or leverage (>2.0 D/E); total liabilities/equity is a conservative 0.54x. Interest-bearing debt disclosure is limited, but long-term loans are minimal at 0.42 and interest expense near zero, implying low financial risk. Maturity mismatch risk is low; current assets (106.74) exceed current liabilities (61.57) by 45.17. No off-balance sheet obligations were reported in the data provided.

Cash Flow Quality

Earnings quality is high with OCF/Net Income at 1.74x, indicating strong cash conversion. Free cash flow was positive at 7.27 after 9.57 of capex, leaving room for dividends and modest buybacks. The OCF strength relative to NI suggests working capital was a tailwind or at least not a drag; payables (31.33) remain sizable versus receivables (9.36) and inventories (11.37), typical for grocery retail. No apparent working capital manipulation signs from the data; cash generation appears aligned with operating scale. FCF sustainability is reasonable assuming capex stays near current levels and margins stabilize.

Dividend Sustainability

Payout ratio (calculated) is 35.1%, below the 60% benchmark for sustainability. FCF coverage is 2.12x, implying dividends can be funded from internal cash flow even with capex. Total dividends paid and DPS are unreported, so conclusions rely on the payout ratio estimate. Given minimal interest burden and healthy liquidity, near-term dividend capacity looks secure, but sustained margin compression would pressure headroom for both dividends and buybacks.

Risk Assessment

Business Risks:

• Margin pressure from wage inflation, utilities, and logistics within the supermarket format
• Pricing power constraints amid intense regional competition and private-brand vs national-brand mix shifts
• Potential shrink and wastage impacting gross margin in fresh categories
• Execution risk on cost control and store-level productivity needed to restore operating margin

Financial Risks:

• Profit reliance on tight SG&A management given low operating margin (~2.2%)
• Sensitivity of earnings to modest changes in gross margin due to thin margins typical of food retail
• Potential one-time items (extraordinary gains) obscuring underlying profitability trends

Key Concerns:

• Operating income down 31.7% YoY despite +13% revenue growth indicates negative operating leverage
• Net margin compression of ~108 bps YoY to 1.7% drives ROE down to 5.7%
• Ordinary income weaker than PBT suggests non-recurring support to headline results

Investment Implications

Key Takeaways:

• Sales momentum is strong, but profitability is under pressure; cost control is the immediate lever
• Cash generation and balance sheet strength provide time to fix margins without stressing capital
• ROE at 5.7% is below typical equity cost; a margin recovery path is needed to re-rate fundamentals

Metrics to Watch:

• Operating margin trajectory (target stabilization >3% over time)
• SG&A growth vs revenue growth each quarter
• OCF/NI ratio and working capital turns (inventory days, payables days)
• Like-for-like sales and ticket/traffic trends
• Capex levels vs. store renovation/expansion outcomes

Relative Positioning: A mid-sized regional supermarket with a conservative balance sheet and solid cash conversion but currently lagging peers on margin resilience; improvement depends on SG&A efficiency and gross margin protection.

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