| Metric | Current Period | Prior-Year Period | YoY |
|---|---|---|---|
| Revenue | ¥232.8B | ¥235.6B | -1.2% |
| Operating Income | ¥2.9B | ¥4.3B | -33.6% |
| Ordinary Income | ¥3.2B | ¥4.7B | -32.2% |
| Net Income | ¥2.2B | ¥3.4B | -33.9% |
| ROE | 1.5% | 2.2% | - |
FY2026 Q1 results were Revenue ¥232.8B (YoY -¥2.8B -1.2%), Operating Income ¥2.9B (YoY -¥1.4B -33.6%), Ordinary Income ¥3.2B (YoY -¥1.5B -32.2%), and Net Income ¥2.2B (YoY -¥1.2B -33.9%). While revenue was roughly flat, operating income declined by over 30%, highlighting a pronounced deterioration in profitability. The gross profit margin held at 22.4%, in line with the prior-year period; however, SG&A of ¥49.3B accounted for 21.2% of revenue, driving the operating margin down to 1.2%. Full-year guidance anticipates a recovery, with Revenue ¥990B (YoY +1.3%), Operating Income ¥22.0B (YoY +9.6%), and Net Income ¥15.3B (YoY +13.7%). Q1 progress was 23.5% for revenue and 13.1% for operating income.
[Profitability] ROE 1.5% (down from an estimated 2.2% in the prior-year period), Operating Margin 1.2% (down -0.6pt from 1.8% in the prior-year period), Ordinary Income Margin 1.4% (down -0.6pt from 2.0%), Net Margin 1.0% (down -0.4pt from 1.4%). In the DuPont three-factor breakdown, Net Margin 1.0% × Total Asset Turnover 0.625 × Financial Leverage 2.44x are the primary drivers of the decline in profitability. The Gross Profit Margin is flat at 22.4% versus 22.2% a year ago, but the SG&A ratio remains elevated at 21.2%, indicating operating leverage is not functioning. EBIT margin is 1.2%, Interest Coverage 13.8x, and ROIC 1.2%, reflecting low capital efficiency. [Cash Quality] Cash and Deposits ¥28.6B (down -¥8.4B from ¥37.0B in the prior-year period). The Quick Ratio is 50.8%, indicating limited reliance on cash-equivalent assets. Cash coverage of short-term liabilities is 0.24x. Inventory accounts for 26.6% of total assets (¥98.9B), weighing on working capital. [Investment Efficiency] Total Asset Turnover 0.625x (annualized 2.5x). Inventory turnover, on a gross-profit basis, is estimated at approximately 2.1x annualized, suggesting room to improve inventory efficiency. [Financial Soundness] Equity Ratio 40.9% (slightly down from 41.4%), Current Ratio 133.6%, Debt-to-Equity Ratio 1.44x, Interest-Bearing Debt ¥50.4B, and Debt/Capital Ratio 24.9%, indicating leverage at an appropriate level. Interest expenses of ¥0.2B imply a light interest burden, but the low Quick Ratio points to potential short-term liquidity fragility.
Cash and Deposits declined to ¥28.6B, down -¥8.4B YoY, indicating cash outflows on a quarterly basis. In working capital, inventory was ¥98.9B, slightly down from ¥99.5B a year ago, yet still high at 26.6% of total assets, implying continued capital tie-up in inventory. Accounts receivable were ¥28.2B, flat YoY at ¥28.2B; accounts payable were ¥39.6B, up +¥2.6B from ¥37.0B a year ago, suggesting use of trade payables to fund a portion of working capital. The provision for bonuses was ¥2.0B, down -¥3.8B from ¥5.8B a year ago, indicating that timing differences in expense recognition may have influenced cash movements. Cash coverage of short-term liabilities of ¥119.5B is limited at 0.24x; however, with current assets of ¥159.5B, the Current Ratio remains at 133.6%, and short-term liquidity, including inventory and receivables, is being maintained. Against Operating Income of ¥2.9B, the cash and deposits balance is roughly 10x, implying low immediate liquidity risk; nevertheless, the low Quick Ratio of 50.8% suggests weak cash generation capability, making verification of the actual Operating Cash Flow (OCF) important.
With Ordinary Income at ¥3.2B and Operating Income at ¥2.9B, net non-operating gains totaled approximately ¥0.3B. Net non-operating income, calculated as non-operating income of ¥0.6B minus non-operating expenses of ¥0.3B, contributed to the increase in Ordinary Income; this likely consists mainly of financial income such as interest and dividends, as well as foreign exchange gains. Non-operating income is small at 0.3% of revenue, indicating that the earnings structure relies heavily on core operations. The Gross Profit Margin of 22.4% matches the prior-year level, suggesting stable gross profit quality; however, SG&A of ¥49.3B (21.2% of revenue) is suppressing Operating Income, and the heavy fixed-cost structure is degrading earnings quality. The 1.2% Operating Margin is low versus historical trends, leaving substantial room to improve SG&A efficiency. Meanwhile, Interest Coverage of 13.8x indicates a light financial burden, and financial factors are a limited headwind. As Operating CF data have not been disclosed, the cash backing of Net Income of ¥2.2B cannot be directly verified. The decline in cash and high inventory suggest potential accruals (a divergence between accrual-based and cash earnings), warranting a cautious assessment of cash conversion quality.
Revenue downside risk: Revenue declined -1.2% YoY in Q1; continued deterioration in the consumption environment or weakening customer demand could hinder achievement of the full-year target. Inventory risk: Inventory of ¥98.9B accounts for 26.6% of total assets, embedding risks of inventory valuation losses and discounting due to weak sales. Low turnover is a driver of deteriorating capital efficiency. Liquidity risk: With a Quick Ratio of 50.8%, reliance on cash-like assets is low; securing liquidity could become challenging if sudden funding needs arise or revenue drops sharply. Dividend sustainability risk: With quarterly Net Income of ¥2.2B and an annual dividend policy (interim ¥30; year-end ¥45), the Payout Ratio is 260.0%, an extremely high level, raising concerns about dividend continuity if earnings underperform. Achieving full-year Net Income of ¥15.3B is a prerequisite. SG&A fixed-cost burden: SG&A accounts for 21.2% of revenue, and absent top-line growth, the rigidity of the fixed-cost structure may impede improvements in the operating margin.
[Position within the Industry] (Reference information; our research) The 1.2% Operating Margin is low versus the company’s own historical performance, confirming a temporary deterioration in profitability compared to pre-FY2026 levels. ROE of 1.5% indicates low capital efficiency, significantly below the typical range for retail/wholesale industries (industry median around 5–8%). The Equity Ratio of 40.9% is mid-range within the industry, suggesting a certain degree of financial safety, but liquidity indicators (Quick Ratio 50.8%) are estimated to be low even within the industry, pointing to challenges in short-term cash management. The inventory ratio of 26.6% is partly characteristic of the industry, but there is ample room to improve inventory turnover. Given the limited set of benchmarks, emphasis on comparisons with the company’s own historical trajectory shows the Operating Margin declined -0.6pt from 1.8% in the prior-year period to 1.2%, making profitability recovery through SG&A control or revenue growth a key issue. (Industry: retail/wholesale-related; comparator: the company’s past reporting periods; Source: our compilation)
Key Point 1: A significant decline in the Operating Margin (1.2%) and persistently high SG&A ratio are weighing on profitability; achieving full-year guidance will require SG&A control and the realization of top-line effects. With the gross margin holding, the room for improvement lies in SG&A efficiency. Key Point 2: Inventory accounting for 26.6% of total assets is burdening working capital; improving inventory turnover is key to enhancing capital efficiency and strengthening cash generation. Alongside the declining cash and deposits, the effectiveness of inventory management needs to be confirmed in subsequent quarters. Key Point 3: The dividend policy is sustainable (Payout Ratio around 20%) assuming achievement of full-year Net Income of ¥15.3B; however, given the low profit progress rate in Q1, the certainty of earnings recovery and the consistency of the dividend policy are important checkpoints for investors.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statements. It does not constitute a recommendation to invest in any specific security. The industry benchmarks are reference information compiled by our firm based on publicly available financial data. Investment decisions are your own responsibility; consult a professional as needed before making any such decisions.