| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥10103.4B | ¥8780.2B | +15.1% |
| Operating Income / Operating Profit | ¥485.7B | ¥425.6B | +14.1% |
| Ordinary Income | ¥500.6B | ¥419.9B | +19.2% |
| Net Income / Net Profit | ¥140.8B | ¥182.4B | -22.8% |
| ROE | 4.8% | 7.3% | - |
The fiscal year ended Feb 2026 results: Revenue ¥10,103.4B (YoY +¥1,323.2B +15.1%), Operating Income ¥485.7B (YoY +¥60.1B +14.1%), Ordinary Income ¥500.6B (YoY +¥80.7B +19.2%), Net Income attributable to owners of the parent ¥140.8B (YoY -¥41.6B -22.8%). The single segment of Drugstore & Dispensing Pharmacy achieved a triple-digit B increase in revenue, and at the operating stage scale effects from sales growth contributed. Ordinary Income grew faster than operating profit due to improvement in non-operating items (non-operating income ¥59.8B, non-operating expenses ¥44.9B, net +¥14.9B). Net Income increased substantially due to the recognition of deferred tax assets (¥90.9B) resulting in an effective tax rate of 0.4% and EPS of ¥248.56 (YoY +75.1%); however, this tax effect is largely one-off and normalization is expected next fiscal year.
Revenue: The revenue increase of +15.1% YoY was driven by store network expansion and same-store sales growth. The company comprises a single Drugstore & Dispensing Pharmacy segment, with domestic sales accounting for over 90% of consolidated revenue by region. Gross margin improved to 31.8% (up +0.5pt from 31.3% prior year), and Gross Profit was ¥3,212.1B (YoY +13.8%). Profitability: Selling, general and administrative expenses (SG&A) were ¥2,726.4B (YoY +17.2%), rising faster than sales growth, with an SG&A ratio of 27.0% (up +0.5pt from 26.5%). The main drivers were rent expenses ¥489.9B (prior year ¥440.0B, +11.3%) and higher personnel costs; fixed-cost base increases accompanying store expansion pressured profitability. Operating Income was ¥485.7B (+14.1%), and the operating margin was 4.8% (flat from 4.8% prior year), as scale effects and gross margin improvement absorbed the SG&A rise to maintain margins. In non-operating items, interest income ¥6.2B, rental income ¥26.8B, etc., contributed steadily and non-operating items produced a net benefit of +¥14.9B. Ordinary Income rose to ¥500.6B (+19.2%), outpacing operating profit growth. Extraordinary items: Recorded Extraordinary Losses ¥58.6B (of which impairment losses ¥57.6B, loss on retirement of fixed assets ¥4.6B) reflecting review of unprofitable stores and assets. Extraordinary Gains ¥9.7B (gain on bargain purchase ¥5.3B, gain on sales of fixed assets ¥4.4B) resulted in net -¥48.9B. Profit before income taxes was ¥451.7B (prior year ¥380.8B, +18.6%). Income taxes: Due to the recognition of deferred tax assets ¥90.9B, income taxes were ¥1.9B (effective tax rate 0.4%), extremely low, resulting in a large increase in Net Income. However, this is a temporary tax effect, and normalization is expected next fiscal year. Conclusion: Revenue and operating profit both increased, and Net Income rose sharply due to one-off tax effects.
Profitability: Operating margin 4.8% (flat from 4.8% prior year), Net Income margin 1.4% (down -0.7pt from 2.1% prior year). Gross profit margin 31.8% improved +0.5pt YoY, a favorable level for retail. ROE 4.8% (down from 10.6% prior year) is below historical levels under the assumption of tax rate normalization; considering Net Income is distorted by a one-off tax effect, trend assessment under normalized conditions is necessary. Cash quality: Operating Cash Flow (OCF) ¥867.8B, 6.2x Net Income, indicating very strong cash generation. OCF/EBITDA (EBITDA = Operating Income + Depreciation = 485.7 + 176.6 = ¥662.3B) = 1.31x, indicating good earnings quality. Free Cash Flow (FCF) was ¥171.4B (OCF ¥867.8B - Investing CF ¥696.4B), remaining positive and sufficient to cover dividends and growth investments. Investment efficiency: Total Asset Turnover 1.64x (Revenue ¥10,103.4B / Average Total Assets ¥5,548.1B) is high for retail. Capex ¥230.9B / Depreciation ¥176.6B = 1.31x, indicating a growth-investment bias. Financial soundness: Equity Ratio 47.3% (down -3.3pt from 50.6% prior year) declined due to increased long-term borrowings but remains in a healthy range. Current Ratio 134.3% (Current Assets ¥3,110.9B / Current Liabilities ¥2,316.5B). Net Debt/EBITDA 1.36x (Interest-bearing debt ¥944.4B - Cash ¥1,112.1B = -¥167.7B, effectively close to debt-free), indicating strong creditworthiness.
OCF was ¥867.8B (prior year ¥369.4B, +134.9%), a substantial increase. Of the subtotal ¥1,016.3B, an increase in accounts payable +¥317.0B significantly contributed to working capital improvement, and even after deducting corporate taxes paid -¥155.2B, the positive balance expanded. Accounts receivable +¥5.0B and inventories +¥0.1B indicate working capital is being managed efficiently overall. Contract liabilities -¥6.5B indicate a decrease in advance receipts but had minor impact. Investing CF was -¥696.4B, driven by acquisition of tangible fixed assets -¥230.9B (store expansion), acquisition of investment securities -¥303.6B (strategic investments and surplus cash management), and acquisition of shares of subsidiaries and associates -¥23.3B. Conversely, sales of securities and investment securities ¥121.6B and proceeds from business acquisitions ¥6.3B were cash inflows. Financing CF was +¥412.1B, as long-term borrowings ¥720.0B significantly exceeded repayment of short-term borrowings -¥454.0B, achieving liability duration extension and liquidity strengthening. Dividend payments -¥63.3B were made while securing FCF ¥171.4B. Cash and cash equivalents at period-end were ¥1,111.5B (prior year ¥527.4B, +110.7%), a substantial increase providing a strong financial buffer.
Recurring earnings center on Drugstore & Dispensing Pharmacy operating income ¥485.7B, with stable non-operating contributions such as interest income ¥6.2B, rental income ¥26.8B, and equity-method investment gains ¥2.0B. Non-operating income accounts for 0.6% of sales and is small, not materially distorting performance. One-off items included Extraordinary Losses ¥58.6B (including impairment losses ¥57.6B, loss on retirement of fixed assets ¥4.6B, loss on valuation of investment securities ¥1.0B) reflecting structural adjustment of unprofitable stores and assets. Extraordinary Gains ¥9.7B (gain on bargain purchase ¥5.3B, gain on sale of fixed assets ¥4.4B) resulted in a net -¥48.9B. The gap between Ordinary Income ¥500.6B and Profit before income taxes ¥451.7B (difference -¥48.9B) is recognized as temporary structural adjustment costs. Net Income ¥140.8B reflects an effective tax rate of 0.4% due to recognition of deferred tax assets ¥90.9B; normalization is expected next fiscal year. Accrual quality is high: OCF ¥867.8B / Net Income ¥140.8B = 6.2x, and OCF/EBITDA 1.31x is also favorable. However, a large portion of OCF was driven by accounts payable increase +¥317.0B, which boosted period-end cash and may reverse in subsequent periods.
For the fiscal year ending Feb 2027, guidance is: Revenue ¥10,920.0B (YoY +8.1%), Operating Income ¥540.0B (YoY +11.2%), Ordinary Income ¥550.0B (YoY +9.9%), Net Income attributable to owners of the parent ¥328.0B, EPS ¥181.24. Revenue growth is forecast to moderate to +8.1% YoY from the prior double-digit growth but remain solid. Operating Income is planned to increase +11.2%, outpacing sales growth, implying continued SG&A control and scale benefits. Net Income is expected to normalize from the prior fiscal year’s one-off tax effect, with EPS declining from ¥248.56 to ¥181.24, reflecting a conservative guidance that incorporates tax rate normalization. The dividend disclosure considers a stock split (1 share → 2 shares effective Sep 1, 2026), but the policy is consistent with maintaining an annual dividend of ¥35 on a pre-split basis.
Annual dividend is ¥35 (Interim ¥15, Year-end ¥20), totaling ¥63.3B in dividend payments. The dividend payout ratio of 24.7% against Net Income attributable to owners of the parent ¥140.8B is at a conservative level. Dividend coverage of FCF is 2.7x (FCF ¥171.4B / Dividend payments ¥63.3B), indicating ample capacity. No share buybacks were executed; shareholder returns consist solely of dividends (Total Return Ratio = Payout Ratio 24.7%). A stock split (1 share → 2 shares) is planned next fiscal year, with the post-split year-end dividend expected to be ¥10 (consistent with maintaining an annual ¥35 on a pre-split basis). Given OCF ¥867.8B, Net Income ¥140.8B, and dividend payments ¥63.3B, the company is assessed to be able to sustain both growth investment and dividend payouts.
Industry position (reference, company estimate): Comparing to the retail industry median for FY2025, Operating margin 4.8% is roughly in line with the industry median 4.6% and is standard. Net Income margin 1.4% is below the industry median 3.3%; even excluding temporary tax distortions, profitability is somewhat below industry average. ROE 4.8% is below the industry median 5.9%, but current-year distortions from tax effects require evaluation after normalization. Total Asset Turnover 1.64x significantly exceeds the industry median 1.17x, indicating top-tier asset efficiency. Equity Ratio 47.3% is slightly below the industry median 50.2%, but Net Debt/EBITDA 1.36x is somewhat higher than the industry median -0.59x (many peers are effectively debt-free), though creditworthiness remains healthy. Cash conversion ratio (OCF/EBITDA) 1.31x is below the industry median 1.57x, but excluding the one-off accounts payable increase it is generally favorable. Payout ratio 24.7% is below the industry median 27%, indicating conservative shareholder returns. Overall, the company ranks highly on asset efficiency and growth, while profitability and returns lag somewhat behind industry averages.
Three key focus points in the results: 1. Net Income distortion from temporary tax effects: Recognition of deferred tax assets ¥90.9B led to Net Income ¥140.8B and an effective tax rate of 0.4%, which is temporary; normalization is expected next fiscal year and EPS is projected to decline to ¥181.24. Assessment should focus on sustainable operating profitability (Operating margin 4.8%) and cash generation quality (OCF ¥867.8B, 6.2x Net Income). 2. Working capital improvement-driven CF uplift: Of OCF ¥867.8B, accounts payable increase +¥317.0B contributed significantly, presenting reversal risk in subsequent periods. FCF ¥171.4B funds dividends and growth investment, but the sustainability of accounts payable changes will determine CF quality. 3. Stagnation in operating efficiency and structural adjustments: Operating margin 4.8% (flat YoY) and SG&A ratio 27.0% (YoY +0.5pt) indicate fixed-cost base increases accompanying scale expansion are pressuring profitability. The impairment losses ¥57.6B reflect a review of unprofitable stores; optimizing the store network and cost control will be key to improving profitability.
This report was auto-generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information aggregated by our firm based on publicly disclosed financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.