| Metric | This Term | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1638.1B | ¥1519.6B | +7.8% |
| Operating Income / Operating Profit | ¥52.9B | ¥54.8B | -3.6% |
| Ordinary Income | ¥54.7B | ¥57.8B | -5.3% |
| Net Income / Net Profit | ¥40.3B | ¥42.8B | -5.8% |
| ROE | 10.0% | 11.5% | - |
The 2026 FY results show revenue ¥1,638.1B (YoY +¥118.5B +7.8%), Operating Income ¥52.9B (YoY -¥1.9B -3.6%), Ordinary Income ¥54.7B (YoY -¥3.1B -5.3%), Net Income ¥40.3B (YoY -¥2.5B -5.8%), indicating top-line growth with profit decline. Store expansion and resilient demand supported revenue, while new store start-up costs and inflation in logistics and labor increased SG&A ratio, causing Operating Margin to deteriorate to 3.2% (down 0.4pt from 3.6%). Ordinary Income was also pressured by higher interest expense (Interest expense ¥2.5B, prior year ¥0.9B). ROE decreased to 10.0% (prior year 12.1%), and EPS declined to ¥206.51 (prior year ¥218.18).
Revenue ¥1,638.1B (+7.8%) rose steadily, driven by expanded selling area from new store openings and firm same-store demand. Gross profit margin remained essentially flat at 21.5% (prior year 21.5%), with expansion of private brand products and price revisions offsetting cost increases. Gross profit amounted to ¥351.7B (+7.9%) in line with revenue growth, but SG&A increased to ¥298.9B (+10.2%), outpacing sales and raising SG&A ratio to 18.2% (up 0.4pt from 17.8%). Key contributors included Depreciation ¥34.7B (+17.7%), Rent ¥37.2B (+9.3%), and Other SGA ¥115.0B (+7.5%), reflecting higher fixed costs from new store openings and logistics facility investments, combined with inflation in labor and logistics. Operating Income ¥52.9B (-3.6%) and Operating Margin 3.2% (-0.4pt) show deteriorated profitability. Non-operating items improved with Interest and dividend income ¥0.3B (+63.6%), but Interest expense ¥2.5B (+187.3%) rose sharply due to proactive long-term borrowings of ¥224.1B (+103.4%), increasing interest burden and leading to Ordinary Income ¥54.7B (-5.3%). Extraordinary losses were minor (Impairment ¥2.1B), and Net Income ¥40.3B (-5.8%) largely tracked the decline in Ordinary Income. The effective tax rate eased to 23.4% (prior year 24.7%), providing modest support. In summary, the company posted revenue growth but profit decline as investment-led cost increases weighed on earnings.
Profitability: Operating Margin 3.2% down 0.4pt from 3.6%, driven by higher SG&A ratio. Net Margin 2.5% (down 0.3pt from 2.8%) likewise worsened. ROE 10.0% declined from 12.1%, but Financial Leverage 2.56x (prior year 1.99x) and Total Asset Turnover 1.59x (prior year 1.90x) partially offset margin deterioration. ROA 6.0% (prior year 7.7%) also declined.
Cash Quality: Operating Cash Flow (OCF) ¥32.9B gives OCF/Net Income 0.82x, indicating somewhat weak cash conversion, mainly due to working capital outflow from inventory increase of ¥60.1B. OCF/EBITDA 0.38x is low, showing limited cash realization of profits.
Investment Efficiency: Capital Expenditure ¥115.7B is 3.34x Depreciation ¥34.7B, reflecting an active growth investment phase focused on new stores and logistics facilities. Free Cash Flow (FCF) was -¥95.5B, financed by borrowings. Inventory turnover days increased to 96 days (up 11 days from 85), indicating efficiency deterioration; Accounts Payable days 55 days (prior year 53 days) roughly flat; Accounts Receivable days 5 days (prior year 4 days) slightly up; Operating working capital turnover days extended to 46 days.
Financial Soundness: Equity Ratio 39.0% (down 7.3pt from 46.3%) was impacted by asset growth and increased borrowings. Current Ratio 151.6% (prior year 147.5%) indicates good short-term liquidity, but Quick Ratio 48.5% (prior year 42.9%) shows high inventory dependence. Debt/EBITDA 2.56x and Interest Coverage (EBIT / Interest expense) 21.5x indicate adequate interest payment resilience.
Operating Cash Flow ¥32.9B decreased 26.8% from ¥44.9B in the prior year, resulting from OCF subtotal ¥51.3B (prior year ¥62.8B) less working capital change of -¥18.4B. Inventory increase ¥60.1B (Inventory ¥337.4B, prior year ¥277.3B) was the largest cash outflow, reflecting merchandise purchases tied to store expansion and seasonality. Accounts receivable increase ¥3.5B and accounts payable increase ¥21.9B partially offset outflows. Corporate tax payments ¥15.9B (prior year ¥17.1B) declined. Investing Cash Flow was -¥128.4B, driven by CapEx ¥115.7B (prior year ¥39.2B) for new stores, logistics centers, and IT investments. Intangible asset acquisitions ¥6.5B (prior year ¥3.4B) also rose. FCF was -¥95.5B, reflecting the growth investment phase. Financing Cash Flow was +¥124.0B, with long-term borrowings executed ¥180.0B as the main inflow, offset by repayments ¥41.2B, lease liabilities repayments ¥6.1B, dividends ¥5.5B, and share buybacks ¥3.2B. Cash balance increased by ¥28.5B to ¥100.1B (prior year ¥71.7B), securing investment funds and liquidity through borrowings.
Of Ordinary Income ¥54.7B, Operating Income ¥52.9B constituted the bulk. Non-operating income totaled ¥4.4B (Interest income ¥0.3B, Grants ¥0.6B, Other ¥1.0B) and was limited. Non-operating expenses ¥2.6B consisted largely of Interest expense ¥2.5B, highlighting increased interest burden though coverage remains strong at 21.5x. Extraordinary losses ¥2.1B (Impairment ¥2.1B, Loss on disposal of fixed assets ¥0.0B) were one-off and had minor impact on Ordinary Income assessment. Comprehensive income ¥40.3B matched Net Income, with Other Comprehensive Income ¥0.0B, indicating no balance sheet revaluation distortions. Cash conversion rate OCF ¥32.9B / Net Income ¥40.3B = 0.82x; inventory increase was the main factor and accrual ratio is slightly positive. OCF subtotal ¥51.3B vs Operating Income ¥52.9B are largely aligned, and there are no signs of accounting manipulation; earnings quality is neutral.
The full year forecast projects Revenue ¥1,850.5B (YoY +13.0%), Operating Income ¥55.2B (YoY +4.4%), Ordinary Income ¥54.8B (YoY +0.2%), and Net Income ¥40.3B (flat YoY). Versus current results, anticipated increments are Revenue +¥212.4B and Operating Income +¥2.3B. Assumptions include full-year contribution from new stores, normalization of inventory turnover leading to working capital compression, and containment of SG&A ratio through efficiency in depreciation and labor. Operating Margin is expected to be around 3.0%, a slight decline; under continued growth investment, scope for profitability improvement is limited. Flat Ordinary Income reflects sustained interest burden; flat Net Income aligns with tax rate assumptions. Achievement depends on improvements in inventory days, productivity in existing stores, and timely new-store profitability; progress rates are 89% for revenue and 96% for operating income, generally on track, with cost control as the key.
Year-end dividend ¥29, annual dividend ¥29, resulting in Payout Ratio 12.8%, conservative. Total dividends ¥5.5B against Net Income ¥40.3B prioritize internal reserves and funding for growth investments. Share buybacks ¥3.2B were also executed, totaling shareholder returns ¥8.7B and Total Return Ratio 21.6%, a reasonable level. However, with FCF -¥95.5B, dividends and buybacks are funded by Operating Cash Flow ¥32.9B and borrowings, making near-term capital policy investment-first. Cash balance ¥100.1B provides dividend capacity, and after Operating Cash Flow improvement and an investment cycle completion, there is scope for dividend increases. Current Payout Ratio is well below the industry median 27%, clearly prioritizing growth investment over shareholder returns.
(1) Prolonged inventory turnover days at 96 days (prior year 85 days) risks obsolescence and valuation losses. Inventory buildup from missed sales targets could compress gross margins and depress operating income. Inventory ¥337.4B accounts for 32.7% of total assets, and slow absorption could impact liquidity. (2) Structural increases in labor and logistics costs that keep SG&A ratio elevated. Continued wage rises and logistics inflation were major drivers of the YoY +10.2% SG&A increase; if price pass-through or margin mix improvements lag, Operating Margin could fall below 3%. (3) Aggressive borrowing growth (Long-term borrowings ¥224.1B, prior year ¥110.1B) increasing interest burden. Further rate rises could raise interest expense and pressure Ordinary Income; with Debt/EBITDA 2.56x near thresholds, leverage headroom is limited. Delays in new-store earnings contribution could exacerbate the financial burden.
Industry Position (reference, company analysis): Versus the retail industry 2025 median, Operating Margin 3.2% is 1.4pt below the median 4.6%, a lower-tier level. Net Margin 2.5% is 0.8pt below the median 3.3%. ROE 10.0% is 4.1pt above the median 5.9%, aided by Financial Leverage 2.56x (median 1.88x). Total Asset Turnover 1.59x exceeds the median 1.17x by 0.42x, indicating efficiency, but Inventory Turnover Days 96 days is 30 days worse than median 66 days, showing poorer inventory efficiency. Current Ratio 151.6% is below the median 184% but within acceptable range. Equity Ratio 39.0% is 11.2pt below the median 50.2%, indicating higher borrowing dependence. Payout Ratio 12.8% is well below the median 27%, reflecting restrained shareholder returns. CapEx / Depreciation 3.34x far exceeds the median 1.16x, reflecting a growth investment phase. Cash Conversion Rate 0.82x is below the median 1.57x, showing weak cash conversion. Revenue growth 7.8% exceeds the median 4.3%, indicating strong growth. Overall, the company ranks high on growth and asset turnover but lower on profitability, reflecting characteristics of a company in an investment-led phase.
Three key points: (1) Trade-off between margin decline and capital efficiency due to front-loaded growth investment. With CapEx / Depreciation 3.34x and active investment, Operating Margin fell to 3.2%, but Total Asset Turnover 1.59x and Financial Leverage 2.56x maintained ROE at 10%. Improvement in margin and capital efficiency is expected from FY2027 onward as new-store contributions ramp up. (2) Deterioration in inventory efficiency and weak cash conversion. Inventory Turnover Days extended to 96 days and OCF/Net Income 0.82x, with inventory increase ¥60.1B pressuring working capital. Normalizing inventory (target 60-70 days) is prerequisite for OCF improvement and FCF turn to positive; monitoring progress on new-store ramp-up and existing-store efficiency is critical. (3) Rising interest burden and financial balance. Long-term borrowings ¥224.1B (+103%) led to Interest expense ¥2.5B (YoY +¥1.6B), and Debt/EBITDA 2.56x is near threshold but coverage of 21.5x indicates sufficient resilience. The success of the leverage strategy will depend on whether investment returns (new-store ROIC) exceed the cost of capital.
This report was generated by AI analyzing XBRL financial statement data to produce an automated earnings analysis. 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; please consult a professional advisor as necessary.