WA,Inc. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥16.82B
• Operating Income: ¥755M
• Net Income: ¥613M
• EPS: ¥26.69

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

Verdict: A mixed quarter with resilient top-line growth but notable margin compression and lower profitability, cushioned by a very strong balance sheet. Revenue grew 2.6% year over year to 168.15, while operating income declined 32.9% to 7.55 and net income fell 17.0% to 5.09. Gross profit was 101.82, implying a high gross margin of 60.6%, but SG&A of 90.57 (53.9% of sales) absorbed most of the gross profit. Operating margin compressed to 4.5%, and ordinary income was 8.87 with a margin of 5.3%. Profit before tax rose to 10.70, indicating the presence of non-recurring or non-operating items between ordinary and pre-tax levels, while the effective tax rate was elevated at 42.7%. Based on the growth rates provided, prior-year operating margin is estimated at about 6.9%, implying roughly 237 bps of operating margin compression year over year. Net margin is 3.0% this quarter versus an estimated 3.7% a year ago, a compression of about 71 bps. DuPont analysis yields ROE of 4.7%, driven by a modest 3.0% net margin, asset turnover of 1.267, and low financial leverage of 1.22x; the decline in margin is the main headwind to returns. Earnings quality cannot be fully assessed as operating cash flow and free cash flow were not disclosed, which is an important limitation for this quarter’s analysis. Liquidity is exceptionally strong with a current ratio of 549.6% and quick ratio of 297.8%, and leverage is conservative with a D/E ratio of 0.22x and interest coverage of 56.8x. Working capital is ample at 81.82, supported by cash and deposits of 28.96 and receivables of 20.03; inventories at 45.82 are sizable for the sales base and warrant monitoring. The reported payout ratio of 127.4% indicates distributions are running ahead of earnings, raising sustainability questions in the absence of disclosed OCF/FCF. The elevated effective tax rate also weighed on net profit and may reflect one-off or structural items; clarity would help assess normalized earnings. Overall, the quarter shows sales resilience but pressure on operating leverage and margin, with robust solvency mitigating near-term financial risk. Forward-looking, restoring operating margin via SG&A discipline and inventory optimization appears central to improving ROE. With cash flow data unreported, the outlook commentary hinges on cost control, demand trends, and potential normalization of the tax rate.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.7% = Net Profit Margin (3.0%) × Asset Turnover (1.267) × Financial Leverage (1.22x). The largest adverse change appears in the margin component: operating income declined 32.9% despite 2.6% revenue growth, driving operating margin to 4.5% and estimated compression of ~237 bps YoY; net margin fell to 3.0% with an estimated ~71 bps compression. Business drivers likely include SG&A growth outpacing revenue (SG&A is 53.9% of sales), cost inflation (labor, rents, logistics), and limited operating leverage at current sales growth rates. Asset turnover of 1.267 is reasonable for specialty retail and likely stable; financial leverage is low at 1.22x, reflecting a largely equity-financed balance sheet, which caps ROE on depressed margins. Sustainability: margin pressure from elevated SG&A is reversible if cost controls and pricing/mix initiatives take hold; however, a quick rebound requires either stronger demand or disciplined expense management. Flags: SG&A intensity is high; any further SG&A growth exceeding revenue growth would further compress margins and ROE. The elevated effective tax rate (42.7%) further depresses net margin and ROE; if this normalizes, it would provide an uplift to the margin leg of DuPont.

Growth Assessment

Top-line growth of 2.6% indicates steady demand, but it was insufficient to absorb higher operating costs, resulting in a 32.9% decline in operating income. Gross margin is high at 60.6%, suggesting product economics remain sound; the profit shortfall is primarily in operating expense absorption. Ordinary income declined 17.2%, less severe than operating income, while profit before tax increased versus ordinary income, implying special or non-operating gains affected pre-tax results. Net income fell 17.0% to 5.09, with net margin at 3.0%. Given the current cost structure, revenue growth needs to exceed mid-single digits or SG&A needs to be recalibrated to restore operating leverage. Without cash flow disclosure, the durability of growth and the conversion to cash cannot be validated this quarter. Outlook hinges on demand visibility, inventory turns, and SG&A containment; stabilization of the effective tax rate would also improve net growth.

Financial Health

Liquidity is very strong: current ratio 549.6% and quick ratio 297.8% comfortably exceed benchmarks, with current assets of 100.02 versus current liabilities of 18.20. No warning for Current Ratio < 1.0 or D/E > 2.0; D/E stands at a conservative 0.22x. Interest coverage of 56.81x indicates ample headroom to service interest. Maturity mismatch risk appears low: cash (28.96) and receivables (20.03) alone cover current liabilities (18.20), even before considering inventories (45.82). Total equity of 108.47 versus total assets of 132.76 implies an equity ratio of approximately 81.7% based on available figures, underscoring solvency strength. Off-balance sheet obligations were not disclosed; absent specific notes, we cannot assess lease or other contingent liabilities.

Cash Flow Quality

Operating cash flow and free cash flow were not reported, so OCF/Net Income and FCF coverage cannot be calculated this period. As such, earnings quality cannot be confirmed, and any divergence between accrual earnings and cash generation is unknown. Working capital composition shows sizeable inventories (45.82), which, if elevated relative to sales, could tie up cash; however, without prior-period or cash flow data, we cannot assess inventory build or liquidation. There are no visible signs of working capital manipulation from the disclosed snapshot, but the absence of cash flow detail is a key limitation. Given the high payout ratio indicated, validation of OCF sustainability is important to judge dividend safety.

Dividend Sustainability

The calculated payout ratio is 127.4%, indicating distributions exceed reported earnings for the period. With OCF and FCF unreported, we cannot verify coverage from cash generation, and FCF coverage of dividends is not calculable. The balance sheet is strong, which can temporarily support dividends, but sustained payout above earnings typically requires robust and consistent free cash flow. Dividend policy details and DPS were not disclosed; future sustainability will depend on restoring operating margin and confirming cash conversion.

Risk Assessment

Business Risks:

• Margin pressure from SG&A growth outpacing sales (SG&A at 53.9% of revenue)
• Inventory risk and potential markdowns given inventories of 45.82 relative to sales
• Demand variability in fashion/specialty retail affecting traffic and sell-through
• Potential cost inflation (labor, rent, logistics) compressing operating leverage

Financial Risks:

• High effective tax rate (42.7%) depressing net profit and ROE
• Dividend payout ratio at 127.4% without disclosed OCF/FCF creates coverage risk
• Concentration of returns on low leverage (1.22x) amplifies the impact of margin swings on ROE

Key Concerns:

• Operating margin compression of ~237 bps YoY despite revenue growth
• Lack of operating cash flow and free cash flow disclosure limits earnings quality assessment
• Potential one-off items between ordinary income and profit before tax complicate run-rate profitability

Investment Implications

Key Takeaways:

• Top-line up 2.6% but operating income down 32.9% as SG&A intensity weighed on margins
• Operating margin at 4.5% and net margin at 3.0% drove ROE down to 4.7%
• Balance sheet strength (current ratio 550%, D/E 0.22x, interest coverage 56.8x) mitigates near-term risk
• Elevated effective tax rate and potential non-recurring items complicate earnings normalization
• Dividend payout ratio >100% raises sustainability questions absent cash flow disclosure

Metrics to Watch:

• Quarterly SG&A growth versus revenue growth
• Operating margin trajectory and gross-to-SG&A spread
• Inventory levels and turnover versus sales growth
• Effective tax rate normalization
• Disclosure of OCF and FCF, and dividend coverage by FCF

Relative Positioning: Financially conservative with strong liquidity and low leverage relative to typical specialty retailers, but currently facing weaker operating leverage and lower profitability versus peers that sustain mid-to-high single-digit operating margins.

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