People Co.,Ltd. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.05B
• Operating Income: ¥-210M
• Net Income: ¥-27M
• EPS: ¥-6.88

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

People Co., Ltd. (TSE:7865) reported FY2026 Q3 standalone JGAAP results with revenue of ¥1,048 million, declining 15.8% year over year, indicating continued top-line pressure. Despite the sales contraction, operating income remained a loss of ¥210 million, flat YoY by disclosure, suggesting cost controls and/or mix improvements offset part of the revenue decline but not enough to restore profitability. Gross profit is stated at ¥596 million with a gross margin of 56.8%, implying a relatively high value-add per unit for a toy/educational products company, though disclosed line items show internal inconsistencies that limit precise margin interpretation. Ordinary income was a loss of ¥211 million, indicating broadly neutral net non-operating items. Notably, net income narrowed to a relatively small loss of ¥27 million versus the operating loss, implying the presence of significant extraordinary gains under JGAAP on the order of roughly ¥190 million pre-tax. The reported net profit margin stands at -2.58%, showing that bottom-line pressure persisted but was mitigated by non-recurring items. DuPont analysis shows asset turnover of 0.571x and very low financial leverage (1.07x), leading to a calculated ROE of -1.57%, evidencing subdued capital efficiency alongside limited balance-sheet gearing. Liquidity appears extremely strong with a current ratio of 1,482% and working capital of approximately ¥1,836 million, reflecting a sizable cushion against near-term obligations. The balance sheet shows total liabilities of ¥172 million against total equity of ¥1,717 million, with a low debt-to-equity ratio of 0.10x, suggesting conservative leverage. The equity ratio was reported as 0.0% in the dataset, which should be treated as unreported rather than zero; based on the other disclosed balances, equity appears to be the dominant capital source. Cash flow statements were not disclosed in this dataset (zeros indicate unreported), limiting assessment of earnings-to-cash conversion and free cash flow. Dividend per share is disclosed as ¥0, indicating a cautious capital return stance amid losses. The reported EPS is -¥6.88, but shares outstanding were not disclosed, constraining per-share triangulation beyond EPS. Overall, the business remains loss-making at the operating level, but ample liquidity and low leverage mitigate near-term financial stress. Sustainability of the apparent gross margin and progress on operating breakeven will be key to restoring ROE and cash generation. Given the data limitations (notably CF and some apparent line-item inconsistencies), conclusions should be considered indicative rather than definitive.

Profitability Analysis

ROE decomposition (DuPont) indicates: net margin -2.58%, asset turnover 0.571x, and financial leverage 1.07x, yielding ROE of -1.57%. The ROE drag is predominantly from the negative net margin rather than leverage or turnover; leverage is minimal, so improvements must come from margins and/or sales productivity. Operating margin is approximately -20.0% (operating loss ¥210m on revenue ¥1,048m), evidencing continued structural profitability challenges at the core business level. Ordinary margin of about -20.1% shows non-operating items were roughly neutral in aggregate, while net margin benefited from extraordinary gains. The stated gross margin of 56.8% suggests favorable product mix or pricing power in parts of the portfolio, but given disclosure inconsistencies between revenue, cost of sales, and gross profit, the quality and sustainability of this margin should be verified once final statements are available. Operating leverage appears high: a mid-teens revenue decline coincides with a sustained operating loss level (flat YoY), implying that cost actions likely offset some deleveraging, yet fixed-cost absorption remains a headwind. The significant delta between operating loss and net loss indicates reliance on non-recurring items for bottom-line cushioning, which does not improve recurring profitability metrics. Interest expense is unreported and appears immaterial; interest coverage is not meaningful in the absence of debt cost pressure. Overall, profitability hinges on restoring volume growth and/or further SG&A efficiencies to move toward operating breakeven.

Growth Assessment

Revenue declined 15.8% YoY to ¥1,048 million, suggesting weak demand, channel inventory adjustments, or product cycle headwinds. Given the company's category exposure (toys/educational products), sales can be seasonal; however, the magnitude of the decline implies more than typical seasonality. Gross margin (reported 56.8%) indicates mix/pricing resilience, but the margin's reliability requires caution due to line-item inconsistencies. The flat YoY operating loss hints that management enacted cost controls or benefited from mix that partially offset deleveraging, yet structural profitability has not been restored. Ordinary income remained negative, underscoring limited contribution from financial or affiliate income. Net income improved relative to operating income due to extraordinary factors, which are non-recurring and thus not indicative of sustainable earnings power. For outlook, stabilization requires either demand recovery in core SKUs/channels or new product introductions that can support margin and volume. FX and input costs (materials, logistics) can influence gross margin trajectory; the current high reported margin, if validated, provides room to absorb cost volatility but not to offset prolonged volume weakness. With no cash flow data, assessing reinvestment capacity is constrained; however, strong working capital and low leverage suggest capability to fund near-term product refreshes. Near-term earnings quality remains mixed, with reliance on non-recurring gains; medium-term improvement hinges on revenue normalization and disciplined SG&A.

Financial Health

Liquidity is robust: current assets of ¥1,968.8 million against current liabilities of ¥132.8 million yield a current ratio of 1,482% and working capital of roughly ¥1,836 million. The quick ratio is disclosed as equal to the current ratio, implying low inventory reliance in the calculation or unreported inventory details; inventory was not disclosed in this dataset. Solvency is strong with total liabilities of ¥171.5 million and total equity of ¥1,717 million, producing a low debt-to-equity ratio of 0.10x. Financial leverage in DuPont (1.07x) corroborates a conservative balance sheet. While the equity ratio was reported as 0.0%, this should be treated as unreported; based on disclosed balances, equity represents the majority of capital. Total assets are ¥1,834 million; the relationship with reported current assets suggests possible rounding/presentation differences, but does not detract from the clear picture of low leverage. With interest expense not disclosed and likely minimal, refinancing risk appears low. Overall, the company has ample balance sheet capacity to support operations despite operating losses.

Cash Flow Quality

Cash flow statements (operating, investing, financing) were not disclosed in this dataset; zeros should be interpreted as unavailable rather than actual zero. Consequently, OCF/net income and free cash flow cannot be meaningfully assessed, and the reported OCF/NI of 0.00 and FCF of 0 should be treated as placeholders. Earnings quality is therefore difficult to validate: the large gap between operating loss and net loss indicates material non-recurring gains, which do not contribute to cash generation from operations. Working capital appears ample with ¥1,836 million, but without detailed changes in receivables, payables, or inventories, it is unclear whether cash was consumed or released during the period. Depreciation and amortization are unreported; thus, EBITDA and cash conversion metrics are not available. In summary, cash flow quality cannot be judged from this dataset; monitoring full cash flow statements will be essential.

Dividend Sustainability

The company disclosed an annual DPS of ¥0, implying a suspension or absence of dividends amid operating losses. With negative operating income and no cash flow data, payout capacity must be considered constrained, though balance sheet liquidity is strong. The reported payout ratio and FCF coverage ratios of 0.0 should be viewed as not applicable given the lack of cash flow disclosure. Policy-wise, maintaining DPS at zero appears consistent with a focus on preserving cash until operating profitability returns. Future dividend capacity will depend on restoring positive OCF and achieving sustainable profitability rather than relying on extraordinary gains.

Risk Assessment

Business Risks:

• Demand softness and a 15.8% YoY revenue decline, potentially reflecting channel destocking or weaker consumer spending.
• High operating leverage with fixed-cost absorption pressure, leading to persistent operating losses.
• Product cycle and hit-dependency risk typical of toy/educational goods, requiring continual new product success.
• Potential FX and input cost volatility affecting gross margin (materials, logistics).
• Reliance on non-recurring extraordinary gains to support net income in the period, which is not sustainable.

Financial Risks:

• Limited visibility on cash generation due to undisclosed cash flow statements.
• Earnings volatility given the gap between operating and net income, implying non-recurring items.
• Possible working capital swings (receivables, seasonal inventory) not observable in the current dataset.

Key Concerns:

• Core operating loss of ¥210 million despite cost actions.
• Sustainability and accuracy of the reported 56.8% gross margin given line-item inconsistencies.
• Dependence on extraordinary gains to narrow net loss to ¥27 million.
• Lack of disclosed OCF/FCF, hindering assessment of cash burn and funding needs.

Investment Implications

Key Takeaways:

• Top-line contracted 15.8% YoY to ¥1,048 million, signaling near-term demand/mix headwinds.
• Operating loss persisted at ¥210 million; breakeven not yet in sight on current run-rate.
• Net loss narrowed to ¥27 million due to extraordinary gains; recurring earnings remain weak.
• Balance sheet is conservative with D/E of 0.10x and substantial working capital (~¥1.836 billion).
• Cash flow inference is not possible from the dataset; monitoring full CF statements is critical.

Metrics to Watch:

• Quarterly revenue trajectory and order backlog to gauge demand recovery.
• Operating margin progression and SG&A ratio to assess breakeven path.
• Gross margin sustainability once final COGS/gross profit figures are clarified.
• OCF and FCF once disclosed, including working-capital movements.
• Inventory and receivable days (when available) to track channel health and cash conversion.

Relative Positioning: Within small-cap Japanese consumer product peers, People exhibits weaker current profitability but stronger balance sheet resilience, trading off near-term earnings pressure against robust liquidity and low leverage.

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