ESTELLE HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥15.02B
• Operating Income: ¥-338M
• Net Income: ¥-332M
• EPS: ¥-62.62

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Estelle Holdings (TSE:7872) reported FY2026 Q2 consolidated results under JGAAP with modest topline growth but continued losses, alongside solid liquidity and moderate leverage. Revenue was ¥15.024bn, up 0.6% YoY, indicating flat customer traffic and/or limited pricing/mix tailwind. Gross profit was ¥8.346bn, implying a high gross margin of 55.6%, typical of jewelry retailing but insufficient to cover operating overheads this half. Operating income was a loss of ¥338m, an improvement of 122.8% YoY, signaling meaningful cost discipline versus last year despite tepid sales. Ordinary income was a loss of ¥416m, reflecting negative operating results and modest financial costs (interest expense ¥26m). Net income was a loss of ¥656m (EPS ¥-62.62), broadly unchanged YoY. EBITDA was negative at ¥151m, highlighting ongoing fixed-cost burden and limited operating leverage at the current sales level. The DuPont bridge shows net margin of -4.37%, asset turnover of 0.511x, and financial leverage of 2.59x, resulting in ROE of -5.79% for the period; ROA approximates -2.23% (net margin × asset turnover). Operating cash flow was positive at ¥142m (0.9% OCF margin), helped by non-cash add-backs and working capital movements despite the net loss. Financing cash flow was an inflow of ¥631m, suggesting reliance on external funding during the period; investing cash flow was undisclosed. The balance sheet is liquid: current assets of ¥23.921bn versus current liabilities of ¥10.087bn yield a current ratio of 237% and quick ratio of 129.6%. Inventories are ¥10.851bn (about 36.9% of total assets), underscoring the importance of turnover management. Total assets of ¥29.383bn and equity of ¥11.333bn imply an equity ratio of roughly 38.6% (the reported 0.0% is an undisclosed placeholder), while total liabilities of ¥17.634bn translate to a debt-to-equity ratio of 1.56x. No dividend was paid (DPS ¥0.00), consistent with the loss-making status and a focus on financial flexibility. Data gaps exist (e.g., cash balance, investing CF, shares outstanding), so some metrics (e.g., true FCF, per-share book) cannot be validated; conclusions focus on disclosed, non-zero items.

Profitability Analysis

ROE_decomposition: Net margin -4.37% × asset turnover 0.511 × financial leverage 2.59 = ROE -5.79% (matches reported). ROA proxy ≈ -2.23%. The negative margin remains the dominant drag; leverage is moderate and not the primary driver of ROE volatility. margin_quality: Gross margin is high at 55.6%, consistent with jewelry retail mark-ups, but SG&A of approximately ¥8.684bn (≈57.8% of sales) exceeded gross profit, producing an operating margin of -2.25%. Ordinary margin was -2.77%, and net margin -4.37%. The loss narrowed YoY at the operating level, suggesting cost actions are gaining traction, but the cost base remains too heavy for the current sales level. operating_leverage: Revenue grew only 0.6% YoY, yet operating loss improved by 122.8% YoY, indicating positive operating leverage and effective expense control. However, EBITDA remains negative (¥-151m), implying fixed-cost absorption is still suboptimal and further scale or structural cost reductions are needed to achieve breakeven.

Growth Assessment

revenue_sustainability: H1 revenue of ¥15.024bn grew 0.6% YoY, pointing to stable but subdued demand. Given the sector’s seasonality (typically stronger H2), sustaining low-single-digit growth will likely depend on same-store sales, product mix, and promotional intensity. profit_quality: Improved operating loss despite flat sales suggests healthier cost discipline, but the quality of profits is not yet proven as EBITDA is negative and OCF benefited from non-cash/working capital effects. Gross margin resilience is a strength; SG&A efficiency is the swing factor for profitability. outlook: If H2 seasonal uplift materializes and SG&A discipline continues, breakeven at the operating level is plausible. Key to the outlook will be inventory turnover improvement, maintaining gross margin while calibrating promotions, and controlling store-level fixed costs (rent, personnel) amid cautious consumer sentiment.

Financial Health

liquidity: Current assets ¥23.921bn vs. current liabilities ¥10.087bn yield a current ratio of 237% and quick ratio of 129.6%, indicating strong short-term liquidity. Working capital is ¥13.834bn. Cash and equivalents were not disclosed in the XBRL (reported as 0), so the exact cash buffer cannot be assessed. solvency: Total assets ¥29.383bn, equity ¥11.333bn imply an estimated equity ratio of ~38.6% (reported 0.0% reflects non-disclosure). Total liabilities are ¥17.634bn, translating to a debt-to-equity ratio of 1.56x, a moderate leverage profile for retail. capital_structure: Interest expense is modest at ¥26m, with EBIT-based interest coverage of -13.0x due to negative EBIT; coverage would remain tight until operating profits normalize. Financing CF inflow of ¥631m suggests ongoing access to funding, likely to bridge working capital and capex needs.

Cash Flow Quality

earnings_quality: OCF of ¥142m versus net loss of ¥656m yields an OCF/NI ratio of -0.22 (NI negative), indicating cash flow support from non-cash items and/or working capital release. EBITDA of ¥-151m underscores that cash generation is not yet supported by core earnings. FCF_analysis: Investing CF was not disclosed (reported as 0), so Free Cash Flow cannot be reliably calculated. As such, any FCF figure would be speculative without capex and investment activity detail. working_capital: Inventories stand at ¥10.851bn (~36.9% of assets); effective turnover is critical to avoid markdown pressure. The positive OCF suggests some working capital tailwind this period, but sustainability depends on maintaining inventory discipline alongside stable sales.

Dividend Sustainability

payout_ratio_assessment: No dividend declared (DPS ¥0.00; payout ratio 0.0%), appropriate given negative earnings (EPS ¥-62.62). FCF_coverage: FCF coverage cannot be assessed because investing cash flows were not disclosed. With EBITDA negative, organic dividend capacity appears limited near term. policy_outlook: Resumption of dividends would likely require sustained positive EBITDA, return to operating profitability, and consistent positive OCF after working capital changes, with a clear view on maintenance capex.

Risk Assessment

Business Risks:

• Demand cyclicality in discretionary jewelry purchases amid soft consumer confidence
• Margin pressure from promotional activity and competition in specialty retail
• High inventory intensity leading to markdown/obsolescence risk
• Commodity price volatility (e.g., gold) impacting COGS and pricing
• FX exposure on imported materials and merchandise
• Store productivity challenges (traffic, conversion) and fixed store costs
• Labor and rent inflation affecting SG&A
• Seasonality exposure with reliance on peak selling periods

Financial Risks:

• Negative EBITDA and operating loss limiting interest coverage
• Dependence on external financing (¥631m inflow in H1) to support operations/investment
• Working capital swings tied to inventory levels and procurement cycles
• Potential impairment risk if underperforming stores persist
• Limited visibility on cash balance and capex due to disclosure gaps

Key Concerns:

• Sustained negative EBITDA despite YoY improvement
• Elevated SG&A ratio (~57.8% of sales) preventing operating breakeven
• Inventory at ~¥10.9bn requiring tighter turnover management to protect gross margin

Investment Implications

Key Takeaways:

• Topline essentially flat (+0.6% YoY), indicating subdued demand momentum
• Operating loss narrowed materially YoY, reflecting better cost control
• EBITDA still negative (¥-151m), showing insufficient fixed-cost absorption
• Liquidity robust (current ratio 237%; quick ratio 129.6%) and leverage moderate (D/E 1.56x)
• OCF positive (¥142m), but reliant on non-cash and working capital factors
• Equity ratio estimated ~38.6%, despite reported placeholder
• Dividend suspended; priority likely on restoring profitability and cash generation

Metrics to Watch:

• Same-store sales growth and traffic/conversion trends
• Gross margin and promotional intensity
• SG&A ratio and store-level fixed cost productivity
• Inventory turnover/days and shrink/markdowns
• EBITDA margin progression and ordinary income trajectory
• Operating cash flow sustainability and capex (once disclosed)
• Interest coverage and changes in borrowings

Relative Positioning: A mid-sized, inventory-intensive jewelry retailer with solid liquidity and moderate leverage but profitability trailing sector norms; execution on SG&A efficiency and inventory turnover will determine normalization toward peer-level 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
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