| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥682.9B | ¥663.0B | +3.0% |
| Operating Income | ¥41.4B | ¥27.8B | +48.8% |
| Ordinary Income | ¥44.3B | ¥30.7B | +44.1% |
| Net Income | ¥36.1B | ¥16.5B | +118.6% |
| ROE | 9.3% | 4.6% | - |
FY2026 results settled at Revenue ¥682.9B (YoY +¥19.9B +3.0%), Operating Income ¥41.4B (YoY +¥13.6B +48.8%), Ordinary Income ¥44.3B (YoY +¥13.6B +44.1%), and Net Income attributable to owners of the parent ¥29.8B (YoY +¥13.1B +78.6%), finishing with higher sales and significantly higher profits. Operating margin improved to 6.1% (prior year 4.2%), an improvement of approximately 1.9pt, and gross margin expanded to 30.3% (prior year 26.3%), up 4.0pt. Operating Cash Flow was ¥90.3B (YoY +114.3%), reaching 2.5x Net Income, and Free Cash Flow was ¥115.3B, ample to fully cover dividends of ¥6.7B and share buybacks of ¥48.1B. Against full-year guidance (Revenue ¥705B, Operating Income ¥42B, Net Income ¥30B), achievement rates were Revenue 97%, Operating Income 99%, Net Income 99%, essentially on plan.
[Revenue] Revenue was ¥682.9B (YoY +3.0%), maintaining a growth trend. Segment information is not disclosed as there is a single segment (Daily sundry goods and apparel Business), but price revisions taking hold and improved product mix supported sales. Gross profit was ¥206.9B (prior year ¥174.3B), with gross margin improving to 30.3% (prior year 26.3%), a 4.0pt improvement, likely aided by stabilized raw material markets and successful price pass-through.
[Profit & Loss] Cost of sales was contained at ¥476.1B (cost of sales ratio 69.7%), and gross profit expansion flowed through to Operating Income. Selling, general and administrative expenses were ¥165.5B (SG&A ratio 24.2%, prior year ¥14.6B/2.0pt) up 13.0% YoY, but gross margin improvement absorbed the SG&A increase, resulting in Operating Income of ¥41.4B (YoY +48.8%). Non-operating income was ¥6.6B (dividend income ¥2.0B, interest income ¥1.3B, foreign exchange gains ¥0.9B, etc.), and non-operating expenses were ¥3.6B (interest expense ¥3.1B), leading to Ordinary Income of ¥44.3B (YoY +44.1%). Extraordinary gains included ¥3.5B from sale of investment securities, and extraordinary losses totaled ¥3.0B (loss on disposal of fixed assets ¥2.0B and valuation loss on investment securities ¥2.1B), resulting in a net contribution of +¥0.5B, which is minor. Effective tax rate was 32.8% (corporate taxes etc. ¥14.7B / income before taxes ¥44.9B), and Net Income attributable to owners of the parent was ¥29.8B (YoY +78.6%), concluding with higher sales and substantially higher profits.
[Profitability] Operating margin was 6.1% (prior year 4.2%), improving by approximately 1.9pt, and Net Profit Margin improved to 5.3% (prior year 2.5%), up 2.8pt. ROE was 9.3% (calculation: Net Income ¥36.1B ÷ average shareholders' equity during the period ¥~387B), a significant improvement from 4.8% in the prior year. Gross margin of 30.3% expanded by 4.0pt versus the prior year, and SG&A ratio of 24.2% rose 2.1pt from 22.1% the prior year, but gross margin improvement more than offset the SG&A increase, demonstrating operating leverage. [Cash Quality] Operating Cash Flow ¥90.3B is 2.5x Net Income ¥36.1B, and Operating CF/EBITDA ratio is 1.27x (Operating CF ¥90.3B ÷ EBITDA approx. ¥71B), which is healthy. The accrual ratio is -6.0% ((Operating CF ¥90.3B − Net Income ¥36.1B) / Total Assets ¥938B ×100), indicating strong cash backing. [Investment Efficiency] Capital expenditures were ¥22.2B, depreciation ¥29.3B, giving a CapEx/Depreciation ratio of 0.76x, somewhat restrained. Days Inventory Outstanding (DIO) is approx. 77 days (inventory ¥100.2B ÷ cost of sales ¥476.1B ×365), Days Sales Outstanding (DSO) approx. 56 days (accounts receivable ¥104.8B ÷ Revenue ¥682.9B ×365), Days Payable Outstanding (DPO) approx. 20 days (accounts payable ¥25.5B ÷ cost of sales ¥476.1B ×365), and Cash Conversion Cycle (CCC) approx. 113 days (DIO+DSO−DPO), indicating room for improvement in inventory efficiency. [Financial Soundness] Equity Ratio is 41.4% (Net Assets ¥388.1B ÷ Total Assets ¥938.0B), D/E ratio is 1.15x (interest-bearing debt ¥448.9B ÷ Net Assets ¥388.1B; interest-bearing debt = long-term borrowings ¥377.5B + securitization ¥61.5B + short-term borrowings ¥10B). Current ratio is 410.8% (Current Assets ¥591.4B ÷ Current Liabilities ¥144.0B), quick ratio is 341.0% (Quick Assets ¥491.2B ÷ Current Liabilities ¥144.0B), indicating very robust short-term liquidity. Interest Coverage is 13.2x (Operating Income ¥41.4B ÷ interest expense ¥3.1B), showing ample capacity to service interest.
Operating Cash Flow was ¥90.3B (prior year ¥42.1B, YoY +114.3%), a substantial increase and about 2.0x cash generation versus pre-tax profit ¥44.9B. Operating CF subtotal (before working capital changes) was ¥96.5B, and working capital changes (decrease in trade receivables ¥4.3B, increase in inventory −¥1.9B, decrease in trade payables −¥0.9B, etc.) were approximately neutral. After payment of corporate taxes and other taxes ¥6.8B, ample cash remained. Investing Cash Flow was positive ¥25.0B, consisting of CapEx −¥22.2B, proceeds from sale of investment securities ¥8.0B, M&A-related proceeds −¥12.4B (sale of subsidiary shares −¥30.7B and business transfer −¥12.4B) etc. Free Cash Flow was ¥115.3B (Operating CF ¥90.3B + Investing CF ¥25.0B), extremely ample. Financing Cash Flow was −¥11.1B, comprising borrowings from long-term debt ¥30.0B, repayment of long-term borrowings −¥40.0B, increase in short-term borrowings ¥10.0B, share buybacks −¥48.1B, and dividend payments −¥6.7B. Cash and cash equivalents at period-end increased by ¥104.7B to ¥241.8B (period-start ¥137.1B), and cash balances were ¥347.0B, maintaining strong liquidity.
Earnings quality is high and predominantly operating-driven. Extraordinary gains of ¥3.5B (gain on sale of investment securities) and extraordinary losses of ¥3.0B (loss on disposal of fixed assets ¥2.0B, valuation loss on investment securities ¥2.1B, impairment loss ¥0.0B, etc.) net to +¥0.5B, representing only 1.4% of Net Income ¥36.1B, indicating limited reliance on one-off items. Non-operating income ¥6.6B (0.97% of Revenue) is mainly composed of dividend income ¥2.0B and interest income ¥1.3B, providing a stable composition. Operating CF ¥90.3B is 2.5x Net Income ¥36.1B, OCF/EBITDA is 1.27x, and accrual ratio is −6.0%, reflecting very strong cash backing of earnings. The gap between Ordinary Income ¥44.3B and pre-tax profit ¥44.9B is minor, and the effective tax rate of 32.8% is within a standard range with no abnormal tax effects observed. Goodwill amortization under JGAAP is ¥1.2B (goodwill balance ¥10.2B), which is minor and has a limited compressive effect on Net Income relative to IFRS peers.
Against full-year guidance (Revenue ¥705.0B, Operating Income ¥42.0B, Ordinary Income ¥42.0B, Net Income attributable to owners of the parent ¥30.0B), actuals were Revenue ¥682.9B (achievement 96.9%), Operating Income ¥41.4B (98.6%), Ordinary Income ¥44.3B (105.5%), and Net Income ¥29.8B (99.3%), generally landing on plan. Although Revenue was slightly below target (−3.1%), improvement in gross margin and SG&A control kept Operating Income near plan, and Ordinary Income exceeded plan by 5.5%. Reported EPS of ¥91.22 is nearly in line with forecast EPS ¥91.61. Deviations were within ±10%, underpinned by expected progress in price revisions and stabilized raw material markets.
Annual dividend is ¥27 (interim ¥10, year-end ¥17), with a payout ratio of 29.6% (annual dividend ¥27 ÷ EPS ¥91.22), which is at a sustainable level. Total dividends amount to approximately ¥6.7B (basic shares outstanding approx. 32,745 thousand × ¥27), and FCF coverage versus Operating CF ¥90.3B is 17.2x (FCF ¥115.3B ÷ dividends ¥6.7B), indicating substantial headroom. Share buybacks of ¥48.1B were executed, bringing combined shareholder returns to approximately ¥54.8B, and Total Return Ratio is 151.8% (¥54.8B ÷ Net Income ¥36.1B), a high level. Meanwhile, Free Cash Flow ¥115.3B sufficiently covers total returns ¥54.8B (FCF/Total Return = 2.1x), and cash balances ¥347.0B support return capacity. Distinguishing payout ratio and Total Return Ratio, dividends alone are sustainable, but Total Return Ratio in excess of 150% including buybacks should be viewed as a temporary capital policy; persistence would require concurrent profit growth and debt reduction.
Raw Material Price Volatility Risk: At a cost of sales ratio of 69.7%, increases in raw material markets such as resins and pulp could make maintaining a gross margin of 30.3% difficult and compress Operating Income margin of 6.1%. Foreign exchange volatility (foreign exchange gains ¥0.9B recorded) may also affect gross margin given a high import ratio.
Inventory Efficiency Risk: Inventory ¥100.2B (prior year ¥100.2B) with DIO approx. 77 days means inventory levels remain elevated. Prolonged CCC of 113 days would increase working capital funding requirements and raise the risk of markdowns and valuation losses.
Financial Leverage Risk: D/E ratio 1.15x, interest-bearing debt ¥448.9B (of which long-term borrowings ¥377.5B), and Debt/EBITDA approx. 6.3x (interest-bearing debt ¥448.9B ÷ EBITDA approx. ¥71B) indicate elevated debt levels. In a rising interest rate environment, interest burden (currently ¥3.1B) could increase and credit terms could deteriorate. Although interest coverage is 13.2x, continued debt reduction is a medium-term priority.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.1% | 7.8% (4.6%–12.3%) | -1.7pt |
| Net Profit Margin | 5.3% | 5.2% (2.3%–8.2%) | +0.1pt |
Operating margin is 1.7pt below the industry median, but Net Profit Margin is in line with the median.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 3.0% | 3.7% (-0.4%–9.3%) | -0.7pt |
Revenue growth slightly lags the industry median but remains above the IQR lower bound, maintaining a growth trend.
※Source: Company aggregation
Significant improvement in gross margin (prior year +4.0pt) and operating margin (prior year +1.9pt) drove profit growth; continuation of price revisions and stable raw material markets will be key to sustaining profitability. Operating CF at 2.5x Net Income and FCF ¥115B demonstrate ample cash generation to fund dividends and share buybacks.
Inventory efficiency (DIO approx. 77 days, CCC 113 days) has room for improvement; optimizing working capital could unlock additional cash and expand investment capacity. Conversely, D/E 1.15x and Debt/EBITDA approx. 6.3x indicate somewhat high financial leverage, and sustaining Operating CF growth alongside steady debt reduction is crucial for medium-term improvement in financial soundness.
Full-year guidance achievement rates were high (Revenue 97%, Operating Income 99%, Net Income 99%), confirming management’s execution capability. Total Return Ratio of 151.8% shows an aggressive shareholder return stance, but sustainability depends on continued profit growth and cash generation.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information aggregated by the firm based on public financial statements. Investment decisions are your responsibility; consult advisors as needed before making investment decisions.