ASICS Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥534.48B
• Operating Income: ¥120.49B
• Net Income: ¥82.27B
• EPS: ¥115.93

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

Verdict: A strong FY2026 Q2 (H1) with broad-based revenue growth and pronounced margin expansion, albeit with weaker cash conversion and heavy working-capital ties. Revenue rose 32.7% YoY to ¥5,344.8bn (億円換算: 5,344.83), with operating income up 48.5% to ¥1,204.9bn and net income up 53.3% to ¥821.7bn, reflecting robust demand across regions. Operating margin expanded to 22.5% from 20.1% (+239bps), aided by a gross margin of 57.3% (+~60bps YoY) and disciplined SG&A leverage. Net margin improved to 15.4% from 13.3% (+207bps), supported by modest non-operating items and a 26.3% effective tax rate. Europe led profit generation (segment OPM 20.8%), while Japan delivered the highest margin at 27.0%, underscoring healthy pricing and channel mix. North America accelerated profitably (OP +86.0% YoY), pointing to operating leverage and product-mix gains. Cash flow quality lagged earnings: operating cash flow was ¥588.3bn versus net income of ¥821.7bn (OCF/NI 0.72x), primarily due to higher receivables tied to growth (DSO 88 days) even as inventories were a tailwind in H1. EBITDA of ¥1,362.4bn (margin 25.5%) underpins strong earnings power, though cash conversion (OCF/EBITDA 0.43x) was soft. The balance sheet remains robust: current ratio 196%, net cash profile with Debt/EBITDA 0.04x and interest coverage >40x, and intangibles are moderate (intangible/assets 15.9%, goodwill/equity 2.0%). Extraordinary items were a net loss of ¥4.93bn (~6% of NI), not distorting the core trend. Capital intensity remains low near term (CapEx/Depreciation 0.52x), supporting near-term FCF but raising medium-term capacity renewal questions. Guidance was raised, and H1 progress is ahead of the 50% benchmark for operating and net income, implying upside risk if demand momentum and margin discipline persist. Key watchpoints are working capital discipline (DSO, DIO) and marketing/opex seasonality in H2. Overall, fundamentals are solid with scalable profitability, but execution on cash conversion and inventory normalization is critical to sustain returns.

Profitability Analysis

ROE (DuPont 3-factor) stands at 22.8% = Net Profit Margin 15.4% × Asset Turnover 0.787 × Financial Leverage 1.88x. The largest delta YoY came from margin expansion: operating margin rose to 22.5% (+239bps) on a 57.3% gross margin and SG&A discipline as revenue scaled 32.7% while SG&A grew more slowly. Asset turnover improved alongside revenue growth against a rising asset base, enhancing operating efficiency. Leverage remained conservative, with minimal interest-bearing debt and strong coverage; thus, returns are primarily earnings-driven rather than leverage-boosted. Business drivers include premium pricing, favorable mix (performance running and regional channel execution), and operating leverage in North America and Europe. The improvement appears largely recurring given broad-based regional gains and marketing efficiency, though H2 seasonality could moderate margins as advertising and promotional intensity typically rises. SG&A growth trails revenue growth, indicating positive operating leverage without evidence of cost slippage.

Growth Assessment

• Revenue growth of +32.7% YoY was broad-based: Europe +46.4%, North America +28.1%, Greater China +30.7%, Japan +6.9%, Southeast & South Asia +33.9%, Oceania +35.0%, and Other Region +30.7%.
• Operating income advanced +48.5% YoY, with Europe (+63.1%) and North America (+86.0%) the key incremental profit contributors; Japan also delivered +32.2% on a high-OPM base.
• Gross margin at 57.3% and operating margin at 22.5% reflect successful pricing, mix, and scale benefits.
• Extraordinary items netted a loss of ¥4.93bn, small relative to NI and not masking core growth.
• With H1 revenue at ¥5,344.8bn versus full-year forecast ¥10,500.0bn, topline progress (~50.9%) is in line, while operating and net income are tracking ahead, suggesting conservative guidance or front-loaded profitability.
• Outlook: Continued demand for performance footwear and apparel, disciplined SG&A, and regional strength (Europe, North America, China) support sustained growth; key swing factors are H2 promotional cadence and working-capital normalization to translate earnings into cash.

Financial Health

• Liquidity: Current ratio 196% and quick ratio 128% indicate strong near-term liquidity. Working capital of ¥2,409.6bn provides ample buffer against H2 seasonality.
• Solvency: Debt/EBITDA 0.04x, EBITDA interest coverage 46.3x, and Debt/Capital 1.4% reflect a de facto net cash balance sheet; interest coverage (40.98x by EBIT) is robust.
• Capital structure: D/E 0.88x (broad liabilities/equity measure) is conservative given minimal interest-bearing debt (¥50.0bn) and large cash (¥141.4bn).
• Maturity profile: Short-term debt ratio is 100%, but the absolute level is small and cash covers short-term debt by 28.3x, suggesting low refinancing risk.
• Intangibles: Intangible/assets 15.9% and goodwill/equity 2.0% imply modest balance-sheet exposure to M&A-related valuation risk.

Notable B/S Changes

Accounts Receivable: +454.1bn (+54.7%) - Reflects rapid sales growth and longer DSO; monitor collection risk and credit terms. Cash & Deposits: +291.6bn (+26.0%) - Supported by positive OCF and moderated CapEx; enhances liquidity buffer. Retained Earnings: +712.3bn (+28.9%) - Accumulation of profits; supports future dividends and investment capacity. Goodwill: +15.2bn (+26.5%) - Incremental M&A; current level low vs equity, limited impairment risk. Short-term Loans: +25.0bn → 50.0bn (+100.0%) - All debt is short-term; small absolute size, easily covered by cash.

Cash Flow Quality

• OCF/Net Income at 0.72x flags softer cash conversion relative to earnings, driven mainly by receivables growth (ΔAR −¥430.5bn) alongside strong sales; inventories contributed positively (ΔInv +¥84.5bn) in H1.
• Free cash flow was ¥447.9bn, supported by modest CapEx (¥82.2bn) and limited investing cash outflows.
• Cash conversion (OCF/EBITDA) at 0.43x is below benchmark, indicating working-capital intensity; DSO at 88 days and DIO at 280 days extend the cash cycle (CCC 247 days).
• No signs of aggressive working-capital management to inflate earnings; accruals ratio at 3.4% suggests clean accruals.
• Sustainability: FCF currently covers dividend commitments comfortably, but improving collections and inventory turns is necessary to align cash with income as growth scales.

Dividend Sustainability

• Interim DPS is ¥20, implying a payout ratio of 17.9% on H1 earnings; FCF coverage is 3.05x, indicating strong affordability.
• Full-year DPS guidance is ¥44, consistent with enhanced profitability and cash generation capacity.
• With low leverage and strong EBITDA, dividend capacity is underpinned by operations; key sensitivity is working-capital absorption in peak seasons rather than balance-sheet constraints.
• Policy outlook: Headroom exists for continued progressive dividends in line with earnings growth, contingent on maintaining margins and improving cash conversion.

Risk Assessment

Business risks include Demand normalization risk post-strong growth in performance footwear/apparel, H2 promotional intensity and marketing spend potentially compressing margins, Channel mix shifts (DTC vs wholesale) affecting working capital and margin structure, FX volatility impacting multi-region earnings translation.

Financial risks include Extended working-capital cycle (DSO 88 days, DIO 280 days, CCC 247 days) tying up cash, Short-term debt structure (100% of debt ST) despite small absolute size, Underinvestment signal (CapEx/Depreciation 0.52x) if prolonged, potentially affecting capacity and IT/digital competitiveness.

Key concerns include Cash conversion below benchmark (OCF/EBITDA 0.43x; OCF/NI 0.72x), Receivables build vs sales growth elevating collection risk in a demand slowdown, Inventory obsolescence risk if sell-through slows given high finished-goods concentration.

Investment Implications

Key takeaways include Earnings momentum is strong with broad-based growth and 239bps operating margin expansion to 22.5%., Europe and North America are the key profit engines; Japan delivers best-in-class margins., Balance sheet is robust (Debt/EBITDA 0.04x, current ratio 196%), supporting resilience and capital returns., Cash conversion lags due to elevated DSO and DIO; working-capital normalization is the main execution focus., CapEx remains light, boosting near-term FCF but warrants monitoring for medium-term competitiveness..

Metrics to watch include DSO (target <60 days) and DIO (target <120 days) for WC normalization, H2 operating margin trajectory vs full-year guidance, Sell-through and inventory weeks of supply by region, Advertising and promotion spend efficiency vs revenue growth, OCF/NI and OCF/EBITDA recovery toward >1.0x and >0.7x, respectively.

Regarding relative positioning, Within global athletic footwear/apparel peers, profitability and balance-sheet strength are top-tier, while cash conversion and inventory intensity are weaker and require improvement to sustain premium ROE.