| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1081.0B | ¥994.8B | +8.7% |
| Operating Income / Operating Profit | ¥138.5B | ¥134.8B | +2.7% |
| Ordinary Income | ¥145.2B | ¥130.3B | +11.4% |
| Net Income / Net Profit | ¥101.2B | ¥100.2B | +0.9% |
| ROE | 3.9% | 3.9% | - |
FY2026 Q1 (Jan–Mar 2026) results: Revenue ¥1,081.0B (YoY +¥86.2B +8.7%), Operating Income ¥138.5B (YoY +¥3.7B +2.7%), Ordinary Income ¥145.2B (YoY +¥14.9B +11.4%), Quarterly Net Income attributable to owners of the parent ¥101.2B (YoY +¥0.9B +0.9%). Revenue was driven by the core Furniture Business (+6.4%) and Stationery Business (+8.8%), achieving a second consecutive quarter of revenue growth; however, gross margin fell from 42.6% in the prior-year period to 41.9% (down 74bp), and operating margin contracted from 13.6% to 12.8% (down 75bp). At the ordinary income level, improvement in non-operating balance contributed to double-digit profit growth, but net income only edged up modestly due to a higher tax burden and a decline in special gains. Versus the full-year forecast (Revenue ¥3,900B +8.4%, Operating Income ¥270B +2.9%), revenue progress was 27.7% and operating income progress was 51.3%, indicating significant front-loading of profits.
[Revenue] Revenue of ¥1,081.0B (+8.7%) was achieved with 3 of 4 segments reporting revenue increases. Furniture Business ¥572.6B (+6.4%) led as the core business, accounting for 53.0% of revenue composition, supported by large-scale office renewal demand and price adjustments. Stationery Business ¥237.3B (+8.8%) improved its composition to 22.0% and saw operating margin rise to 10.6% (prior 10.0%) due to new product introductions and price revision uptake. Business Supply Distribution ¥299.1B (+12.7%) notably expanded revenue and rose to a 27.7% composition share, though profitability reflected intensified competition. Interior Retail ¥55.3B (+2.7%) remained small but steady. On an external sales basis excluding intersegment transactions, growth was broad-based, maintaining the top-line expansion trend.
[Profit & Loss] Cost of sales increased to ¥627.7B (prior ¥570.5B), causing gross margin to decline from 42.6% to 41.9% (down 74bp). The main drivers were rising raw material and logistics costs and changes in product mix. SG&A expenses were ¥314.8B (prior ¥289.5B, +8.8%), rising roughly in line with revenue; SG&A ratio remained 29.1% (prior 29.1%). Operating margin contracted to 12.8% (prior 13.6%, down 75bp). Non-operating items included interest income ¥1.1B, foreign exchange gains ¥3.4B, and equity-method investment gains ¥0.3B, totaling non-operating income ¥7.7B, against non-operating expenses such as foreign exchange losses ¥5.6B and interest expense ¥0.4B totaling ¥1.0B, resulting in a non-operating balance of +¥6.7B (prior -¥4.6B), an improvement of ¥11.3B. Consequently, Ordinary Income rose to ¥145.2B (+11.4%), with ordinary income margin improving by 33bp to 13.4% (prior 13.1%). Extraordinary items produced net special gains of ¥1.8B (Special income ¥2.7B including ¥2.2B gain on sale of investment securities; special losses ¥0.9B), a substantial decrease from prior-year net special gains of ¥15.0B. Profit before income taxes was ¥147.0B (+1.2%); after deducting income taxes ¥45.9B (effective tax rate 31.2%) and non-controlling interests ¥0.2B, net income attributable to owners of the parent was ¥101.2B (+0.9%), and net margin declined to 9.3% (prior 10.1%, down 72bp). In conclusion, while the company secured revenue and profit growth, compression of gross margin and reduction in special gains limited growth at the net income level.
Furniture Business: Revenue ¥572.6B (+6.4%), Operating Income ¥127.2B (+1.4%), Operating Margin 22.2% (prior 23.3%), down 111bp, but remains the largest profit contributor. Orders for large office projects and price adjustments supported revenue expansion, while rising raw material costs pressured margins. Stationery Business: Revenue ¥237.3B (+8.8%), Operating Income ¥25.1B (+18.1%), Operating Margin 10.6% (prior 10.0%), up 60bp. New products and price revision uptake contributed to margin improvement and notable profitability gains. Business Supply Distribution: Revenue ¥299.1B (+12.7%) achieved the highest revenue growth rate, but Operating Income ¥13.1B (-3.0%) led to an Operating Margin of 4.4% (prior 5.1%), down 70bp. Despite revenue expansion, profitability lagged, likely due to intensified channel competition and increased promotional costs. Interior Retail Business: Revenue ¥55.3B (+2.7%), Operating Income ¥1.4B (-9.8%), Operating Margin 2.5% (prior 2.8%), slightly deteriorated. Other segments: Revenue ¥1.4B (-5.2%), Operating loss ¥1.1B (prior -¥0.7B), with an expanded loss. Including corporate adjustments of -¥27.2B, consolidated operating income totaled ¥138.5B.
[Profitability] Operating margin 12.8% (prior 13.6%, -75bp) reflects the 74bp decline in gross margin and flat SG&A ratio. Net margin 9.3% (prior 10.1%, -72bp) contracted despite ordinary-level improvement, due to decreased special gains and higher tax burden. ROE 3.9% (prior 3.9%) remained flat, with scope for improvement in capital efficiency given the decline in net margin and deterioration in total asset turnover. [Cash Quality] Operating Cash Flow (OCF) -¥99.5B (prior -¥79.0B, deterioration -26.0%); OCF/Net Income -0.99x (prior -0.79x) indicating weak cash conversion of profits. The main drivers were Accounts Receivable +¥133.1B increase and Accounts Payable -¥104.6B decrease, showing marked deterioration in working capital. [Investment Efficiency] ROIC 4.7% (estimated) suggests limited value creation relative to the cost of capital. Total asset turnover 0.307x/year (annualized) is low. Capital expenditure ¥41.6B is 1.93x depreciation expense ¥21.5B, indicating continued growth/renewal investment to support medium-to-long-term productivity improvements. [Financial Soundness] Equity Ratio 74.1% (prior 71.9%, +2.2pt), interest-bearing debt ¥39.1B (current ¥38.9B, non-current ¥0.1B), Debt/EBITDA 0.24x, interest coverage 384.7x — financial soundness is extremely high. Current ratio 297.3%, quick ratio 256.2%, and cash & deposits ¥611.9B indicate ample short-term liquidity.
Operating Cash Flow was -¥99.5B (prior -¥79.0B, -26.0%) worsening. Adjusted profit before tax ¥147.0B plus depreciation ¥21.5B etc. produced an OCF subtotal (before working capital changes) of -¥63.4B; significant movements in working capital had a major impact. Increases in trade receivables -¥133.1B (advance shipments and credit terms impact), decreases in trade payables -¥104.6B (advance settlement of payables), and increases in inventories -¥11.8B worsened working capital, resulting in CCC 291 days, DSO 322 days, DIO 248 days — efficiency indicators materially deteriorated from the prior year. Payments of income taxes -¥36.9B, interest and dividend receipts ¥1.5B, and interest paid -¥0.4B contributed to a large net cash outflow from operating activities. Investing Cash Flow was -¥44.2B, primarily capex -¥41.6B, partially offset by proceeds from sale of tangible fixed assets ¥0.7B and proceeds from sale of securities ¥5.0B. Free Cash Flow was -¥143.8B (Operating CF -¥99.5B + Investing CF -¥44.2B), a substantial negative, indicating weak internal cash generation this quarter. Financing Cash Flow was -¥54.5B, mainly due to dividend payments -¥55.7B, lease liability repayments -¥3.1B, and short-term borrowings increase +¥5.4B. Including foreign exchange effects +¥2.0B, cash and cash equivalents decreased by ¥196.2B to ¥909.8B. OCF/Net Income -0.99x and OCF/EBITDA -0.62x indicate weak cash conversion of profits and raise concerns about earnings quality.
Against Ordinary Income ¥145.2B, non-operating income ¥7.7B and non-operating expenses ¥1.0B yielded a net non-operating improvement of +¥6.7B, which boosted from Operating Income ¥138.5B by +4.8%. The composition of non-operating income was mainly recurring elements: foreign exchange gains ¥3.4B, interest income ¥1.1B, dividend income ¥0.5B, and included equity-method investment gains ¥0.3B. Special gains ¥2.7B (gain on sale of investment securities ¥2.2B, gain on sale of fixed assets ¥0.2B) were temporary and materially decreased from ¥15.6B a year earlier. Comprehensive income ¥109.7B exceeded net income ¥101.2B by ¥8.5B, composed of valuation difference on available-for-sale securities ¥7.3B, deferred hedge gains ¥3.1B, foreign currency translation adjustment -¥1.5B, and retirement benefit adjustments -¥0.4B. The accrual indicator (OCF/Net Income -0.99x) shows that cash did not accompany profit recognition; working capital movements in receivables, payables, and inventories were the main drivers, temporarily reducing the quality of accounting earnings.
Full-year forecast (FY ending Dec 2026): Revenue ¥3,900B (YoY +8.4%), Operating Income ¥270B (YoY +2.9%), Ordinary Income ¥268B (YoY -1.6%), Net Income attributable to owners of the parent ¥203B, EPS ¥47.90, Dividend ¥12.25 (post stock split basis; pre-split ¥52.00; equivalent to annual ¥98.00). As of the end of Q1, progress rates are Revenue 27.7%, Operating Income 51.3%, Net Income 49.7%, indicating significant front-loading of profits. The full-year projected operating margin of 6.9% compares with 12.8% in Q1, suggesting substantial seasonality (concentration of large project shipments and domestic office renewal demand in the early fiscal period). The company has not revised either its earnings or dividend forecasts, but has noted potential impacts on raw material and logistics costs due to Middle East developments; uncertainty remains and is under examination. High profit progress in Q1 suggests upside risk to the full-year forecast, but normalization of working capital and profit allocation to the second half are prerequisites.
The company forecast annual dividend ¥12.25 (post-split basis; pre-split ¥52.00) implies a payout ratio of 25.6% against the EPS forecast ¥47.90, a conservative level. Given Q1 net income attributable to owners ¥101.2B and EPS progress 49.7% against forecast EPS ¥47.90, there is room for upward revision and the possibility of dividend increases cannot be excluded. A 1-for-4 stock split was implemented effective July 1, 2025; on a pre-split basis, the year-end dividend equates to ¥52.00 and annualized to ¥98.00. Dividend payments ¥55.7B were made despite negative operating cash flow, but funding is sufficient given cash & deposits ¥611.9B and securities ¥299.5B. No share buyback has been announced; total return ratio is at the same level as the payout ratio. With extremely strong financial soundness, dividend sustainability is not a concern, though priority is given to normalizing working capital and continuing growth investment; the company appears to prioritize improving capital efficiency over excessive dividend increases.
Working capital deterioration and liquidity pressure: Simultaneous occurrence of Accounts Receivable +¥133.1B, Accounts Payable -¥104.6B, Inventories +¥11.8B caused CCC 291 days, DSO 322 days, DIO 248 days and materially worsened efficiency metrics. OCF/Net Income -0.99x and FCF -¥143.8B indicate weak cash generation; if working capital management deterioration persists beyond seasonal norms, there is risk to liquidity and profitability in the second half. Although cash & deposits ¥611.9B and securities ¥299.5B provide a near-term buffer, delayed normalization would impair capital efficiency and investor confidence.
Gross margin contraction and profitability pressure: Gross margin 41.9% (prior 42.6%, -74bp) declined due to higher raw material and logistics costs and product mix effects. Operating margin 12.8% (prior 13.6%, -75bp) shows limited operating leverage, and downside risk exists from further cost increases tied to Middle East developments, making full-year margin maintenance uncertain. Profitability in core segments declined—Furniture margin 22.2% (prior 23.3%), Business Supply Distribution 4.4% (prior 5.1%)—making continued pass-through of costs and productivity improvements essential.
Dependence on large projects and order variability risk: The Furniture Business accounts for 53.0% of revenue and 91.8% of operating income (¥127.2B/¥138.5B), making results highly sensitive to timing of large office renewal orders and shipments. Q1 profit progress of 51.3% suggests advance shipments of large projects and a potential risk of a second-half rebound decline. Disclosure on backlog and contract liabilities is limited, leaving some uncertainty over future revenue visibility. External factors (corporate CAPEX cycles, persistence of remote work) could affect orders; diversifying segments and expanding stable revenue sources are medium-to-long-term priorities.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.8% | 6.8% (2.9%–9.0%) | +6.0pt |
| Net Margin | 9.4% | 5.9% (3.3%–7.7%) | +3.4pt |
Profitability significantly exceeds the industry median, ranking at the upper end for both operating and net margins.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.7% | 13.2% (2.5%–28.5%) | -4.5pt |
Revenue growth is below the industry median, indicating a moderate expansion pace within the sector.
※ Source: Company compilation
Front-loading of profit progress and upside to full-year: Q1 progress rates of Operating Income 51.3% and Net Income 49.7% represent significant front-loading versus full-year forecasts. Large project shipments and price revision effects contributed, but focus will be on whether inventory and receivables are corrected and order pace is smoothed into the second half. If working capital normalizes and gross margin stabilizes, the probability of full-year upside increases. Distinguishing seasonality from one-off factors is critical — Q2 progress and management commentary will be key.
Working capital normalization is key to cash generation and capital efficiency improvement: With OCF -¥99.5B, FCF -¥143.8B, and CCC 291 days, working capital deterioration reduced cash conversion of profits this quarter. If receivables, payables, and inventory optimization progress and CCC falls below 250 days with OCF/Net Income recovering above 0.9x in the second half, ROIC and ROE improvement and recovery of internal funding capacity can be expected. Inventory optimization and receivables collection will be important to monitor.
Strong financial position supports stable dividends and continued growth investment: Equity Ratio 74.1%, Debt/EBITDA 0.24x, and cash ¥611.9B underpin an extremely robust financial base and support sustainable shareholder returns with a payout ratio of 25.6%. Capex at 1.93x depreciation indicates continued investment for productivity and competitiveness. Although gross margin pressure and capital efficiency challenges remain, low leverage and ample liquidity enhance resilience to economic and external shocks and support stable operations.
This report was automatically generated by AI analyzing XBRL earnings disclosure data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the firm based on public financial disclosures. Investment decisions are your responsibility; please consult a specialist as appropriate.