| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥699.6B | ¥459.0B | +52.4% |
| Operating Income | ¥28.0B | ¥19.6B | +43.0% |
| Ordinary Income | ¥31.6B | ¥23.5B | +34.6% |
| Net Income | ¥1.4B | ¥2.0B | -31.3% |
| ROE | 0.3% | 0.5% | - |
The fiscal year ended Feb 2026 closed with Revenue of ¥699.6B (YoY +¥240.6B +52.4%), Operating Income of ¥28.0B (YoY +¥8.4B +43.0%), Ordinary Income of ¥31.6B (YoY +¥8.1B +34.6%), and Net Income attributable to owners of the parent of ¥1.4B (YoY -¥0.6B -31.3%). The Brand Business led the expansion with a large revenue increase of +109.2% YoY, bringing consolidated Revenue close to ¥700B for the first time in three years. Operating Income increased, but a decline in gross margin (33.2%, down -10.2pt from 43.4% a year earlier) pressured profitability, resulting in an Operating Margin of 4.0% (down -0.3pt from 4.3%). Ordinary Income increased 34.6% supported by financial income, but Net Income decreased due to volatility in non-recurring items such as valuation losses on investment securities and gains on disposal of fixed assets, leading to a 31.3% decline YoY.
Revenue was ¥699.6B (+52.4%), a substantial increase. By segment, the Brand Business doubled to ¥453.5B (+109.2%), accounting for 64.8% of consolidated Revenue. The main drivers were contributions from Rasin Co., Ltd., which operates a luxury watch reuse sales business, and solid performance of existing brands such as "4°C". The Apparel Business recorded ¥247.4B (+1.6%), a slight increase, reducing its share to 35.4%. Cost of goods sold was ¥467.1B, gross profit ¥232.5B, and gross margin 33.2% (a significant decline of -10.2pt from 43.4% the prior year). This is likely due to a mix effect from increased proportion of lower-margin merchandise such as reuse goods. SG&A was ¥204.5B, with an SG&A ratio of 29.2% (improved -10.0pt from 39.2%), absorbing much of the gross margin decline. Goodwill amortization was ¥6.2B (¥6.2B prior year), unchanged. As a result, Operating Income rose to ¥28.0B (+43.0%) but Operating Margin decreased to 4.0% (-0.3pt). Non-operating items included dividend income ¥3.4B and interest income ¥1.4B, boosting Ordinary Income to ¥31.6B (+34.6%). Extraordinary gains included ¥5.0B gain on sale of fixed assets and ¥2.0B gain on sale of investment securities, totaling ¥7.1B, while extraordinary losses included impairment losses ¥2.6B and valuation losses on investment securities ¥0.6B, totaling ¥6.9B. Profit before income taxes was ¥31.8B (+31.5%); after deducting income taxes of ¥13.9B, Net Income attributable to owners of the parent was ¥1.4B (-31.3%). The divergence between Ordinary Income and Net Income was driven by fluctuations in extraordinary items and higher tax burden (effective tax rate 43.7%). In conclusion, while the company achieved revenue and operating profit growth, margins declined and Net Income decreased due to extraordinary items.
The Brand Business recorded Revenue ¥453.5B (+109.2%), Operating Income ¥28.6B (+89.5%), and Operating Margin 6.3% (down -0.7pt from 7.0% prior year). Although Revenue doubled, margins slightly declined, likely due to expansion of lower-margin merchandise such as reuse goods. The Apparel Business posted Revenue ¥247.4B (+1.6%), Operating Income ¥10.0B (-2.4%), and Operating Margin 4.0% (down -0.2pt from 4.2%), reflecting slight Revenue growth but profit decline. Margin remains in a stable range but growth is slowing. Corporate adjustments (including goodwill amortization △¥9.99B in general administrative expenses) amounted to △¥10.5B, an increased burden from △¥5.7B prior year. The shift in segment composition toward the Brand Business increases the impact of that segment’s performance on consolidated results.
Profitability: Operating Margin of 4.0% declined -0.3pt from 4.3% and is below the industry median of 4.6%. Net Margin was 0.2%, down -2.8pt from 3.0% prior year, substantially below the industry median of 3.3%. ROE was 0.3% (prior year 3.6%), significantly lower than the industry median 5.9%. ROA declined to 0.2% from 2.1% prior year, below the industry median 3.3%. Gross Margin of 33.2% fell -10.2pt from 43.4%, while SG&A ratio improvement to 29.2% (from 39.2%) limited the decline in Operating Margin. Cash Quality: Operating Cash Flow (OCF) ¥11.0B is 7.9x Net Income ¥1.4B and appears healthy, but of the OCF subtotal ¥21.3B, increases in working capital (Inventories △¥24.1B, Accounts Receivable △¥5.3B) significantly absorbed cash, indicating weak cash generation. OCF/EBITDA ratio 0.29x is far below the industry median 1.57x, signaling issues in cash conversion. Investment Efficiency: Total Asset Turnover improved to 1.02x (prior year 0.69x), approaching the industry median 1.17x. Inventory turnover days extended to 133 days from 121 days prior year, well above the industry median 66 days. Accounts Receivable days improved to 18 days from 23 days, near the industry median 21 days. Accounts Payable days shortened to 18 days from 28 days, below the industry median 39 days. Operating working capital days lengthened to 133 days from 116 days. CAPEX ¥6.4B was below Depreciation ¥9.4B, and the CAPEX/Depreciation ratio of 0.67x is below the industry median 1.16x, indicating restrained investment. Financial Health: Equity Ratio 59.7% improved from 58.5% and is above the industry median 50.2%. Current Ratio improved to 169.1% from 162.0% but slightly below the industry median 184%. Net Debt/EBITDA ratio is 2.91x, indicating higher reliance on interest-bearing debt compared to the industry median -0.59x. Financial leverage 1.68x decreased from 1.71x prior year and is below the industry median 1.88x.
Operating Cash Flow was ¥11.0B (down -63.5% from ¥30.2B prior year). The OCF subtotal (pre-working capital changes) was ¥21.3B; increases in Inventories ¥24.1B and Trade Receivables ¥5.3B absorbed cash, partially offset by increases in Trade Payables ¥5.0B. Income tax payments ¥14.1B also pressured OCF. Investing Cash Flow was positive ¥22.7B, with inflows including proceeds from sales of fixed assets ¥8.5B and sales of investment securities ¥2.6B, exceeding outflows such as CAPEX ¥6.4B and acquisition of intangible assets ¥0.7B. Free Cash Flow was positive ¥33.7B (OCF ¥11.0B + Investing CF ¥22.7B) but depended on one-off asset sales. Financing Cash Flow was △¥37.5B: proceeds from long-term borrowings ¥100.0B offset by long-term borrowings repayments ¥20.0B, net increase in short-term borrowings ¥7.5B, and dividend payments ¥17.9B. Cash and cash equivalents decreased ¥3.8B from ¥17.1B at the beginning of the period to ¥13.3B at the end. The OCF decline was mainly due to working capital absorption from inventory accumulation, and CAPEX was contained within depreciation.
Ordinary Income ¥31.6B versus Net Income attributable to owners of the parent ¥1.4B shows a large divergence, warranting scrutiny of earnings quality. Operating profit was ¥28.0B, and financial income such as dividend income ¥3.4B and interest income ¥1.4B lifted Ordinary Income. Extraordinary gains ¥7.1B (gain on sale of fixed assets ¥5.0B, gain on sale of investment securities ¥2.0B) were one-off. Extraordinary losses ¥6.9B (impairment losses ¥2.6B, valuation losses on investment securities ¥0.6B) were also non-recurring. The effective tax rate was high at 43.7%, reflecting recognition of deferred tax assets and timing differences. OCF ¥11.0B exceeded Net Income ¥1.4B, but of the OCF subtotal ¥21.3B, ¥10.3B was absorbed by working capital changes, and inventory accumulation (△¥24.1B) hindered cash generation. Accrual (Net Income ¥1.4B - OCF ¥11.0B = △¥9.6B) is negative, indicating cash exceeds profit; while this superficially appears positive, the large working capital absorption raises questions about sustainability. Comprehensive Income was ¥39.2B, well above Net Income ¥1.4B, mainly due to an increase in valuation difference on available-for-sale securities of ¥20.4B. While Ordinary Income improved, Net Income declined due to extraordinary items and tax burden; focusing on core profitability improvement and excluding one-offs is important.
Full year guidance for the fiscal year ending Feb 2026 projects Revenue ¥720.0B (YoY +2.9%), Operating Income ¥36.0B (YoY +28.4%), Ordinary Income ¥39.0B (YoY +23.2%), Net Income attributable to owners of the parent ¥23.0B, and EPS ¥107.11. The year-end dividend forecast is ¥42.5, bringing annual dividend to ¥85.0 (prior year ¥83.0). Compared with prior year results (Revenue ¥699.6B, Operating Income ¥28.0B, Ordinary Income ¥31.6B, Net Income ¥1.4B), the guidance assumes Revenue +2.9%, Operating Income +28.4%, Ordinary Income +23.2%, implying improvement in profitability. Progress rates are Revenue 97.2%, Operating Income 77.8%, Ordinary Income 81.0%, assuming profit accumulation in the second half. The guidance assumes Operating Margin improvement to 5.0% (vs. prior year 4.0%, +1.0pt), requiring recovery in gross margin or further SG&A ratio improvement. Net Income is expected to rise substantially from ¥1.4B to ¥23.0B, which can be interpreted as normalization excluding prior year extraordinary volatility. Payout Ratio is projected to decline from 1.29 in the prior year to 0.79 on a full-year basis, indicating a return to a sustainable level.
Annual dividend was ¥83.0 (interim ¥41.5 + year-end ¥41.5), double the prior year interim ¥41.5. With EPS ¥83.46, the Payout Ratio was 1.29, extremely high and representing dividends exceeding Net Income. Total dividends were approximately ¥18.0B and were adequately covered by Free Cash Flow ¥33.7B, but the Investing CF positive ¥22.7B depended on one-off asset sales. OCF ¥11.0B could not cover dividends, with working capital absorption due to inventory accumulation pressuring OCF. FY2026 full-year forecast assumes dividend forecast ¥42.5 (annual ¥85.0) and EPS forecast ¥107.11, implying Payout Ratio 0.79 and normalization. There were no share buybacks; shareholder returns are concentrated in dividends. The prior year’s high Payout Ratio resulted from a sharp decline in Net Income, but full-year forecasts suggest a return to sustainable payout levels with profit normalization. To secure dividend continuity, improving inventory turnover to generate OCF is necessary.
Industry Position (reference information, company analysis): Within the retail sector, the company’s Operating Margin 4.0% is 0.6pt below the industry median 4.6%, placing it in the lower tier. Net Margin 0.2% is well below the industry median 3.3%, reflecting the impact of extraordinary items and tax burden. ROE 0.3% is significantly below the industry median 5.9%, indicating capital efficiency challenges. Total Asset Turnover 1.02x approaches the industry median 1.17x, aided by Brand Business expansion. Inventory turnover days 133 days are more than twice the industry median 66 days, highlighting poor inventory efficiency. Equity Ratio 59.7% exceeds the industry median 50.2%, indicating relatively solid financial health. Net Debt/EBITDA 2.91x suggests higher reliance on interest-bearing debt compared with the industry median -0.59x. OCF/EBITDA 0.29x is far below the industry median 1.57x, underscoring weak cash conversion. CAPEX/Depreciation ratio 0.67x is below the industry median 1.16x, suggesting constrained renewal investment. Payout Ratio 1.29 far exceeded the industry median 0.27, but this was distorted by a temporary decline in Net Income; the full-year forecast anticipates normalization to 0.79. Overall, financial health is good, but profitability, cash conversion efficiency, and inventory efficiency lag industry averages, leaving substantial room for improvement.
Key points from the results are as follows. First, the Brand Business’s strong growth (+109.2%) improved Total Asset Turnover to 1.02x, with top-line expansion boosting asset efficiency. However, the 10.2pt decline in gross margin suggests structural mix shift toward lower-margin merchandise; although SG&A efficiency (-10.0pt) offset this, Operating Margin still fell to 4.0%. Next fiscal year guidance assumes a 1.0pt improvement to 5.0% Operating Margin, making the feasibility of gross margin recovery the focal issue. Second, inventory accumulation (Inventories ¥166.0B, DIO 133 days) absorbed working capital and compressed OCF to ¥11.0B, revealing weak cash conversion with OCF/EBITDA 0.29x well below the industry median 1.57x. Free Cash Flow ¥33.7B was supported by one-off asset sales, and sustainable cash generation requires normalization of inventory turnover. Third, the company paid dividends exceeding Net Income with a Payout Ratio of 1.29, and OCF did not cover dividends; the full-year forecast assumes normalization to a Payout Ratio of 0.79. Goodwill ¥76.5B (18.6% of net assets) and amortization burden ¥9.99B are JGAAP-specific factors compressing Net Income, so evaluation on a pre-goodwill-amortization EBITDA basis is appropriate. Medium-term keys to improving capital efficiency include inventory efficiency improvement, management of segment concentration, and gross margin recovery.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.