| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥584.5B | ¥605.3B | -3.4% |
| Operating Income / Operating Profit | ¥13.0B | ¥27.1B | -52.2% |
| Ordinary Income | ¥14.4B | ¥28.2B | -49.2% |
| Net Income / Net Profit | ¥41.1B | ¥39.6B | +3.6% |
| ROE | 10.0% | 10.1% | - |
For the fiscal year ending February 2026, Revenue was ¥584.5B (YoY -¥20.8B, -3.4%), Operating Income was ¥13.0B (YoY -¥14.1B, -52.2%), Ordinary Income was ¥14.4B (YoY -¥13.9B, -49.2%), and Net Income was ¥41.1B (YoY +¥1.5B, +3.6%). Core operating performance deteriorated substantially, but recognition of ¥41.1B in gain on sales of investment securities resulted in an increase in final profit. Gross margin remained at a high level of 60.9%, but SG&A ratio stayed elevated at 58.7%, causing Operating Margin to decline 2.3pt to 2.2% (prior year 4.5%). The increase in Net Income depends on a one-time special gain, and restoring sustainable earnings power remains a key challenge.
[Revenue] Revenue of ¥584.5B fell -3.4% YoY. No segment disclosures were provided; the company operates as a single business (fashion-related business centered on apparel), so analysis is at the corporate level. Cost of sales was ¥228.5B, yielding Gross Profit of ¥356.0B and Gross Margin of 60.9% (prior year 62.5%), a 1.6pt decline but still high. The revenue decline appears attributable to weak same-store trends and changing market conditions, with top-line contraction being the initial source of profit pressure.
[Profit & Loss] Operating Income declined 52.2% YoY to ¥13.0B, with Operating Margin deteriorating 2.3pt to 2.2% (prior year 4.5%). The main cause was SG&A of ¥343.0B remaining high at 58.7% of sales, offsetting the high gross margin. SG&A decreased in absolute terms by ¥7.9B from ¥350.9B the prior year, but the decline was insufficient to absorb the revenue shortfall, leaving fixed cost burden heavy. Non-operating income of ¥3.2B (dividends received ¥2.2B, interest income ¥0.5B) and non-operating expenses of ¥1.9B (interest expense ¥1.3B) resulted in Ordinary Income of ¥14.4B (-49.2%). After special gains of ¥41.1B (gain on sales of investment securities) and special losses of ¥5.2B (impairment losses ¥5.2B), Profit Before Tax was ¥50.3B, and Net Income after taxes of ¥9.1B was ¥41.1B (+3.6%). The divergence between Ordinary Income and Net Income is due to the special gain, meaning asset sales offset core operating decline. In conclusion, the company experienced revenue and core-profit decline, but one-off items produced a final-year profit increase.
[Profitability] Operating Margin of 2.2% declined 2.3pt from 4.5% the prior year, as a persistently high SG&A ratio of 58.7% weighed on a Gross Margin of 60.9%. ROE of 10.0% was roughly unchanged from 10.0% the prior year, sustained by the one-time special gain lifting Net Income. Net Margin of 7.0% improved from 6.6% the prior year due to the special gain, but core earnings power has weakened as indicated by the decline in Operating Margin. [Cash Quality] Operating Cash Flow (OCF) was ¥9.9B, only 24% of Net Income ¥41.1B, indicating low cash conversion. Accounts payable decrease of -¥6.8B and inventory increase of -¥1.8B pressured working capital, leaving OCF/Net Income at 0.24x, well below the quality-alert benchmark of 1.0x. Free Cash Flow (FCF) of ¥26.3B was supported by cash in of ¥16.4B from sale of investment securities, indicating scope for improvement in sustainable cash generation. [Investment Efficiency] Total Asset Turnover was 0.98x (prior year 1.06x), declining, and inventory days were elongated to 148 days (Inventory ¥92.9B ÷ daily sales ¥0.63B). Capital expenditure of ¥10.9B was 0.96x of depreciation ¥11.4B, indicating maintenance-level investment. [Financial Soundness] Equity Ratio was 68.3% (prior year 68.9%), remaining high, with Current Ratio 357% and Quick Ratio 271% indicating very strong short-term liquidity. Cash and deposits of ¥239.9B versus current liabilities of ¥108.4B limits funding risk. Debt/EBITDA was 2.12x, and Interest Coverage was 18.3x (simple calculation: Operating Income + interest income 13.0 + 0.5B ÷ interest expense 1.3B), showing debt burden within reasonable range. Long-term borrowings increased to ¥51.5B from ¥37.9B prior year, but ample cash and low leverage provide sufficient financial resilience.
OCF of ¥9.9B declined -62.9% from ¥26.8B the prior year, with OCF/Net Income ratio at 0.24x. OCF subtotal (before working capital changes) was ¥17.3B, but working capital movements—decrease in accounts payable -¥6.8B, increase in inventories -¥1.8B, and increase in other current liabilities +¥3.2B—compressed OCF. Corporate tax payments of -¥8.5B also impacted cash flow. Investing Cash Flow was positive ¥16.4B, driven primarily by proceeds from sales of investment securities of ¥43.6B; partially offset by capital expenditures -¥10.9B and net increase in time deposits -¥1.3B (payments -¥91.0B, withdrawals +¥77.8B). Financing Cash Flow was -¥36.8B, driven by dividend payments -¥21.0B, share buybacks -¥17.2B, proceeds from long-term borrowings +¥35.0B, and repayment of long-term borrowings -¥31.1B. FCF (OCF + Investing CF) was positive ¥26.3B but reliant on one-off sale of investment securities, indicating that sustainable cash generation depends on improving OCF. Lengthening inventory days and shortening of accounts payable have worsened working capital; inventory optimization and renegotiation of procurement terms are key to improvement.
Of Ordinary Income ¥14.4B, Operating Income ¥13.0B represents core business earnings, non-operating income ¥3.2B (dividends received ¥2.2B, interest income ¥0.5B) are ongoing financial income, and non-operating expenses ¥1.9B (interest expense ¥1.3B, foreign exchange loss ¥0.2B) are recurring costs. Special gains ¥41.1B (gain on sales of investment securities) are one-off, and special losses ¥5.2B (impairment losses ¥5.2B) are non-recurring. Net Income ¥41.1B versus Ordinary Income ¥14.4B represents a 185% divergence, indicating heavy reliance on special gains. Non-operating income is 0.5% of sales, below the 5% threshold, and consists primarily of dividends and interest—stable income sources outside the core business. Comprehensive Income of ¥53.2B exceeded Net Income by +¥12.1B, comprised of valuation differences on securities +¥12.1B and foreign currency translation adjustments +¥0.1B, reflecting increases in unrealized gains. OCF ¥9.9B falling substantially short of Net Income ¥41.1B indicates significant accruals (difference between accounting profit and cash), warranting attention to earnings quality.
The company forecast for FY2027 is Revenue ¥600.0B (YoY +2.7%), Operating Income ¥21.0B (YoY +61.7%), Ordinary Income ¥20.0B (YoY +39.3%), and EPS guidance ¥136.13. An improvement in Operating Margin to 3.5% is anticipated, and assuming a normalization of special gains, Net Income is expected to be below the prior year. Achieving guidance assumes improvement in inventory turnover and SG&A suppression (reduction to the mid-50% range of sales), with recovery in same-store sales and benefits from new store openings being key. Dividend guidance of ¥72 considers the 1-for-3 stock split in Sep 2026; pre-split equivalent annual dividend is ¥147 (terminal ¥75). Progress rate versus full-year guidance is excluded from evaluation since current period results are finalized, but realizing the large planned recovery in Operating Income will require executing inventory optimization and fixed-cost reductions.
The dividend is ¥70 at year-end and ¥69 interim, totaling ¥139 annually, with a Payout Ratio of 36.7%, within a sustainable range. Shares outstanding are 10,197 thousand shares (after deduction of 1 thousand treasury shares), based on weighted average shares of 10,490 thousand. Share buybacks of ¥17.2B were conducted, bringing total shareholder returns (dividends ¥21.0B + buybacks ¥17.2B = ¥38.2B) to a Total Return Ratio of 93% relative to Net Income ¥41.1B, indicating an aggressive stance. Dividend burden relative to FCF of ¥26.3B is about 80%, with FCF coverage 1.25x. However, this period's FCF is dependent on sale of investment securities, so sustainability in subsequent years depends on improved OCF. A 1-for-3 stock split is scheduled for Sep 2026; year-end dividend forecast for FY2027 is ¥72 post-split (pre-split equivalent ¥75, annual ¥147). Dividend policy aims to continue shareholder returns while balancing profit growth and financial soundness, but progress on inventory and working capital improvements will determine dividend capacity.
Inventory stagnation risk: Inventory days are long at 148 days, and inventories of ¥92.9B account for 15.9% of Revenue. Stagnant inventory raises risk of increased markdowns, erosion of gross margin, and impairment losses, pressuring OCF. Quantitatively, improving inventory days to below 60 days is desirable; current levels are more than double that. Improvements require better demand forecasting, SKU rationalization, and enhanced merchandising precision.
Deterioration in OCF conversion: OCF ¥9.9B is only 24% of Net Income ¥41.1B, with OCF/Net Income at 0.24x, well below the 1.0x alert threshold. Decrease in accounts payable -¥6.8B and increase in inventory -¥1.8B are the main drivers, with working capital deterioration impeding cash generation. Remedies include renegotiation of procurement terms, inventory optimization, and shortening collection periods. Without improvement in OCF, sustainability of dividends and investments is a concern.
Fragility of core earnings power: Operating Margin of 2.2% (prior year 4.5%) is low, with SG&A at 58.7% compressing Gross Margin of 60.9%. Revenue decline of -3.4% could not be absorbed by fixed costs, indicating economies of scale are not functioning. EBIT margin of 2.2% is 2.4pt below the industry median of 4.6%, implying low recession resilience. Without structural SG&A reform and recovery in same-store sales, achieving the company’s guidance of +61.7% in Operating Income next year will be difficult. Quantitatively, reducing SG&A ratio below 55% is required to restore Operating Margin above 5%.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.2% | 4.6% (1.7%–8.2%) | -2.4pt |
| Net Margin | 7.0% | 3.3% (0.9%–5.8%) | +3.7pt |
Operating Margin is 2.4pt below the industry median, placing the company in the lower tier, but Net Margin exceeds the median by 3.7pt due to the contribution of special gains. Core earnings are inferior within the industry while final profits (driven by one-off items) rank higher.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -3.4% | 4.3% (2.2%–13.0%) | -7.7pt |
Revenue growth is 7.7pt below the industry median, showing clear underperformance. Top-line recovery is an urgent issue.
※ Source: Company compilation
The focus is on moving away from dependence on one-off special gains. Although Net Income rose due to gain on sales of investment securities of ¥41.1B, Operating Income halved (-52.2%) and core earnings deteriorated sharply. The next fiscal year's guidance assumes Operating Income recovery of +61.7%, but achieving this requires improving inventory turnover (from current 148 days to below 60 days) and reducing SG&A ratio (from 58.7% to below 55%). Progress in inventory optimization and fixed-cost reduction will be the watershed for assessment.
Low OCF conversion is a concern for cash quality. OCF/Net Income at 0.24x is far below the 1.0x benchmark, with decreases in accounts payable and increases in inventory worsening working capital. FCF of ¥26.3B is dependent on sale of investment securities; therefore, improving OCF is essential for sustainable cash generation. Monitoring quarterly inventory days and OCF trends is important. The financial base is strong—cash ¥239.9B and Equity Ratio 68.3%—limiting short-term funding risk, but qualitative improvement in OCF is required to sustain shareholder returns.
Relative industry position: strong in financial soundness but weak in profitability and growth. Operating Margin 2.2% lags the industry median 4.6% by 2.4pt, and Revenue growth -3.4% lags median +4.3% by 7.7pt. Net Margin 7.0% exceeds the median due to special gains but lacks sustainability. Going forward, raising Operating Margin through inventory efficiency and SG&A restructuring and reversing the decline in same-store sales are key to improving valuation.
This report was 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 compiled by the company based on public financial statements. Investment decisions should be made at your own responsibility, and, if necessary, after consulting a professional advisor.