| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥634.7B | ¥601.6B | +5.5% |
| Operating Income | ¥56.5B | ¥53.5B | +5.5% |
| Ordinary Income | ¥56.2B | ¥52.2B | +7.8% |
| Net Income | ¥50.4B | ¥42.7B | +18.1% |
| ROE | 5.3% | 4.6% | - |
FY2027 Q1 results showed Revenue of ¥634.7B (YoY +¥33.1B +5.5%), Operating Income of ¥56.5B (YoY +¥3.0B +5.5%), Ordinary Income of ¥56.2B (YoY +¥4.0B +7.8%), and Net Income of ¥50.4B (YoY +¥7.7B +18.1%), representing year-over-year increases in both top and bottom lines. Operating margin was 8.9%, maintained at the prior-year period level. The large increase in Net Income was aided by a one-off gain on sale of investment securities of ¥13.9B. Domestic Business remains the primary earnings driver with Revenue of ¥598.0B (+4.9%) and Operating Income of ¥61.3B (+5.7%), while Overseas Business recorded revenue growth (Revenue ¥51.8B +14.1%) but continued losses (Operating loss ¥3.1B), diluting company-wide margins. Progress toward full-year guidance is 25.7% of Revenue, 44.1% of Operating Income, and 45.0% of Net Income, indicating profits are being recognized earlier in the year.
[Revenue] Revenue was ¥634.7B (YoY +5.5%), marking a third consecutive period of revenue growth. By segment, Domestic Business was ¥598.0B (+4.9%), accounting for 94.2% of total, and Overseas Business was ¥51.8B (+14.1%), driving growth. Domestic strength was supported by expansion of the existing customer base and effective pricing policies, while overseas achieved double-digit growth through development of new markets. Gross profit was ¥356.1B with a gross margin of 56.1% (YoY -0.9pt), a slight decline but still well above industry averages. The gross margin decline is attributed mainly to higher raw material costs and a change in the mix due to the Overseas Business.
[Profitability] SG&A expenses were ¥299.6B (47.2% of Revenue), increasing by +3.5% YoY, below the Revenue growth rate of +5.5%, reflecting efficient expense management and enabling Operating Income of ¥56.5B (+5.5%) to grow in line with Revenue. Non-operating items comprised non-operating income of ¥2.2B (interest income ¥0.1B, equity-method income ¥0.1B, foreign exchange gains ¥0.4B, etc.) versus non-operating expenses of ¥2.4B (interest expense ¥1.4B, foreign exchange losses ¥0.7B, etc.), resulting in a small net non-operating loss. Ordinary Income of ¥56.2B (+7.8%) was achieved through accumulation from operating activities. Extraordinary gains included a gain on sale of investment securities of ¥13.9B, and extraordinary losses of ¥0.5B (impairment losses), leading to Pretax Income of ¥69.6B (+41.8%). After deducting income taxes of ¥19.2B (effective tax rate 27.5%), Net Income was ¥50.4B (+18.1%). Growth was supported by operating performance and the one-off extraordinary gain leading to double-digit Net Income growth.
Domestic Business recorded Revenue of ¥598.0B (YoY +4.9%) and Operating Income of ¥61.3B (YoY +5.7%), securing a segment operating margin of 10.3% and contributing above the company-wide Operating Income of ¥56.5B, maintaining its position as the core earnings source. Overseas Business achieved Revenue of ¥51.8B (+14.1%) with double-digit growth but continued to post an Operating loss of ¥3.1B (loss narrowed 10.8% YoY), yielding a margin of -6.1% and diluting consolidated margins. Segment adjustments were -¥1.7B, including goodwill amortization of ¥3.3B and corporate expenses of ¥9.4B. During the quarter, the acquisition of Cosme de Beaute Co., Ltd. increased the number of consolidated subsidiaries by one, with provisional goodwill of ¥28.5B newly recognized, raising the total goodwill to ¥73.4B (YoY +52.4%). Increased goodwill amortization burden and monitoring of impairment risk are upcoming challenges.
[Profitability] Operating margin of 8.9% was flat YoY, maintaining high gross margin of 56.1% through SG&A efficiency at 47.2%. Net margin improved to 7.9% (+0.8pt YoY) due to the extraordinary gain, but for steady-state profitability assessment, operating-level metrics are more appropriate. ROE of 5.3% reflects returns on Equity of 944.4B, composed of asset turnover 0.34x and financial leverage 1.97x. [Cash Quality] Days Sales Outstanding (DSO) 121 days, Days Inventory Outstanding (DIO) high with Inventory of 447.4B relative to Revenue, and Days Payable Outstanding (DPO) shortened, leading to stagnation in working capital turnover. Inventory persistency and increase in Accounts Receivable (Accounts Receivable ¥210.4B YoY +12.2%) are flags for potential future markdown risk and cash conversion delays. [Investment Efficiency] ROIC (return on invested capital) is estimated in the mid-3% range, based on Operating Income ¥56.5B against invested capital (Net Assets + Interest-bearing debt ¥472.8B), below cost of capital and with substantial room for improvement. [Financial Soundness] Equity Ratio is 50.6% (prior year 49.4%), moderate; current ratio 137.8%, quick ratio 69.0% indicating short-term liquidity near lower acceptable bounds. Short-term borrowings ¥313.6B versus cash ¥125.5B give cash/short-term liabilities of 0.40x, warranting attention to refinancing resilience. Interest coverage is 40.1x, indicating ample capacity to service interest.
Cash and deposits were 125.5B, down ¥71.7B YoY (-36.3%), with acquisitions and increased working capital absorbing cash. Working capital changes included Accounts Receivable increasing by ¥22.8B to ¥210.4B (prior year ¥187.6B), extending collection periods; Inventory remained high at 447.4B (prior year 448.3B); Accounts Payable decreased by ¥6.5B to ¥107.4B (prior year ¥113.9B), shortening payment terms. As a result, buildup of working capital is pressuring Operating Cash Flow generation. Investing activities included provisional goodwill recognition (+¥28.5B) from the Cosme de Beaute acquisition, and tangible fixed assets marginally increased to 438.4B (prior year 434.2B). Financing activities showed short-term borrowings at ¥313.6B (prior year ¥310.8B) roughly unchanged, while long-term borrowings rose slightly to ¥159.2B (prior year ¥152.5B). Dividend payments and retained earnings movement show retained earnings at ¥290.9B (prior year ¥262.2B +¥28.7B), indicating internal accumulation. Compressing inventory and receivables and smoothing short-term liabilities are key to improving capital efficiency.
Recurring earnings are concentrated in Operating Income ¥56.5B, and net non-operating items resulted in a small loss of ¥0.2B, so the impact on earnings structure is minor. Non-operating income of ¥2.2B (0.3% of Revenue) comprised foreign exchange gains ¥0.4B, equity-method income ¥0.1B, etc., well below a 5% threshold, indicating limited distortion. Conversely, Extraordinary gains of ¥13.9B (gain on sale of investment securities) boosted Pretax Income to ¥69.6B, constituting a temporary factor in the ¥50.4B Net Income increase. The gap between Ordinary Income ¥56.2B and Net Income ¥50.4B (-10.3%) is mainly due to income taxes at an effective rate of 27.5%; therefore, for normalized profit assessment, evaluation at the ordinary income level is appropriate. Comprehensive Income was ¥30.2B, ¥20.2B below Net Income ¥50.4B, driven by valuation differences on available-for-sale securities -¥20.4B, foreign currency translation adjustments +¥2.0B, and retirement benefit adjustments -¥1.7B, among other items. Buildup of Inventory ¥447.4B and Accounts Receivable ¥210.4B along with decreased Accounts Payable suggests qualitative deterioration in working capital, implying latent risks of future valuation losses or markdowns that could erode gross profit. Note also that goodwill amortization of ¥3.3B (Japanese GAAP) will continue to suppress Net Income relative to IFRS peers.
Full-year guidance remains unchanged at Revenue ¥2470.0B (YoY +4.3%), Operating Income ¥128.0B (YoY +10.3%), Ordinary Income ¥123.0B (YoY +10.0%), and Net Income ¥112.0B. Q1 progress rates versus full-year guidance are Revenue 25.7% (roughly standard), Operating Income 44.1% (standard 25% +19.1pt ahead), Ordinary Income 45.7%, and Net Income 45.0%, indicating profits are front-loaded. The high progress in Operating Income reflects SG&A efficiency and seasonality (pull-forward demand for spring/summer campaigns), while Net Income outperformance is partially due to the one-off extraordinary gain of ¥13.9B. Dividend forecast remains unchanged at an annual ¥16 (interim ¥8, year-end ¥8). With full-year EPS forecast of ¥82.34, the Payout Ratio is 19.4%, a conservative level, and combined with retained earnings accumulation of ¥290.9B, there is ample room for future dividend increases. Profit visibility in the second half depends on improvements in inventory and receivables turnover and the pace of turning Overseas Business profitable.
As of the end of Q1 there is no change to the dividend forecast, and the company plans an annual dividend of ¥16 (interim ¥8, year-end ¥8). Against the full-year EPS forecast of ¥82.34, the Payout Ratio is 19.4%, a conservative level, and retained earnings of ¥290.9B (prior year ¥262.2B +10.9%) indicate sufficient dividend funding. There were no share buybacks, so the Total Return Ratio equals the Payout Ratio. Shares outstanding are 141,922 thousand, treasury shares 5,907 thousand, giving a treasury share ratio of 4.2%, at a standard level. Assessment of dividend yield requires share price data, but given the low Payout Ratio and thick retained earnings, downside risk to dividends is low; in the medium term, if inventory and receivables compression and Overseas Business recovery advance, there is potential for dividend increases.
Working capital turnover stagnation risk: Accounts Receivable ¥210.4B (DSO 121 days) and Inventory ¥447.4B indicate buildup of working capital, and a reduction in Accounts Payable to ¥107.4B weakens capital efficiency. High inventory increases the risk of markdowns and impairment in the event of demand deterioration and delays cash generation. In the apparel industry, accelerated trend changes also pose a risk of inventory obsolescence.
Short-term liquidity risk: Short-term borrowings ¥313.6B versus cash ¥125.5B give cash/short-term liabilities ratio of 0.40x and short-term liabilities ratio of 66.3%, indicating weak refinancing resilience. Current ratio 137.8% and quick ratio 69.0% are near the lower bounds of standard, and combined with heavy working capital the buffer for liquidity is limited. Interest coverage of 40.1x suggests sufficient interest service capacity, but concentration risk in short-term debt refinancing requires monitoring.
Overseas business profitability risk: Overseas Business achieved Revenue ¥51.8B (+14.1%) but continues to incur an Operating loss of ¥3.1B (margin -6.1%), diluting consolidated operating margin of 8.9%. Although the loss narrowed 10.8% YoY, timing of profitability recovery is uncertain, and prolonged initial investment burdens for integration and market development are risks. High domestic dependence at 92.0% means delayed overseas turnaround could constrain consolidated growth.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.9% | 3.4% (0.8%–7.7%) | +5.5pt |
| Net Margin | 7.9% | 2.2% (0.5%–6.2%) | +5.7pt |
Profitability significantly exceeds industry median, indicating the advantage of a high-gross-margin business model.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 5.5% | 7.7% (0.8%–14.6%) | -2.2pt |
Revenue growth is slightly below the industry median, affected by domestic market maturation and stagnant inventory turnover.
※Source: Company compilation
High gross margin of 56.1% and Operating Margin of 8.9% are well above industry averages, and the revenue base of the domestic core business is solid. Efficiency in SG&A at 47.2% supports maintenance of operating profitability, and there is no structural problem in core business earnings power. The 44.1% progress rate toward full-year Operating Income, ahead of schedule, also supports the effectiveness of cost management.
The large increase in Net Income (+18.1%) is attributable to a one-off gain on sale of investment securities of ¥13.9B; therefore, steady-state profitability should be evaluated at the Ordinary Income level (+7.8%). The decline of Comprehensive Income to ¥30.2B, ¥20.2B below Net Income ¥50.4B, was mainly due to valuation differences on securities of -¥20.4B, suggesting simultaneous realization of gains and recognition of valuation losses. No material qualitative change in recurring earnings was observed.
Buildup of Inventory ¥447.4B and Accounts Receivable ¥210.4B (DSO 121 days) alongside reduced Accounts Payable ¥107.4B has stalled working capital turnover and delayed cash generation. ROIC in the mid-3% range, below the cost of capital, reflects low invested capital turnover. Continued losses in Overseas Business (Operating loss ¥3.1B) also suppress ROE to 5.3%; compressing inventory and receivables and restoring profitability overseas are keys to improving capital efficiency. Short-term borrowings ¥313.6B versus cash ¥125.5B (cash/short-term liabilities 0.40x) weaken refinancing resilience, and the heavy working capital load raises liquidity risk—structural issues to monitor.
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 company-compiled reference information based on public financial statements. Investment decisions are your own responsibility; please consult specialists as necessary before making investment decisions.