Mizuno Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥126.51B
• Operating Income: ¥12.01B
• Net Income: ¥10.00B
• Earnings per Unit (EPU): ¥128.68

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: Solid Q2 FY2026 with healthy top-line growth, margin expansion, and strong cash conversion, underpinned by tight cost discipline and a clean balance sheet. Revenue rose 5.8% YoY to 1,265.08, with operating income up 7.7% to 120.11 and net income up 22.0% to 98.76, indicating positive operating leverage and improved below-OP line items. Gross profit reached 527.64, implying a gross margin of 41.7%, while operating margin stood at 9.5% and net margin at 7.8%. Based on growth differentials, operating margin expanded by an estimated 17 bps YoY, and net margin expanded by roughly 104 bps YoY. Ordinary income increased 12.5% to 127.22, aided by net non-operating income of 7.11 (9.21 in income vs 2.10 in expenses), including dividend income of 3.15 and interest income of 0.86. Earnings quality was strong: operating cash flow of 113.98 exceeded net income (OCF/NI 1.15x), reducing the risk of accrual-driven earnings. Interest coverage is exceptionally high at 100.09x, supported by low interest expense (1.20) and sound operating profits. The balance sheet is robust, with a current ratio of 378.5% and quick ratio of 253.8%, and conservative leverage (D/E 0.36x). Working capital is ample (1,078.12), though inventory of 482.65 suggests a long cycle typical for seasonal sportswear; estimated CCC is ~149 days, manageable but worth monitoring into peak seasons. ROE is 6.0% via DuPont (margin 7.8% × asset turnover 0.571 × leverage 1.36x), respectable but below best-in-class consumer discretionary peers; ROIC at 6.5% is slightly below the common 7–8% target range. Cash returns to shareholders appear modest (share repurchases nearly zero), and dividend data are unreported; the calculated payout ratio of 121.1% should be treated with caution due to disclosure gaps. Forward-looking, the company enters H2 with improved margin momentum, solid liquidity to navigate FX/input cost volatility, and capacity to invest (capex 14.46) without stressing cash flows. Key watch items are inventory discipline, SG&A efficiency, and sustaining gross margin amid currency and demand fluctuations. Overall, execution was disciplined, with quality earnings and conservative financial posture supporting medium-term resilience.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 7.8% × Asset turnover 0.571 × Financial leverage 1.36x = ROE 6.0%. The largest driver of YoY improvement appears to be net margin expansion, given net income grew +22.0% versus revenue +5.8%, while leverage remained conservative. Net margin benefitted from operating leverage (OP +7.7% vs revenue +5.8%) and favorable non-operating balance (net +7.11), along with a 25.3% effective tax rate that did not pressure earnings. Asset turnover at 0.571 is moderate for a branded sports company with seasonal inventory; no clear YoY trend is available, but the large asset base (2,214.78) caps ROE. The improvement in operating margin (~+17 bps by estimate) likely reflects pricing/mix and SG&A productivity, though SG&A YoY growth is unreported, limiting precision. These margin gains appear sustainable near term if pricing power and cost control persist; however, currency swings and input costs (materials, freight) could compress gross margin. No concerning SG&A trend can be confirmed due to missing YoY SG&A data; nonetheless, continued revenue outpacing fixed-cost growth will be key to maintaining operating leverage.

Growth Assessment

Top-line growth of 5.8% indicates steady demand across categories/geographies, with operating income growing faster at 7.7%, implying positive operating leverage. Net income grew 22.0%, outpacing OP due to improved non-operating items and tax effect, which may not fully recur if financial income normalizes. Gross margin at 41.7% indicates healthy pricing/mix; sustaining this will depend on FX (JPY trend) and product mix (footwear/apparel vs equipment). Ordinary income +12.5% confirms broad-based profit improvement beyond core operations. With EBITDA at 137.35 (10.9% margin), there is headroom to reinvest (capex 14.46) while preserving cash. Outlook hinges on inventory turnover in H2, promotional intensity during seasonal peaks, and sponsorship/marketing ROI. Given conservative leverage and strong liquidity, the company is positioned to defend margins amid macro variability, but achieving ROIC > 7–8% will require continued mix upgrade and tighter working capital.

Financial Health

Liquidity is very strong: current ratio 3.79x and quick ratio 2.54x; no warning triggers (Current Ratio well above 1.0). Solvency is conservative with D/E 0.36x and interest coverage 100.09x. Short-term debt (22.88) is well covered by cash and deposits (356.58) and current assets (1,465.22), indicating minimal maturity mismatch risk. Long-term loans of 84.10 are modest relative to total equity (1,633.38). No off-balance sheet obligations are disclosed in the data provided. Working capital of 1,078.12 provides ample buffer for seasonal inventory swings.

Cash Flow Quality

OCF/Net Income at 1.15x signals good earnings quality with cash conversion supporting reported profits. Operating CF of 113.98 covers capex (14.46) comfortably; a simple proxy FCF (OCF − Capex) is ~99.5, but full investing CF is unreported and may differ due to security purchases/disposals or other items. Financing CF of -25.84 reflects net outflows (likely repayments/dividends), but dividends paid are unreported; share repurchases were negligible (-0.01). Working capital appears investment-heavy in inventories (482.65), with estimated days: Inventory ~119, Receivables ~63, Payables ~33 (assuming a 182-day half-year), yielding a CCC of ~149 days; this is consistent with seasonal apparel/footwear but should be watched for build-ups. No signs of working-capital-driven earnings management are evident given positive OCF relative to NI.

Dividend Sustainability

Dividend details are largely unreported; the listed payout ratio of 121.1% likely reflects data timing/methodology and should not be taken at face value without full-year dividend disclosure. On a cash basis, OCF comfortably covers capex, suggesting room for distributions; however, actual dividend cash outflow is unknown, and financing CF includes -25.84 that may partially reflect dividends. With conservative leverage and strong liquidity, base capacity to sustain ordinary dividends appears adequate, but without confirmed DPS and total dividend paid, FCF coverage cannot be conclusively assessed. Policy outlook likely prioritizes stable dividends with disciplined reinvestment, contingent on maintaining OCF/NI ≥ 1.0 and stable working capital.

Risk Assessment

Business Risks:

• Demand volatility in sportswear and equipment across regions and channels
• FX risk (JPY fluctuations) impacting gross margin and overseas earnings translation
• Input cost volatility (materials, freight) potentially pressuring gross margins
• Inventory obsolescence/markdown risk given long estimated CCC (~149 days)
• Brand/endorsement and event-cycle risk affecting marketing ROI and sell-through

Financial Risks:

• Potential cash flow timing risk tied to seasonal working capital needs
• Interest rate and funding cost changes (low sensitivity given coverage 100x and low debt)
• Equity market fluctuations affecting investment securities (136.97) and comprehensive income

Key Concerns:

• ROIC at 6.5% below the 7–8% target range, limiting value creation buffer
• Asset turnover of 0.571 indicates capital intensity/working capital tie-up
• Dividend disclosure gaps create uncertainty around true payout and FCF coverage

Investment Implications

Key Takeaways:

• Healthy Q2 with revenue +5.8%, OP +7.7%, NI +22.0%, indicating margin and below-OP improvement
• Operating margin estimated +17 bps YoY to 9.5%; net margin +~104 bps to 7.8%
• Strong cash quality (OCF/NI 1.15x) and ample liquidity (current ratio 3.79x)
• Conservative leverage (D/E 0.36x) and very high interest coverage (100x)
• ROE 6.0% and ROIC 6.5% suggest room to improve capital efficiency
• Inventory intensity implies execution risk into seasonal peaks; watch markdowns and sell-through

Metrics to Watch:

• Gross margin trajectory vs FX and input costs
• SG&A ratio to sales and operating leverage sustainability
• Inventory days, AR days, and overall CCC
• OCF/NI and FCF (including full investing CF) coverage of dividends and capex
• ROIC progression toward ≥7–8%
• Ordinary income components (non-operating items) stability

Relative Positioning: Within Japan-listed sporting goods peers, the company combines solid mid-single-digit growth and disciplined cost control with a conservatively financed balance sheet; profitability is healthy but capital efficiency (ROIC/ROE) trails best-in-class, making working capital productivity and mix upgrades the key levers for catch-up.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis