Mizuno (8022) FY2026 Q3 Earnings Report

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Executive Summary

In addition to higher revenue and earnings, the growth in operating income exceeded revenue growth, resulting in improved profitability. Revenue was ¥1873.5B (+6.8% YoY), operating income was ¥179.4B (+12.1%), ordinary income was ¥189.8B (+12.1%), and quarterly net income attributable to owners of the parent was ¥148.8B (+18.0%). The operating margin improved by approximately 0.5pt YoY to 9.6%, with earnings growth in the Japan segment driving consolidated profits. Meanwhile, extraordinary income, including gains on the sale of investment securities and fixed assets, contributed to the expansion in net income growth.

Factors Affecting Earnings

【Revenue】Revenue was ¥1873.5B, up +6.8% YoY. By region, Japan accounted for ¥1116.1B (59.6% of total), Asia and Oceania ¥303.2B (16.2%), the Americas ¥302.1B (16.1%), and Europe ¥236.6B (12.6%), with revenue increasing in all regions. Europe recorded the highest growth at +19.9%, while Japan was limited to +4.3%.

【Profit and Loss】Operating income was ¥179.4B (+12.1%), with only modest changes from the previous year in the gross margin at 42.1% and the SG&A ratio at 32.5%. Foreign exchange gains of ¥6.9B under non-operating income contributed to ordinary income of ¥189.8B (+12.1%). Extraordinary income of ¥13.4B (¥6.8B in gains on the sale of investment securities and ¥6.6B in gains on the sale of fixed assets) exceeded extraordinary losses of ¥2.4B, boosting net income to ¥148.8B (+18.0%). The fact that net income growth exceeded operating income growth was attributable to this one-time contribution from extraordinary income, resulting in higher revenue and earnings.

Segment Analysis

Segment profit in Japan, at ¥102.0B (+28.9% YoY and 57.1% of the total), grew markedly and drove consolidated earnings growth. Europe recorded higher revenue and earnings, with segment profit of ¥13.3B (+9.8%). Conversely, the Americas posted segment profit of ¥30.4B (-8.6%) despite revenue growth of +4.6%, while Asia and Oceania posted profit of ¥33.0B (-7.1%) despite revenue growth of +9.4%, indicating higher revenue but lower earnings and variability in profitability among regions. Profit margins were 9.1% in Japan, 5.6% in Europe, 10.1% in the Americas, and 10.9% in Asia and Oceania, with Europe’s margin relatively low.

Key Financial Indicators

【Profitability】The operating margin improved to 9.6% from 9.1% in the same period last year, while the net margin increased from the previous year to 7.9%. The business structure absorbs an SG&A ratio of 32.5% on the basis of a gross margin of 42.1%.【Cash Flow Quality】Net income includes net extraordinary income of ¥10.99B from gains on the sale of investment securities and fixed assets, equivalent to approximately 7.4% of net income attributable to owners of the parent. Accordingly, recurring earnings power should be evaluated based on operating income and ordinary income.【Investment Efficiency】ROE was 9.0%, supported by total asset turnover and restrained financial leverage (total assets of ¥2283.8B versus net assets of ¥1682.7B).【Financial Soundness】The equity ratio was 73.7%, and cash and deposits were ¥388.0B. Current assets of ¥1524.2B substantially exceeded current liabilities of ¥387.2B, indicating a conservative financial foundation.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is unavailable, funding trends can be assessed from changes in the balance sheet. Cash and deposits increased to ¥388.0B from ¥324.0B in the previous year, suggesting an accumulation of internal funds accompanying earnings growth. Meanwhile, accounts receivable of ¥444.8B and inventories of ¥494.9B indicate that working capital balances remain elevated, suggesting that funds may be tied up in inventory and receivables during the period of revenue expansion. Interest-bearing debt is limited, centered on long-term borrowings of ¥98.3B, and the Company is considered to have substantial financial funding capacity against its strong equity base of net assets of ¥1682.7B.

Earnings Quality

Operating income increased +12.1% YoY, reflecting improved core earnings power. From ordinary income through net income, in addition to non-operating income such as foreign exchange gains of ¥6.9B and dividend income of ¥3.0B, extraordinary income of ¥13.4B, including gains on the sale of investment securities of ¥6.8B and fixed assets of ¥6.6B, was recorded. Extraordinary losses remained limited to ¥2.4B, primarily comprising business restructuring expenses, resulting in net extraordinary income of approximately ¥10.99B. Consequently, net income growth of +18.0% exceeded operating income growth of +12.1%, with part of the earnings increase dependent on asset-sale gains with low recurrence. Comprehensive income was ¥153.4B, close to net income of ¥150.8B, while foreign currency translation adjustments of -¥7.8B were a factor weighing on results, indicating that changes in the yen-converted value of overseas assets affected comprehensive income.

Earnings Forecasts and Guidance

The full-year Company forecast is revenue of ¥2600.0B (+8.2% YoY), operating income of ¥225.0B (+8.3%), and ordinary income of ¥230.0B (+7.7%). For the cumulative Q3 period, progress rates were 72.1% for revenue, 79.7% for operating income, and 82.5% for ordinary income, with operating income and ordinary income tracking above the standard 75% level. Against forecast EPS of ¥215.02, cumulative EPS had reached ¥193.87, placing it near the full-year target even without a substantial buildup of earnings in Q4. However, because the progress of net income includes the contribution of extraordinary income, progress at the operating level is considered to reflect underlying performance more accurately.

Shareholder Returns

The full-year dividend forecast is ¥60.00 per share, at the same level as the previous year’s actual dividend. The Q2 dividend was ¥25.00, implying an expected year-end dividend of ¥35.00. Based on forecast EPS of ¥215.02, the Payout Ratio is approximately 28%, below the general benchmark of 60%. With retained earnings of ¥939.6B and cash and deposits of ¥388.0B, the balance sheet has substantial capacity to fund dividends.

Risk Factors

1. Declining working capital efficiency: Accounts receivable of ¥444.8B and inventories of ¥494.9B remain at elevated levels, suggesting that collections and inventory turnover may not be keeping pace with revenue growth. If this continues, it could affect capital efficiency and the gross margin.

2. Variability in regional profitability: Segment profit declined -8.6% YoY in the Americas and -7.1% in Asia and Oceania despite revenue growth. Dependence on Japan for profits is increasing, making the recovery of profitability in overseas regions a key challenge for diversification going forward.

3. Quality of net income: Net extraordinary income of ¥10.99B, including gains on the sale of investment securities of ¥6.8B and fixed assets of ¥6.6B, contributed to net income growth of +18.0%. It will be necessary to monitor the fact that a similar earnings contribution may not continue in subsequent periods.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

All of the Company’s profitability indicators exceed the industry median and are relatively high within the industry.

Growth and Capital Efficiency

The revenue growth rate also exceeds the industry median, indicating a relatively high pace of revenue growth within the industry.

※Source: Compiled by the Company

Key Points in the Results

1. The operating margin improved YoY, and earnings growth in the Japan segment drove consolidated performance. The trend of higher revenue and earnings is supported by improved core earnings power.

2. Full-year progress rates were 79.7% for operating income and 82.5% for ordinary income, both above standard levels. However, since the 90.2% progress rate for net income includes the contribution of extraordinary income, an evaluation placing greater emphasis on progress at the operating and ordinary income levels is appropriate.

3. The Americas and Asia and Oceania recorded lower earnings despite higher revenue, making differences in regional profitability a key structural area for future observation. The levels of accounts receivable and inventories also warrant close monitoring from the perspective of working capital efficiency.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,193–¥2,322 at ±1% cost of equity, and ¥2,254–¥2,258 at ω±0.1.

Notes:

• Because progress of net income against the full-year forecast (90%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of progress tend to exceed forecasts. The adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end have been used (there is a time lag relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

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AI Financial Analysis

Executive Summary

Mizuno delivered a strong FY2026 Q3 cumulative earnings performance, with operating and attributable profit growth outpacing revenue growth. Revenue rose 6.8% year on year to ¥187.35bn. Operating income increased 12.1% to ¥17.94bn. Ordinary income also rose 12.1% to ¥18.98bn. Profit attributable to owners of the parent grew 18.0% to ¥14.88bn. The operating margin expanded by 45bp year on year to 9.6% from 9.1%. Gross margin improved by 43bp to 42.1%, indicating favorable product mix, pricing, sourcing, or channel effects. SG&A increased 6.7%, marginally below revenue growth, and the SG&A-to-sales ratio edged down by approximately 3bp to 32.5%. Net margin expanded by approximately 75bp to 7.9%, aided by both stronger operating earnings and net extraordinary gains. Extraordinary income of ¥1.34bn, primarily gains on sales of investment securities and fixed assets, exceeded extraordinary losses of ¥0.24bn, creating a net ¥1.10bn gain. This represented approximately 7% of attributable profit and should not be treated as fully recurring earnings. Japan remained the core business, contributing 57% of segment revenue and 57% of segment profit, while also accounting for most of the consolidated segment-profit increase. Overseas revenue growth was especially strong in Europe and Asia-Pacific, although segment-profit margins in these regions declined. The annualized ROE of 11.8% is in the good 10-15% range and is supported principally by profitability rather than aggressive leverage. Financial flexibility is substantial, with a 393.7% current ratio, ¥38.80bn in cash and deposits, and only ¥12.34bn of interest-bearing debt. The key operational concern is working-capital intensity: DSO of 65 days, DIO measures of 143 days and 125 days, and an annualized cash conversion cycle of 170 days indicate material capital tied up in the operating cycle. Management's full-year guidance appears conservative relative to the Q3 run rate, as operating-profit progress has reached 79.7% against a standard 75% seasonal benchmark and attributable-profit progress has reached 90.2%.

Profitability Analysis

The reported annualized ROE of 11.8% decomposes into a 7.9% net profit margin, 1.094x annualized asset turnover, and 1.36x financial leverage. The principal driver is the net profit margin, which improved from an estimated 7.2% in the prior-year period to 7.9%, while financial leverage remains modest. Operating leverage was favorable: revenue grew 6.8%, whereas operating income rose 12.1%, producing 45bp operating-margin expansion to 9.6%. Gross-margin expansion of 43bp to 42.1% accounts for nearly all of this operating-margin improvement. SG&A growth of 6.7% was slightly below revenue growth, demonstrating disciplined overhead absorption rather than cost deleveraging. The five-factor profile is also sound: the tax burden was 0.741 and the interest burden was 1.119, with the latter exceeding 1.0 because profit before tax benefited from non-operating and extraordinary items relative to EBIT. Interest coverage of 96.98x confirms that interest costs are immaterial to earnings capacity. However, ¥1.10bn of net extraordinary gains—¥0.68bn from securities sales and ¥0.66bn from fixed-asset sales, offset by ¥0.24bn of extraordinary losses—enhanced pre-tax and net profit. Consequently, the 18.0% growth in attributable profit is stronger than the 12.1% operating-income increase, but part of the incremental net-profit growth is non-recurring. Japan's segment margin expanded to 9.1% from 7.4%, making it the largest positive contributor to consolidated profitability. Europe, the Americas, and Asia-Pacific generated positive segment profits, but their margins declined year on year, indicating that the domestic margin recovery was more important than overseas operations to the Q3 profit improvement.

Growth Assessment

Revenue growth was broad based across all reported geographic segments. Japan external sales increased 4.3% year on year to ¥106.37bn, Europe increased 19.9% to ¥23.66bn, the Americas increased 4.6% to ¥30.19bn, and Asia-Pacific increased 9.4% to ¥27.11bn. Japan was the core business by both revenue and segment-profit contribution, with segment profit rising 28.9% to ¥10.20bn. Europe expanded revenue rapidly but segment profit increased only 9.8% to ¥1.33bn, reducing segment margin to 5.6% from 6.1%. Americas segment profit fell 8.6% to ¥3.04bn despite revenue growth, with margin declining to 10.1% from 11.5%. Asia-Pacific segment profit declined 7.1% to ¥3.30bn and margin fell to 10.9% from 12.5%. The divergence between Japanese and overseas margin trends should be monitored because international revenue represented 43.2% of consolidated external sales. Full-year revenue guidance of ¥260.0bn implies 72.1% Q3 progress, modestly below the standard 75% benchmark. Operating-income guidance of ¥22.5bn implies 79.7% progress, 4.7 percentage points ahead of the standard benchmark. Ordinary-income guidance of ¥23.0bn implies 82.5% progress, 7.5 percentage points ahead of standard. Attributable-profit guidance of ¥16.5bn implies 90.2% progress, 15.2 percentage points ahead of standard, partly reflecting the recognized extraordinary gains. The implied Q4 operating margin under guidance is approximately 6.3%, versus 9.6% for the first nine months, suggesting either normal seasonality, planned spending, or conservatism in the outlook. Sustained growth will depend on preserving gross-margin gains while restoring profitability in the Americas and Asia-Pacific.

Financial Health

Balance-sheet strength is high. Current assets of ¥152.42bn exceed current liabilities of ¥38.72bn by ¥113.70bn, producing a 393.7% current ratio and a 265.9% quick ratio. These ratios indicate no current liquidity stress and no maturity mismatch between near-term obligations and liquid/current assets. Cash and deposits of ¥38.80bn are 15.46x short-term loans of ¥2.51bn. Interest-bearing debt totals ¥12.34bn, equivalent to 6.8% of capital, while cash exceeds interest-bearing debt by ¥26.47bn. The 20.3% short-term debt ratio indicates that most borrowings are long-term rather than subject to near-term refinancing. Long-term loans rose ¥2.22bn, or 29.2% year on year, to ¥9.83bn, but this increase is readily absorbed by the net-cash position and strong interest coverage. Total equity increased 7.1% year on year to ¥168.27bn, lifting the capital adequacy ratio to 73.3% from 71.6%. Retained earnings increased ¥10.84bn, or 13.0%, to ¥93.96bn, reflecting continued internal capital generation. Investment securities increased ¥4.49bn, or 47.0%, to ¥14.06bn and now represent 6.2% of total assets; the larger portfolio adds exposure to equity-market valuation changes and potential reliance on realized gains. Goodwill is only ¥0.77bn, equal to 0.5% of equity and 0.3% of assets, so the balance sheet has negligible M&A-related impairment dependence. Asset retirement obligations are ¥0.30bn, equivalent to approximately 0.5% of total liabilities, and are not material to solvency.

Notable B/S Changes

Investment securities: +¥4.49bn (+47.0%) to ¥14.06bn - larger marketable investment exposure increases sensitivity to valuation changes and supports potential future realized-gain volatility. Long-term loans: +¥2.22bn (+29.2%) to ¥9.83bn - borrowing increased, but refinancing and solvency risk remain limited by ¥38.80bn of cash, low debt/capital of 6.8%, and 96.98x interest coverage. Retained earnings: +¥10.84bn (+13.0%) to ¥93.96bn - continued profit retention strengthened equity and supported the increase in capital adequacy to 73.3%.

Cash Flow Quality

Working-capital efficiency is the principal earnings-quality and cash-conversion consideration. The quality alert for DSO of 65 days is warranted because it exceeds the 60-day warning threshold and indicates slower customer collection than a typical efficient manufacturing benchmark. Accounts receivable nevertheless declined 3.5% year on year to ¥44.48bn while revenue increased 6.8%, which is directionally favorable, but the day-based collection metric remains elevated. The quality alert for DIO of 143 days is material because it is far above the 90-day warning threshold and ties up a substantial amount of capital in inventory. A second inventory alert reports DIO of 125 days against a 60-day benchmark; despite the differing calculation basis, both reported measures identify elevated inventory duration. Finished goods are ¥49.49bn and account for the reported inventory balance, underscoring exposure to demand forecasting, product-cycle timing, markdowns, and inventory obsolescence. Finished-goods inventory declined 2.5% year on year, while sales rose, providing some evidence of improved absolute inventory discipline. The annualized cash conversion cycle of 170 days is above the 120-day warning threshold and is the most significant operating-capital quality flag. This long cycle heightens sensitivity of cash generation to seasonal sales patterns, collection timing, inventory turns, and discounting requirements. Accounts payable declined 6.5% year on year to ¥15.06bn, which may reduce supplier-financing support to the cash conversion cycle. Cash reserves of ¥38.80bn provide a substantial buffer against this working-capital requirement. The investment implication is that earnings conversion should be evaluated through sustained reductions in inventory and receivable days rather than profit growth alone.

Dividend Sustainability

The indicated full-year DPS is ¥60, compared with FY2026 forecast EPS of ¥215.02, implying a forecast dividend payout ratio of approximately 27.9%. This is comfortably below the 60% sustainability benchmark. The Q2 dividend was ¥25 per share, leaving ¥35 per share implied for the year-end dividend if the full-year ¥60 DPS is maintained. The balance sheet supports the distribution, given the net-cash position, 73.3% capital adequacy ratio, and limited debt burden. Retained earnings of ¥93.96bn also provide substantial accounting capacity for dividends. The moderate payout leaves scope to fund inventory requirements, capital investment, and overseas business development. Attributable profit has already reached 90.2% of the full-year forecast, which provides a sizable earnings cushion for the stated dividend. However, part of the nine-month net-profit outperformance reflects net extraordinary gains, so recurring operating earnings and working-capital discipline are more relevant than the current profit run rate for assessing longer-term dividend growth capacity. No total return ratio is calculated because no share-buyback amount is provided.

Risk Assessment

Business risks include Inventory and demand risk: DIO of 143 days and 125 days, both above applicable warning thresholds, exposes the sporting-goods business to seasonal sell-through risk, markdown pressure, product obsolescence, and inventory write-downs., Receivables and collection risk: annualized DSO of 65 days exceeds the 60-day alert threshold, increasing sensitivity to distributor, retailer, and wholesale customer payment behavior., International profitability risk: segment margins declined in Europe, the Americas, and Asia-Pacific despite revenue growth, creating execution risk in pricing, promotions, sourcing, and local operating costs., Foreign-exchange risk: foreign-exchange gains were ¥0.69bn, equal to approximately 3.9% of operating income, showing that currency movements can affect below-the-line earnings., Consumer-discretionary and industry-specific risk: demand for athletic footwear, apparel, and sporting goods is exposed to consumer sentiment, competitive product launches, retailer inventory adjustments, and seasonal weather or sporting-event patterns..

Financial risks include Cash conversion risk: the annualized 170-day cash conversion cycle exceeds the 120-day warning level, increasing the amount of capital required to support growth., Investment-security market risk: investment securities increased 47.0% year on year to ¥14.06bn, increasing sensitivity of equity and comprehensive income to market-price movements., Long-term borrowing increased 29.2% year on year to ¥9.83bn, although the risk is mitigated by cash of ¥38.80bn, debt/capital of 6.8%, and interest coverage of 96.98x..

Key concerns include The HIGH_RECEIVABLE_DAYS alert is a concern because DSO of 65 days is above 60 days; while receivables declined in absolute terms, collection efficiency remains weaker than the stated benchmark and can delay cash realization., The HIGH_INVENTORY_DAYS alert based on 143 days is a concern because it is well above 90 days; the principal impact is elevated markdown, obsolescence, and cash tie-up risk in finished goods., The second HIGH_INVENTORY_DAYS alert of 125 days is also material because it exceeds the 60-day manufacturing benchmark; both inventory measures point to the same underlying need for faster sell-through and tighter inventory planning., The LONG_CCC alert is a concern because the annualized 170-day cycle exceeds 120 days; this makes free cash generation more sensitive to working-capital movements even when reported earnings are growing., Net extraordinary gains of ¥1.10bn supported attributable profit, so the 18.0% net-income growth rate should not be extrapolated entirely as recurring operating performance..

Investment Implications

Key takeaways include Operating performance improved materially: 6.8% revenue growth translated into 12.1% operating-income growth and 45bp operating-margin expansion to 9.6%., Japan is the earnings anchor, delivering ¥10.20bn of segment profit and a 9.1% margin, while overseas margin recovery is the key requirement for broader profit expansion., The annualized 11.8% ROE is healthy and is driven by profitability rather than financial leverage., Liquidity and solvency are exceptionally strong, with a 393.7% current ratio, net cash of ¥26.47bn, and debt/capital of 6.8%., The most important counterweight to strong earnings is the elevated operating cycle, particularly long inventory duration and a 170-day annualized cash conversion cycle., Full-year profit guidance appears achievable on the nine-month result, but the gap is partly supported by non-recurring gains on asset and securities sales..

Metrics to watch include Japan segment margin and whether its 9.1% Q3 cumulative level can be sustained., Americas and Asia-Pacific segment margins, which declined to 10.1% and 10.9%, respectively., DSO of 65 days and the pace of receivable collection., DIO measures of 143 days and 125 days, particularly finished-goods inventory sell-through., Annualized cash conversion cycle of 170 days., Investment securities balance of ¥14.06bn and any further realized gains or valuation movements., The extent to which FY2026 profit is generated by recurring operations rather than extraordinary gains..

Regarding relative positioning, Mizuno combines good annualized profitability, strong gross-margin momentum, and an unusually conservative balance sheet. Its 9.6% operating margin and 11.8% annualized ROE place it in a solid profitability range, while leverage is materially lower than typical concern thresholds. Relative positioning is moderated by a working-capital cycle that is long for a manufacturing and branded-goods business, and by overseas segment margins that have not matched the improvement in Japan.