LOOK HOLDINGS INCORPORATED FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥36.52B
• Operating Income: ¥781M
• Net Income: ¥987M
• EPS: ¥83.36

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

For FY2025 Q3 (cumulative), Look Holdings reported revenue of ¥36.5bn, down 7.6% YoY, indicating a softer demand environment and/or portfolio rationalization. Operating income declined 44.8% YoY to ¥0.78bn, demonstrating significant operating deleverage as fixed costs weighed on profits amid lower sales. Ordinary income was ¥1.01bn and net income ¥0.62bn (down 37.1% YoY), translating to a net margin of 1.70%, which is thin for an apparel/brand portfolio business. ROE is calculated at 1.63%, driven by low net margin (1.70%), modest asset turnover (0.589x), and moderate financial leverage (1.62x). Gross margin is shown as 64.2% based on the reported gross profit figure, which implies strong product mix/pricing, but there is an internal inconsistency between the reported gross profit and cost of sales lines; we base margin commentary on the stated gross profit metric while acknowledging this discrepancy. Operating margin compressed to roughly 2.1%, highlighting pressure from SG&A and reduced scale efficiencies. Interest coverage remains healthy at about 9.9x, reflecting manageable financing costs relative to operating income. The balance sheet appears conservative with total assets of ¥62.0bn and equity of ¥38.2bn; implied equity ratio is approximately 61–62% (the separately reported equity ratio of 0.0% appears to be unreported rather than literal). Liquidity looks comfortable with a current ratio of 350% and a quick ratio of 195%, supported by sizeable working capital of ¥21.3bn. Inventories of ¥13.25bn represent about 36% of YTD revenue, which merits monitoring given the revenue contraction. Cash flow statements are unreported (all zeros), limiting assessment of cash conversion and free cash flow generation; consequently, the OCF/NI and FCF metrics provided as zero should be treated as not disclosed rather than actual values. No dividend information is effectively disclosed (DPS and payout shown as zero), so dividend policy and sustainability cannot be evaluated from this dataset. EPS stands at ¥83.36, but share count and cash balances are not provided, constraining per-share and liquidity cross-checks. Overall, Look Holdings exhibits resilient gross profitability but notable operating pressure and subdued returns, with a comparatively strong balance sheet providing cushion. Key areas to monitor are revenue trajectory into 4Q, inventory normalization, and whether cost actions can stabilize operating margins. Given the data gaps, conclusions rely on income statement and balance sheet items that are disclosed, while cash flow and dividend inferences remain limited.

Profitability Analysis

ROE of 1.63% decomposes into net margin 1.70% × asset turnover 0.589 × financial leverage 1.62, indicating that low profitability, rather than leverage or asset intensity, is the main drag. Operating margin is approximately 2.1% (¥0.781bn / ¥36.525bn), down sharply YoY, signaling operating deleverage as revenues fell 7.6%. Gross margin is reported at 64.2%, suggesting strong brand mix/pricing and sourcing efficiencies, although the mismatch between reported gross profit and cost of sales warrants caution in interpreting this figure. SG&A intensity has increased relative to sales (implied by the step-down from gross to operating profits), pressuring EBIT. Ordinary margin is about 2.8%, modestly above operating margin, indicating some contribution from non-operating income. Interest expense of ¥79m is low versus EBIT, yielding healthy coverage of about 9.9x and indicating limited financing drag on profitability. With depreciation and amortization unreported, EBITDA and EBITDA margin cannot be reliably assessed; the reported EBITDA of zero should be treated as not disclosed. The low ROE reflects thin margins more than underutilization of assets; improving operating efficiency and cost control would have the largest impact on returns. Pricing power appears intact at the gross level, but fixed and semi-fixed costs reduced operating profit conversion. Absent cash flow data, we cannot corroborate accrual vs. cash profitability, so the quality of earnings assessment relies primarily on margins and coverage metrics.

Growth Assessment

Revenue declined 7.6% YoY to ¥36.5bn, indicating demand softness or portfolio pruning. Operating income fell 44.8% YoY, a larger decline than revenue, evidencing operating deleverage. Net income decreased 37.1% YoY as lower operating profits were only partially cushioned by non-operating items. The discrepancy between gross profit and cost of sales complicates granular gross margin trend analysis, but the provided gross margin suggests mix resilience. Inventory at ¥13.25bn (~36% of YTD revenue) implies potential normalization risk if demand remains weak; successful sell-through in 4Q is key for sustaining recovery. Ordinary income at ¥1.01bn versus operating income of ¥0.78bn implies some non-operating support, which may not be repeatable, so underlying growth depends on restoring operating leverage. Near-term outlook hinges on holiday/seasonal demand and cost control; stabilizing revenue and reducing SG&A intensity are critical to re-expand operating margin. Without cash flow data, we cannot assess whether working capital absorbed growth or if receivables collection slowed, limiting visibility on sustainable growth capacity. EPS of ¥83.36 reflects profitability but lacks share base context due to unreported shares outstanding, constraining per-share growth comparisons. Overall, the growth profile for FY2025 appears pressured, with recovery contingent on sales traction and expense discipline.

Financial Health

Total assets are ¥61.99bn, liabilities ¥23.63bn, and equity ¥38.21bn, implying an equity ratio around 61–62% despite a reported 0.0% that appears to be undisclosed. Debt-to-equity is 0.62x, indicating a moderate leverage position supported by a sizable equity base. Liquidity looks strong with a current ratio of 350% and a quick ratio of 194.5%, supported by ¥21.31bn in working capital. Interest expense is modest at ¥79m, and interest coverage of ~9.9x suggests low refinancing risk under current earnings. The large inventory balance relative to sales warrants monitoring for potential markdown or obsolescence risk in a softer sales environment. Cash and equivalents are not disclosed (reported as zero), which limits a more granular liquidity assessment, including net cash/debt positioning. Overall solvency appears sound given the high equity buffer and coverage, while near-term liquidity seems comfortable based on current and quick ratios.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported; therefore, any OCF/NI or FCF metrics shown as zero should be treated as not disclosed rather than actual outcomes. Without OCF, we cannot directly assess accrual quality (e.g., cash conversion ratio) or free cash flow generation. Working capital indicators suggest ample current assets relative to current liabilities, but inventory at ¥13.25bn is sizeable and could tie up cash if sell-through slows. The decline in operating income alongside revenue points to weaker operating cash potential unless offset by working capital releases. In the absence of D&A disclosure, we cannot separate non-cash components of earnings, further limiting cash earnings analysis. Key watchpoints include inventory turnover, receivables collections, and payables terms, which would indicate whether cash conversion is deteriorating or improving.

Dividend Sustainability

Dividend data are effectively undisclosed for the period (DPS and payout ratio show as zero placeholders). As such, payout behavior and policy cannot be assessed from this dataset. With net income at ¥621m and unknown OCF/FCF, we cannot evaluate coverage from free cash flow. The strong equity base and moderate leverage could support dividends under normal conditions, but margin compression and absent cash flow disclosure increase uncertainty around near-term distributions. We recommend monitoring any company guidance or board resolutions on dividends, alongside subsequent cash flow disclosures and year-end results, to evaluate sustainability.

Risk Assessment

Business Risks:

• Revenue contraction (-7.6% YoY) indicating demand softness or competitive pressures
• Operating deleverage leading to significant EBIT decline (-44.8% YoY)
• Inventory at ~36% of YTD sales, raising markdown/obsolescence risk
• Potential reliance on non-operating items to support ordinary income
• Brand and category mix sensitivity to consumer sentiment and fashion cycles
• Supply chain and procurement risks affecting cost and lead times

Financial Risks:

• Thin net margin (1.70%) limits shock absorption
• Cash flow data unreported, obscuring cash conversion and FCF visibility
• Internal inconsistency between gross profit and cost of sales complicates margin analysis
• Potential tax rate volatility; tax expense implies a high effective tax rate despite a reported 0.0% metric
• Exposure to inventory valuation risk if demand weakens further

Key Concerns:

• Sustained pressure on operating margin and ROE (1.63%)
• Need for inventory normalization to protect gross-to-operating profit conversion
• Limited transparency on cash generation and dividend capacity due to undisclosed cash flow and DPS data

Investment Implications

Key Takeaways:

• Revenue decline with outsized EBIT contraction signals operating deleverage
• ROE subdued at 1.63%, driven primarily by low net margin
• Balance sheet appears strong with an implied equity ratio around 61–62% and healthy coverage
• Liquidity is ample (current ratio 350%, quick ratio 195%), but cash balances are undisclosed
• Inventory levels are high relative to YTD sales and warrant close monitoring
• Data gaps on cash flows and dividends limit assessment of earnings quality and capital returns

Metrics to Watch:

• Sales trajectory and like-for-like growth into 4Q and FY close
• Operating margin recovery and SG&A ratio
• Inventory turnover and gross margin stability (including markdowns)
• Ordinary income composition (recurring vs. non-recurring)
• OCF/NI and FCF once disclosed
• Effective tax rate normalization at year-end

Relative Positioning: Within Japanese branded apparel and fashion groups, Look Holdings exhibits comparatively high reported gross margins but weaker operating margin resiliency and low ROE, offset by a conservative balance sheet and manageable leverage; transparency on cash flows and capital return policies trails best-in-class peers.

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