Goldwin Inc. FY2027 Q1 Earnings Report

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Executive Summary

This quarterly result was characterized by a significant decline in operating income, while an increase in equity-method investment income supported ordinary income and net income. Revenue was essentially flat at ¥23.59B (-1.2% YoY), but operating income fell sharply to ¥0.37B (-82.1%), while ordinary income was ¥2.60B (-30.9%) and net income attributable to owners of the parent was ¥2.25B (-29.5%). Although the gross profit margin improved to 54.0% (up 1.1pt from 53.0% in the previous year), reflecting improvement in costs, the SG&A ratio rose sharply to 52.4% (up 8.2pt from 44.3% in the previous year), placing pressure on operating income. At the ordinary income level, equity-method investment income of ¥2.18B (+33.6% YoY) mitigated the decline.

Factors Affecting Performance

【Revenue】Revenue was ¥23.59B, essentially flat at -1.2% YoY. As the Company operates a single segment (Sports-Related Business), no breakdown by business is disclosed. Cost of sales was ¥10.85B (-3.4% from ¥11.23B in the previous year), and the cost-of-sales ratio declined to 46.0% (-1.0pt from 47.0% in the previous year). Gross profit was ¥12.75B (+0.8% YoY), and the gross profit margin was 54.0% (an improvement of 1.1pt from 53.0% in the previous year).

【Profit and Loss】SG&A expenses increased 17.1% to ¥12.37B from ¥10.57B in the previous year, and the SG&A ratio rose sharply to 52.4% (up 8.2pt from 44.3% in the previous year). As a result, operating income declined substantially to ¥0.37B (-82.1% from ¥2.08B in the previous year), and the operating margin deteriorated to 1.6% (-7.1pt from 8.7% in the previous year). Non-operating income was ¥2.30B (+34.1% from ¥1.71B in the previous year), including equity-method investment income of ¥2.18B (+33.6% from ¥1.63B in the previous year), which boosted ordinary income; however, ordinary income remained at ¥2.60B (-30.9% from ¥3.76B in the previous year). After deducting extraordinary loss of ¥0.04B (a temporary factor; extraordinary gain of ¥0.12B was recorded in the previous year), profit before tax was ¥2.55B, and net income attributable to owners of the parent was ¥2.25B (-29.5% from ¥3.19B in the previous year). Despite the improvement in gross profit, the increase in SG&A expenses outweighed it, resulting in a decline in both revenue and profit.

Key Financial Metrics

【Profitability】The operating margin was 1.6%, down significantly from 8.7% in the previous year, while the net profit margin based on net income attributable to owners of the parent narrowed to 9.5% (13.4% in the previous year). ROE was 1.8%, below the estimated 2.5% in the previous year. 【Cash Quality】Equity-method investment income accounted for ¥2.18B of ordinary income of ¥2.60B, representing a ratio of 83.8%. Non-operating income of ¥2.30B represented 9.7% of revenue, a somewhat high level, indicating that income contributions outside core operations are supporting profits. 【Investment Efficiency】Investment securities amounted to ¥36.26B, accounting for 22.7% of total assets. While investments in equity-method affiliates are one source of earnings, asset efficiency measured on an operating-income basis has declined from the previous year. 【Financial Soundness】The equity ratio improved to 79.7% (up 2.8pt from 76.9% at the end of the previous fiscal year), while long-term borrowings were minimal at ¥0.97B, maintaining a conservative financial structure that is effectively close to debt-free.

Cash Flow Analysis

Cash and deposits were ¥53.64B, down 8.3% (-¥4.86B) from ¥58.497B at the end of the previous fiscal year. Accounts receivable were ¥9.01B, down 44.8% from ¥16.32B in the previous fiscal year, indicating improvement in cash collection. Meanwhile, inventories increased 5.3% to ¥19.62B from ¥18.63B in the previous fiscal year, suggesting that a portion of working capital remained tied up in inventory. Accounts payable were ¥4.69B, essentially flat at +1.3% from ¥4.63B in the previous fiscal year, with no significant change in payment terms. Overall, while the reduction in accounts receivable generated cash inflows, this coincided with inventory accumulation and a decline in cash balances. Inventory turnover and liquidation will be key determinants of cash efficiency going forward.

Earnings Quality

Equity-method investment income accounted for ¥2.18B of ordinary income of ¥2.60B, representing a high ratio of 83.8%. This income is linked to the performance and market conditions of affiliates, and the significant gap between it and core operating income (¥0.37B) indicates that non-recurring and non-operating components represent an increasing proportion of the earnings mix. Extraordinary loss of ¥0.04B was recorded as a temporary factor. Comprehensive income was ¥0.98B (¥0.92B attributable to owners of the parent), creating a gap of -¥1.33B from net income attributable to owners of the parent of ¥2.25B. The primary factor was the -¥1.39B share of other comprehensive income of equity-method companies, with fluctuations in affiliates’ foreign exchange and securities valuations, among other factors, widening the gap between net income and comprehensive income. Accordingly, the quality of earnings for the period is strongly dependent on the sustainability of equity-method income rather than the degree of recovery in core operating performance.

Earnings Forecast and Guidance

Progress against the full-year plan was 16.2% for revenue (¥23.59B/¥145.40B), 1.4% for operating income (¥0.37B/¥26.10B), 7.6% for ordinary income (¥2.60B/¥34.10B), and 8.8% for net income (¥2.25B/¥25.60B), all substantially below the 25% benchmark based on simple quarterly allocation. Operating income progress was particularly low, suggesting that the increase in the SG&A ratio may have exceeded assumptions. While the earnings forecast was revised during the quarter, the dividend forecast was unchanged. Going forward, the momentum of SG&A expenses in the second half and the sustainability of equity-method investment income will be key to achieving the full-year plan.

Shareholder Returns

The full-year forecast for the year-end dividend is ¥70 (on a post-stock-split basis), representing a payout ratio of 37.4% against the Company’s forecast EPS of ¥187.16. The interim dividend is ¥87, including a ¥10 commemorative dividend for the Company’s 75th anniversary. As the Company implemented a 3-for-1 stock split of its common shares effective October 1, 2025, the total annual dividend is not presented as a simple aggregate and is shown as “-”; on a pre-split basis, the year-end dividend is equivalent to ¥87 and the annual dividend to ¥174. The conservative financial structure, including an equity ratio of 79.7% and long-term borrowings of ¥0.97B, supports dividend sustainability. However, given the decline in the operating margin for the period, the recovery of core operating earnings that form the source of dividends remains an area requiring close monitoring.

Risk Factors

1. Sharp increase in the SG&A ratio: The SG&A ratio rose 8.2pt from the previous year to 52.4%, offsetting the benefit of the 1.1pt improvement in the gross profit margin and placing pressure on core operating income. The degree of operating income recovery for the full year will depend on whether this increase represents temporary upfront expenses or a structural rise in costs.

2. Dependence on equity-method investment income: Equity-method investment income of ¥2.18B accounted for 83.8% of ordinary income of ¥2.60B, creating a significant gap from core operating income of ¥0.37B. The impact of performance and market fluctuations at affiliates on consolidated earnings is relatively high.

3. Changes in working capital: Inventories increased 5.3% to ¥19.62B, while cash and deposits decreased 8.3% to ¥53.64B. Depending on inventory liquidation, future cash efficiency and profitability may be affected.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (retail)

Profitability and Returns

The operating margin is below the industry median, while the net profit margin is substantially above the industry median due to the contribution from equity-method investment income.

Growth and Capital Efficiency

The revenue growth rate is substantially below the industry median, placing the Company among those showing a notable slowdown in growth momentum within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The gross profit margin improved to 54.0% (+1.1pt YoY), but the operating margin deteriorated to 1.6% (-7.1pt YoY) as the SG&A ratio rose to 52.4% (+8.2pt YoY). The increase in SG&A expenses, which exceeded the improvement in gross profit, was the primary cause of the profit decline, and narrowing this gap will be key to recovering core profitability.

2. Ordinary income and net income were supported by equity-method investment income of ¥2.18B (+33.6% YoY), which accounted for 83.8% of ordinary income. The increasing weight of non-operating factors in the earnings mix is an important consideration when evaluating earnings quality.

3. Progress against the full-year plan remained low at 1.4% for operating income, 7.6% for ordinary income, and 8.8% for net income. Given that the earnings forecast was revised during the quarter, trends in SG&A expenses and inventory during the second half will be key areas to monitor.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson type; explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,252–¥1,327 at ±1% for the cost of equity, and ¥1,280–¥1,303 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI through analysis of 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, after consulting professionals as necessary.

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