KISOJI CO.,LTD. FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, Revenue was ¥545.7B (YoY +¥13.4B +2.5%), Operating Income was ¥29.1B (YoY +¥2.0B +7.6%), Ordinary Income was ¥29.3B (YoY +¥1.8B +6.3%), and Net Income was ¥17.3B (YoY -¥14.4B -45.4%). The top line achieved growth for the second consecutive year; a gross margin of 68.4% (up +0.3pt from 68.2%) and a SG&A ratio of 63.1% (flat vs. prior year 63.1%) drove an improvement in Operating Margin to 5.3% (up +0.2pt from 5.1%). Profitability up to the ordinary income level grew smoothly, but Net Income declined substantially YoY due to recording Special Losses of ¥3.8B including an impairment loss of ¥2.6B and an increase in the effective tax rate to 36.6% (YoY). Meanwhile, Operating Cash Flow was ¥54.3B (YoY +¥37.9B +278.7%), 3.14x Net Income, and Free Cash Flow was ¥36.2B, indicating a healthy cash-generation profile sufficient to cover dividend payments and capital expenditures.

Drivers of Performance

[Revenue] Revenue was ¥545.7B, up +2.5% YoY. The Group operates effectively as a single segment centered on restaurant operations; same-store customer counts, average spend per customer, and store openings/closings drive revenue. Cost of Sales was ¥172.3B (31.6% of sales), Gross Profit was ¥373.4B, and Gross Margin improved to 68.4% from 68.2% (+0.3pt). Improvements are attributed to price revisions, menu-mix optimization, and yield improvements, demonstrating maintenance/improvement of gross margin amid rising raw material and utility costs. All revenue is domestic; overseas revenue is zero.

[Profitability] SG&A was ¥344.3B (63.1% of sales), up +2.5% YoY, approximately in line with sales growth, leaving the SG&A ratio unchanged at 63.1%. Operating Income was ¥29.1B (Operating Margin 5.3%), up +7.6% YoY; Operating Margin improved +0.2pt from 5.1% the prior year. Non-operating items: Non-operating income ¥1.2B (interest and dividends received ¥0.8B, etc.) less Non-operating expenses ¥1.0B (interest expense ¥0.6B, etc.) resulted in net +¥0.2B, producing Ordinary Income of ¥29.3B (Ordinary Income Margin 5.4%), up +6.3% YoY. Extraordinary items: Extraordinary gains ¥1.8B (gain on sale of fixed assets) less Extraordinary losses ¥3.8B (impairment loss ¥2.6B, loss on disposal of fixed assets ¥1.2B) yielded net -¥2.0B, resulting in Profit Before Income Taxes of ¥27.2B. Income taxes amounted to ¥10.0B (effective tax rate 36.6%), a large increase from prior year -¥7.6B (driven by reversal of deferred tax assets, etc.), resulting in Net Income of ¥17.3B (Net Margin 3.2%), a YoY decline of -45.4%. In summary, despite revenue and operating profit growth, one-off items and tax burden led to a significant reduction in Net Income.

Key Financial Metrics

[Profitability] Operating Margin 5.3% (prior 5.1%, +0.2pt), Net Margin 3.2% (prior 5.9%, -2.8pt), ROE 5.5% (prior 10.9%, -5.4pt). Operating-level profitability improved due to gross margin expansion, but Net Margin deteriorated significantly from one-off losses and higher tax rate, halving ROE due to lower net income. [Cash Quality] Operating CF / Net Income = 3.14x, indicating high cash quality; Operating CF / EBITDA (EBITDA = Operating Income + Depreciation = estimated ¥43.9B) = 1.24x, favorable. Non-cash items such as impairment contributed, so cash generation is strong relative to accounting profit. [Investment Efficiency] Total Asset Turnover 1.13x (prior 1.14x). CapEx ¥19.6B is 1.33x Depreciation ¥14.8B, reflecting renewal/growth investment; Tangible Fixed Asset Turnover 3.28x, showing sustained asset efficiency. [Financial Soundness] Equity Ratio 65.1% (prior 64.9%), Current Ratio 150.5%, Quick Ratio 150.3% indicate strong short-term liquidity. Interest-bearing debt ¥70.7B (short-term borrowings ¥70.0B + long-term borrowings ¥0.7B) vs. cash and deposits ¥152.7B, close to net cash. Debt/EBITDA 1.61x, Interest Coverage approximately 47x (Operating CF ¥54.3B / interest paid ¥0.6B ×2 ≈ 45x; EBIT ¥29.1B / interest paid ¥0.6B ≈ 48x), indicating very high debt-servicing ability. Short-term borrowings ratio 99.1% (short-term borrowings ¥70.0B / interest-bearing debt ¥70.7B) concentrates maturities in the short term, but Cash/Short-term Borrowings = 2.18x limits immediate refinancing pressure. Asset retirement obligations ¥13.3B warrant attention as potential exit/restoration costs. Goodwill ¥9.8B equals 3.1% of net assets and 0.22x of EBITDA—conservative levels with low impairment risk.

Cash Flow Analysis

Operating CF was ¥54.3B, improving from ¥14.3B a year earlier (+¥37.9B +278.7%), and was 3.14x Net Income, demonstrating high-quality cash generation. Subtotal of operating CF (before working capital changes) was ¥59.4B; working capital contributed via inventory decrease +¥7.2B, trade receivables decrease +¥0.7B, and trade payables increase +¥4.1B, while corporate tax payments -¥5.3B were cash outflows, yielding net Operating CF of ¥54.3B. Non-cash add-backs included impairment loss ¥2.6B. Investing CF was -¥18.1B, mainly CapEx -¥19.6B (new stores, renovations, maintenance/renewals), net acquisitions/disposals of investment securities, and proceeds from sales of tangible fixed assets ¥2.5B; redemption proceeds of investment securities ¥5.0B also provided inflow. Financing CF was -¥17.4B: net change in short-term borrowings was zero (prior year net increase ¥30.0B), long-term borrowings repayment -¥2.9B, lease liabilities repayment -¥1.0B, and dividend payments -¥13.5B were cash outflows. Free Cash Flow (Operating CF + Investing CF) was ¥36.2B, covering dividends ¥13.5B and share buybacks ¥0.0B by 2.68x, and cash increased by ¥18.8B. Year-end cash was ¥152.7B, representing 31.5% of total assets and indicating very high financial flexibility.

Quality of Earnings

Recurring income consists of Revenue ¥545.7B and Non-operating income ¥1.2B, most of which is interest and dividends received ¥0.8B, indicating low dependency on non-operating items and revenue primarily from core operations. One-off items: Extraordinary gains ¥1.8B (gain on sale of fixed assets) and Extraordinary losses ¥3.8B (impairment loss ¥2.6B, loss on disposal of fixed assets ¥1.2B), net -¥2.0B which depressed Net Income. Ordinary Income ¥29.3B vs. Net Income ¥17.3B shows a -41% gap, mainly due to extraordinary losses and a high effective tax rate of 36.6%. Prior year’s effective tax rate was an anomalous -31.8% due to reversal of deferred tax assets; the current 36.6% partly reflects a rebound. On an accrual basis, Operating CF is 3.14x Net Income, indicating strong cash backing. Operating CF / EBITDA 1.24x is healthy, helped by non-cash impairment and working capital improvements. Comprehensive income was ¥26.0B, ¥8.7B above Net Income ¥17.3B, largely due to valuation gains on investment securities of ¥8.8B (OCI from fair value increases), reflecting unrealized gains on held equities. Goodwill amortization under JGAAP of ¥1.4B is about 3% of EBITDA, causing only a minor distortion when comparing with IFRS peers. Overall, recurring income quality is high; Net Income volatility is driven by one-offs and tax-rate fluctuations, while cash-generation capability is sustainable.

Earnings Forecast & Guidance

Full Year forecast: Revenue ¥550.0B, Operating Income ¥32.0B, Ordinary Income ¥32.5B, Net Income ¥21.0B. Achievement rates vs. forecasts were: Revenue 99.2%, Operating Income 91.0%, Ordinary Income 90.1%, Net Income 82.3%. Revenue nearly met the plan, while Operating/Ordinary were short by ~9–10% and Net Income missed by ~18%. The shortfall was mainly due to Extraordinary losses ¥3.8B including impairment loss ¥2.6B and an overshoot of the effective tax rate to 36.6%; operating strength up to the ordinary income level achieved ~90% of plan, which is within an acceptable range. Forecast assumptions are described in the attached management performance overview; as deviations stemmed chiefly from one-offs, next fiscal year’s forecast assumes normalization of extraordinary losses and tax rates. Forecast EPS is 74.57円 vs. actual EPS 61.36円 (+21.5%). Dividend forecast 15円 (annual) contrasts with actual dividend of 30円 (interim 15円 + year-end 15円); the stated 15円 in forecasts may refer to a semiannual amount. Going forward, recovery in same-store traffic, stabilization of raw material and utility costs, and optimization of the store portfolio will be key to stabilizing and improving margins.

Shareholder Returns

This period’s dividend is Interim 15円 & Year-end 15円, annual 30円 (prior year Interim 6円 & Year-end 6円 annual 12円; note prior year year-end included ordinary dividend 18円 + special dividend 15円 totaling 33円—estimated prior year total ~21円), indicating a dividend-upward trend. Payout Ratio is 49.6% (total dividends ¥13.5B / Net Income ¥17.3B; XBRL shows 40.0% elsewhere, indicating discrepancies between declared policy and reported figures). At normal profit levels this is not excessive. Share buybacks were ¥0.1B, immaterial; Total Return Ratio approximately 50%, indicating dividend-focused shareholder returns. Free Cash Flow ¥36.2B covers dividends ¥13.5B by 2.68x; combined with cash ¥152.7B, dividend sustainability is high. DOE (total dividends / net assets) is 4.4%, not an excessive capital return from a capital-efficiency perspective, and represents a balanced level. If Net Income normalizes after one-off impacts, there is room for dividend increases within a payout ratio range of 40–50%. The dividend forecast of 15円 (whether annual or semiannual requires confirmation; if annual, it would be -50% YoY vs. prior 30円) will be decided based on next fiscal year profit levels.

Risk Factors

1. Risk of sustained high raw material and utility costs: Although Gross Margin improved to 68.4% (+0.3pt YoY), continued upward pressure on food and utility prices may prevent full pass-through or cost absorption, reversing and deteriorating gross margin and compressing operating margin.

2. Fixed-cost leverage risk from labor and SG&A: SG&A ratio at 63.1% is high; if labor shortages push labor costs up or rents/utilities rise faster than sales growth, operating leverage can reverse and operating margin decline. Under a high fixed-cost structure, stagnation in same-store sales could rapidly erode profitability.

3. Risk of recurring store impairments and one-off losses: The company recorded impairment losses ¥2.6B this period, which pressured Net Income. If unprofitable stores persist, closures and impairments may recur, increasing Net Income volatility. Asset retirement obligations ¥13.3B (8.0% of liabilities) represent potential one-off cash outflows upon store exits.

Industry Benchmark (Reference — Company compilation)

Profitability & Returns

Operating Margin outperforms the industry median by +0.7pt and ranks relatively high, while Net Margin falls below the median due to one-off losses.

Growth & Capital Efficiency

Revenue growth lags the industry median by -1.8pt, placing the company at a somewhat slower growth position within the dining-out sector.

※ Source: Company compilation

Points of Note in the Financial Results

1. Improvement in operating-level profitability and strong cash generation: Gross Margin 68.4% and Operating Margin 5.3% improved YoY; Operating CF is 3.14x Net Income and Free CF ¥36.2B demonstrates a strong cash-generation profile. Cash ¥152.7B, Debt/EBITDA 1.61x, and Interest Coverage ≈47x provide financial resilience to support both dividends and growth investment. CapEx at 1.33x Depreciation indicates proactive mid-term investment for store network expansion/renewal; improving same-store performance and store-opening efficiency are keys to growth.

2. One-off volatility in Net Income and expectation of normalization next year: Net Income ¥17.3B decreased -45.4% YoY due to impairment ¥2.6B and an effective tax rate of 36.6%, but Ordinary Income rose +6.3%, indicating core operating strength remains. Extraordinary losses related to store selection/closures are transient, and the tax rate increase is partly a rebound from the prior year anomaly; Net Income recovery can be expected next year as one-offs fade and tax rates normalize. Forecasts achieved ~90% for Operating/Ordinary Income but only 82% for Net Income due to one-offs; confirmation of an earnings-uptrend in next year’s guidance will be important.

3. Focus on short-term debt concentration and persistently high SG&A ratio: 99.1% of interest-bearing debt is short-term borrowings ¥70.0B, creating maturity-concentration risk. Cash balances are 2.18x short-term borrowings, providing liquidity, but interest-rate changes or adverse refinancing conditions warrant attention. SG&A ratio at 63.1% remains high; continued upward pressure on labor, rent, and utilities could lead to reversed operating leverage and rapid deterioration in profitability if sales momentum weakens. Monitoring same-store customer counts and average spend, raw material and utility price trends, and optimization of the store portfolio (including recurrence of impairments) will be critical.

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This report is an AI-generated earnings analysis document produced by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.