| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥710.1B | ¥688.6B | +3.1% |
| Operating Income | ¥14.1B | ¥18.9B | -25.2% |
| Ordinary Income | ¥16.3B | ¥20.9B | -21.9% |
| Net Income | ¥10.8B | ¥14.5B | -25.7% |
| ROE | 1.2% | 1.6% | - |
Q1 of the fiscal year ending May 2026 delivered Revenue of ¥710.1B (YoY +¥21.6B, +3.1%) securing top-line growth, but Operating Income fell to ¥14.1B (YoY -¥4.8B, -25.2%), Ordinary Income to ¥16.3B (YoY -¥4.6B, -21.9%) and Net Income to ¥10.8B (YoY -¥3.7B, -25.7%) due to a decline in gross margin and an increase in SG&A ratio. Gross margin was 22.7%, down 0.1pt from 22.8% a year earlier, SG&A ratio rose to 24.2% from 23.7% (+0.5pt), and Operating Margin contracted 0.7pt to 2.0% from 2.7% in the prior-year period. With revenue growth of +3.1% versus SG&A growth of +5.6%, operating leverage turned negative and cost increases clearly weighed on profitability.
[Revenue] The Supermarket Business accounts for 99.6% of sales composition, with that segment posting Revenue of ¥707.2B (YoY +3.1%), showing steady performance. Sales to external customers were supported by resilient demand among existing customers and successful price pass-through. Other businesses (insurance agency, fitness club operations, food manufacturing, etc.) recorded ¥2.9B (YoY +23.1%) — small in absolute terms but a high growth rate. The top line has increased for three consecutive periods.
[Profit & Loss] Cost of goods sold was ¥524.0B, representing a cost-of-sales ratio of 73.8% and a gross margin of 22.7%, down 0.1pt year-on-year. Changes in product mix and discount pressure appear to have compressed gross margin. SG&A was ¥172.1B (YoY +¥9.1B, +5.6%), growing faster than sales; SG&A ratio increased 0.5pt to 24.2%. Key items include Depreciation ¥10.8B (YoY +¥0.6B), Rent ¥13.2B (YoY +¥0.4B), Utilities ¥11.4B (YoY +¥0.0B), indicating notable increases in fixed costs. Operating Income fell to ¥14.1B (YoY -25.2%), with Operating Margin deteriorating to 2.0%. Non-operating income comprised Interest and Dividends Received ¥0.8B and Fee Income ¥0.8B (total non-operating income ¥2.6B); interest expense was ¥0.3B (total non-operating expense ¥0.4B), so non-operating impacts were minor. Extraordinary items were minimal: Extraordinary Gains ¥0.2B (including negative goodwill ¥0.1B) and Extraordinary Losses ¥0.2B (impairment of fixed assets), with limited effect on Net Income. Income taxes were ¥5.5B with an effective tax rate of 33.8%, a standard level and not a primary driver of the earnings decline. In conclusion, the company shows higher revenue but lower profits.
The Supermarket Business reported Revenue ¥707.2B (YoY +3.1%), Operating Income ¥14.7B (YoY -24.2%), and an Operating Margin of 2.1%. Margin declined 0.7pt from 2.8% in the prior-year period as gross margin compression and higher SG&A weighed on profits. Other Businesses posted Revenue ¥2.9B (YoY +23.1%), Operating Income ¥0.6B (YoY +30.2%), and an Operating Margin of 19.1%, maintaining high profitability. Corporate expenses (segment adjustments) were ¥1.1B, up from ¥0.9B in the prior-year period, with increased holding-company group management costs contributing to aggregate profit pressure.
[Profitability] Operating Margin of 2.0% deteriorated 0.7pt from 2.7% year-on-year and was the main factor in the performance decline. Gross Margin 22.7% (prior 22.8%), SG&A Ratio 24.2% (prior 23.7%) — a slight gross margin decrease combined with higher SG&A reduced operating efficiency. Net Margin 1.5% shrank 0.6pt from 2.1%, and ROE at 1.2% is below the prior-year 1.6%. [Cash Quality] Interest Coverage was 44.2x (Operating Income ¥14.1B ÷ Interest Expense ¥0.3B), indicating very strong interest-bearing debt servicing capacity and financial stability. Inventories were ¥93.3B, roughly flat from ¥93.4B a year earlier; inventory turnover days are approximately 65 days (Inventories ÷ 1-day average COGS), a standard level for retail. [Investment Efficiency] Total Asset Turnover was 0.52x (annualized, quarterly sales ×4 ÷ Total Assets), stable without material deterioration in asset efficiency. Tangible Fixed Assets ¥680.1B and Intangible Fixed Assets ¥21.1B indicate continued capital investment; Construction in Progress ¥8.1B (YoY +¥4.5B, +126.8%) suggests progress in new store openings and renovations. [Financial Soundness] Equity Ratio 65.6% declined 1.7pt from 67.3% a year earlier but remains high. Current Ratio 113.2% (Current Assets ¥430.3B ÷ Current Liabilities ¥380.1B) and Quick Ratio 88.7% reflect good short-term liquidity. Cash and Deposits ¥258.4B comfortably exceed Short-term Borrowings ¥69.7B and Long-term Borrowings ¥44.5B (total interest-bearing debt ¥114.2B), yielding cash coverage of 2.3x. Interest-bearing Debt Ratio 8.3% (Interest-bearing Debt ¥114.2B ÷ Total Assets ¥1379.0B) is low, and Debt/Capital ratio 11.2% indicates controlled financial leverage.
Detailed figures for Operating Cash Flow, Investing Cash Flow and Financing Cash Flow are not disclosed, but balance sheet movements allow analysis of cash trends. Cash and Deposits were ¥258.4B, nearly unchanged from ¥258.6B a year earlier (YoY -0.1%), indicating stability. Accounts Payable rose to ¥183.4B from ¥161.1B a year earlier (+¥22.3B), suggesting increases in trade payables contributed to cash generation in working capital. Inventories at ¥93.3B were essentially flat (prior ¥93.4B), implying appropriate inventory control. Accounts Receivable were ¥45.5B, up ¥8.7B from ¥36.8B year-on-year, and receivables growth related to sales expansion may have absorbed some cash. Short-term Borrowings were ¥69.7B (prior ¥67.7B), slightly higher, while Long-term Borrowings were ¥44.5B (prior ¥49.5B), down ¥5.0B, reducing total interest-bearing debt to ¥114.2B from ¥117.2B. Retained Earnings rose to ¥644.8B from ¥642.6B (YoY +¥2.2B), reflecting internal retention after deducting dividends from quarterly Net Income ¥10.8B. Comprehensive Income was ¥0.5B, far below Net Income ¥10.8B, as Valuation Difference on Available-for-sale Securities of -¥10.3B pressured equity. Investment Securities amounted to ¥154.5B (prior ¥169.5B), down ¥15.0B, likely due to market valuation losses and some disposals.
Ordinary Income ¥16.3B versus Net Income ¥10.8B shows a gap of ¥5.5B, primarily due to Income Taxes ¥5.5B. Extraordinary items were minimal: Extraordinary Gains ¥0.2B and Extraordinary Losses ¥0.2B, so one-off factors did not materially affect Net Income. Of Non-operating Income ¥2.6B, Interest and Dividends Received were ¥0.8B, Fee Income ¥0.8B, and Other ¥1.0B — all judged to be recurring income sources. The increase from Operating Income ¥14.1B to Ordinary Income ¥16.3B (+¥2.2B) reflects net non-operating items; contributions from non-core activities are small. Comprehensive Income ¥0.5B diverged markedly from Net Income ¥10.8B due to Valuation Difference on Available-for-sale Securities -¥10.3B. Valuation losses indicate potential future realized loss risk but currently are book-value fluctuations without cash outflow. From an accrual perspective, Accounts Payable increase of +¥22.3B contributed to cash generation without profit recognition, while Accounts Receivable increase of +¥8.7B tied up cash relative to profit. Overall, earnings quality is based on recurring operating activities and one-off distortions are limited.
Full Year (FY) forecasts are unchanged at Revenue ¥2885.0B, Operating Income ¥68.0B (YoY +5.1%), Ordinary Income ¥77.0B (YoY +1.9%), Net Income ¥53.5B, EPS 124.62円, DPS 20.00円. Q1 progress rates are: Revenue 24.6% (¥710.1B ÷ ¥2885.0B), broadly standard; Operating Income 20.8% (¥14.1B ÷ ¥68.0B), Ordinary Income 21.2% (¥16.3B ÷ ¥77.0B), Net Income 20.2% (¥10.8B ÷ ¥53.5B) — profit metrics are in the low-20% range and somewhat lagging. The full-year assumed Operating Margin is 2.4% and Net Margin 1.9%, both higher than Q1 results (Operating Margin 2.0%, Net Margin 1.5%), implying improvement is required in later quarters. Key to achieving guidance from Q2 onward will be gross margin improvement (product mix optimization, restraint on discounts) and SG&A containment (tight fixed-cost control, productivity gains). The company has not revised forecasts this quarter and appears to assume recovery in the second half.
Dividend guidance remains DPS 20.00円, unchanged from the prior period. Payout Ratio on FY EPS 124.62円 is 16.0%, low, indicating ample capacity to absorb earnings volatility. Based on Cash and Deposits ¥258.4B and Shares Outstanding (after treasury stock) 42,651 thousand shares, the annual dividend payout is estimated at approximately ¥0.85B, equivalent to 3.3% of cash balances. Annualized Net Income (quartely ×4) would be ¥43.2B versus dividend payout ¥0.85B, indicating dividends are comfortably covered and sustainability is not a concern. No share buybacks have been announced; shareholder returns consist solely of dividends. The dividend policy appears to emphasize stable dividends; given low payout ratio and strong cash balances, the company has the financial base to maintain dividends even amid earnings fluctuations.
Weak Operating Margin and lagging full-year progress: Operating Margin of 2.0% worsened 0.7pt from 2.7% in the prior-year period; to achieve the full-year forecast of 2.4% would require Operating Margin above 3.0% from Q2 onward. Q1 operating progress of 20.8% implies full-year shortfall risk if gross margin improvements and SG&A restraint are not realized. SG&A ratio at 24.2% rose 0.5pt from 23.7% a year earlier, and persistent increases in personnel costs, utilities, and depreciation are turning operating leverage negative.
Concentration in the Supermarket Business and competitive environment: The Supermarket Business accounts for 99.6% of sales, creating very high single-segment dependence. Its Operating Margin of 2.1% declined 0.7pt from 2.8% a year earlier, and intensified price competition or consumer preference for lower prices could press gross margins. External shocks (adverse weather, weakening consumer sentiment) could directly hit performance due to this concentration.
Equity volatility risk from valuation losses on securities: The company holds Investment Securities of ¥154.5B (11.2% of Total Assets) and Valuation Difference on Available-for-sale Securities of -¥10.3B depressed Comprehensive Income. Market valuation-driven fluctuations in equity could lower the Equity Ratio and, in a deteriorating market, impair financial soundness metrics. Cumulative valuation surplus remains +¥41.2B, but impairment risk exists depending on future market conditions.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.0% | 3.4% (0.8%–7.7%) | -1.4pt |
| Net Margin | 1.5% | 2.2% (0.5%–6.2%) | -0.7pt |
Profitability is below the industry median; gross margin decline and rising SG&A ratio are compressing margins.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 3.1% | 7.7% (0.8%–14.6%) | -4.6pt |
Revenue growth lags the industry median by 4.6pt, indicating relatively modest top-line expansion within the sector.
※ Source: Company compilation
Margin and SG&A improvement are pivotal to full-year target achievement: Q1 Operating Margin was 2.0%, down 0.7pt from 2.7% a year earlier; to reach the full-year Operating Margin target of 2.4% will require Q2 onward margins exceeding 3.0%. SG&A ratio at 24.2% is up 0.5pt from 23.7%, and rising fixed costs have turned operating leverage negative. Optimization of product mix, restraint on discounting, SKU rationalization, and efficiency gains in personnel and utilities could enable margin recovery in the second half. Inventory turnover days of 65 are standard and show no significant deterioration in inventory management.
Financial soundness and dividend sustainability remain strong: Equity Ratio 65.6%, Cash and Deposits ¥258.4B, and Interest-bearing Debt ¥114.2B reflect a solid financial position. Interest Coverage 44.2x and Debt/Capital 11.2% indicate very high debt service capacity and limited financial risk. Payout Ratio 16.0% is low and, together with large cash balances, supports dividend sustainability. The company has financial cushions to withstand downside risks and shows high resilience to earnings volatility.
This report is an earnings analysis document automatically generated by AI 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 responsibility; consult advisors as needed before making investment choices.