| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥4366.5B | ¥4032.6B | +8.3% |
| Operating Income / Operating Profit | ¥54.2B | ¥36.9B | +47.0% |
| Ordinary Income | ¥51.1B | ¥34.9B | +46.5% |
| Net Income / Net Profit | ¥32.8B | ¥34.1B | -3.7% |
| ROE | 3.1% | 3.3% | - |
For the fiscal year ended March 2026, Revenue was ¥4,366.5B (vs prior year +¥333.9B, +8.3%), Operating Income was ¥54.2B (vs prior year +¥17.3B, +47.0%), Ordinary Income was ¥51.1B (vs prior year +¥16.2B, +46.5%), and Net Income was ¥32.8B (vs prior year -¥1.3B, -3.7%). While the company achieved higher sales and a substantial increase in operating profit, a material reduction in the net amount of non-recurring items (from +¥21.9B in the prior year to +¥2.2B in the current year) and a higher effective tax rate led to a decline in final profit. Operating margin improved to 1.2% from 0.9% a year earlier (+0.3pt), supported by compression of SG&A ratio (23.4% vs 24.4% prior year), while gross margin fell to 24.7% from 25.3% (-0.6pt). Cash generation remained solid with Operating Cash Flow (OCF) of ¥130.8B (YoY -20.1%) and Free Cash Flow (FCF) of ¥95.8B. ROE at 3.1% indicates continued challenges in capital efficiency.
[Revenue] Revenue expanded steadily to ¥4,366.5B (+8.3%). As a single retail segment focused on consumer electronics and related products, growth was likely driven by contributions from existing and new stores and increased e-commerce penetration. Gross profit was ¥1,077.9B (+5.5%), but gross margin declined to 24.7% from 25.3% a year earlier (-0.6pt). There were signs of intensified discounting and a lower-margin product mix, reflecting a competitive pricing environment. Inventory days of 78 days remain high, and inventory aging-induced markdown pressure may have compressed gross margin.
[Profitability] SG&A was ¥1,023.6B (+3.4%), below the sales growth rate, and SG&A ratio improved to 23.4% from 24.4% a year earlier (improvement of 1.0pt). Efficiency gains in personnel and store-related expenses contributed, leading to a large increase in Operating Income to ¥54.2B (+47.0%). Non-operating items worsened to a net loss of ¥3.1B (prior year -¥2.0B) due in part to higher interest expense of ¥3.8B (prior year ¥2.8B), resulting in Ordinary Income of ¥51.1B (+46.5%). Non-recurring items amounted to Special Income ¥20.0B (gain on sale of marketable securities ¥16.3B, gain on sale of fixed assets ¥3.5B) and Special Losses ¥17.8B (impairment ¥13.9B, loss on retirement of fixed assets ¥2.9B), producing a net special-item amount of +¥2.2B, a significant reduction from prior year net +¥21.9B. Pre-tax income decreased to ¥53.3B (-6.3%), and a heavy effective tax rate of 38.4% also weighed on results, yielding Net Income of ¥32.8B (-3.7%). While bottom-line declined due to the loss of one-off benefits, the recurring operating base achieved substantial improvement. In summary: revenue and operating/ordinary profits increased, but net income fell due to reduced non-recurring gains.
[Profitability] Operating margin 1.2% (prior year 0.9%, +0.3pt) and net margin 0.8% (prior year 0.8%, flat). Gross margin of 24.7% was down 0.6pt from 25.3%, but a 1.0pt improvement in SG&A ratio supported an improved operating margin. ROE at 3.1% (prior year 3.3%) remains low, indicating ongoing capital efficiency issues. [Cash Quality] Operating Cash Flow of ¥130.8B represents 3.99x Net Income of ¥32.8B, indicating strong cash backing of reported profits. Accrual ratio is -4.3%, favorable. FCF of ¥95.8B was secured, covering both dividends and capital expenditures. [Investment Efficiency] Total asset turnover remained high at 1.91x. Inventory days of 78 indicate stock aging concerns, suggesting markdown risk and reduced capital efficiency. [Financial Soundness] Equity Ratio 46.0% (prior year 45.2%), interest-bearing debt ¥391.0B (prior year ¥467.7B) — stable. Current ratio 155.1% suggests adequate short-term liquidity, though quick ratio 65.7% indicates dependence on inventory. Cash and deposits fell to ¥45.3B (prior year ¥77.1B, -41.2%), reducing liquidity buffers. Interest coverage 14.4x indicates sufficient resilience to interest expense.
OCF was ¥130.8B (prior year ¥163.7B, -20.1%), but remains high at 3.99x Net Income of ¥32.8B, maintaining strong cash-generation capability. Investing cash flow was -¥35.0B (prior year -¥18.2B) as capex increased, and FCF was ¥95.8B (prior year ¥145.6B). Financing cash flow was -¥127.6B (prior year -¥107.4B) reflecting debt repayments and dividend payments totaling ¥39.8B, resulting in cash and deposits declining to ¥45.3B (down ¥31.8B, -41.2%). With an accrual ratio of -4.3%, the quality of OCF is good and profits are cash-driven. FCF covers dividends 2.4x and total capex 2.74x, supporting both internal reserves and shareholder returns. On working capital, high inventory levels (Inventories ¥698.7B, 30.5% of total assets) pressure funding efficiency; improving inventory turnover would expand next-period cash-generation potential.
Recurring earnings center on Operating Income of ¥54.2B, while non-operating items produced a modest net loss of ¥3.1B. One-off items included Special Income ¥20.0B (gain on sale of marketable securities ¥16.3B, gain on sale of fixed assets ¥3.5B) and Special Losses ¥17.8B (impairment ¥13.9B, loss on retirement of fixed assets ¥2.9B); the net special-item amount +¥2.2B represents 6.7% of Net Income of ¥32.8B. This is a large contraction from prior-year net special items of +¥21.9B, bringing current-year Net Income closer to recurring profit levels. However, the absolute size of special items remains material (Special Income equals 61% of Net Income; Special Losses 54%), indicating high exposure to one-off factors. Non-operating income was ¥6.0B, only 0.14% of Revenue. Accrual quality is strong: OCF/Net Income ratio 3.99x provides solid cash backing for earnings, and accounting treatment appears conservative. The gap between Ordinary Income ¥51.1B and Net Income ¥32.8B is explained by the high effective tax rate of 38.4% and the impact of net special items, producing a structure where recurring operating profitability is not fully reflected in final profit.
Against the full-year guidance (Revenue ¥4,380.0B, Operating Income ¥60.0B, Ordinary Income ¥55.0B, Net Income ¥35.0B), actuals were Revenue ¥4,366.5B (achievement 99.7%), Operating Income ¥54.2B (90.4%), Ordinary Income ¥51.1B (93.0%), Net Income ¥32.8B (93.7%). Sales were essentially on plan, but profits missed at each stage. Operating Income shortfall was driven by worse-than-assumed gross margin and insufficient SG&A efficiency; Ordinary Income was affected by higher interest expense; Net Income was impacted by a reduction in net special-item gains and tax burden. Achievement rates in the 90% range are not a large deviation, but indicate issues with profit-plan accuracy. Improving inventory turnover to restore gross margin, continued fixed-cost control, and better predictability of special items are key to improving target achievement.
Annual dividend was ¥100.0 (interim ¥50.0, year-end ¥50.0), representing a payout ratio of 76.3% (XBRL disclosure). Total dividends amounted to ¥39.8B (of which ¥0.66B was to the officers/employees share delivery trust), exceeding Net Income of ¥32.8B by 1.21x. FCF coverage is 2.4x, indicating sufficient capacity to pay this year’s dividend, but with ROE at 3.1% likely below the cost of capital, continued high payout ratios imply a trade-off with reinvestment opportunities. Retained earnings of ¥701.5B show ample internal reserves, supporting short-term dividend sustainability, but maintaining dividends over the medium term requires profit growth and stable cash generation. There was no disclosure of share buybacks; shareholder returns are concentrated on dividends. The payout ratio of 76.3% is consistent with historical average (same as prior year), suggesting a stable dividend policy.
Inventory aging risk: Inventories ¥698.7B equal 30.5% of total assets, and inventory days of 78 are high. Demand volatility or unsold seasonal products could trigger write-downs or markdowns, further compressing gross margin. Although inventories declined slightly year-on-year, structural levels remain high and more precise inventory management is urgent.
Decline in cash on hand: Cash and deposits ¥45.3B (prior year ¥77.1B, -41.2%) leave thinner liquidity buffers. This decline resulted from financing cash outflows of -¥127.6B due to debt repayment and dividend payments. The company’s ability to absorb seasonal working capital needs or unexpected capex is reduced. Securing short-term borrowing lines and transparent funding plans will be necessary.
Impairment risk: The company recorded impairment losses of ¥13.9B this fiscal year. Continued unprofitability of stores or assets could lead to additional impairments. Of fixed assets ¥707.0B, identifying loss-making assets and making timely exit decisions will help limit future impairments and improve capital efficiency.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 1.2% | 4.6% (1.7%–8.2%) | -3.4pt |
| Net Margin | 0.8% | 3.3% (0.9%–5.8%) | -2.6pt |
Operating margin and net margin are well below industry medians, indicating relatively low profitability within the retail sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 8.3% | 4.3% (2.2%–13.0%) | +4.0pt |
Revenue growth outperformed the industry median by 4.0pt, indicating relatively strong top-line expansion.
※ Source: Company compilation
Improvement in Operating Income driven by SG&A efficiency is commendable, but Operating Margin at 1.2% remains far below the industry median of 4.6%, leaving profitability weak. Gross margin of 24.7% declined 0.6pt year-on-year, suggesting significant room to address discounting pressure and product-mix. Compressing inventory days from 78 and shifting mix toward higher-margin products are key to restoring gross margin and moving operating margin closer to industry levels.
Cash generation is solid: OCF is about four times Net Income and FCF of ¥95.8B was secured. Despite a high payout ratio of 76.3%, FCF coverage of 2.4x supports dividend sustainability this year. However, ROE of 3.1% is low and likely below the cost of capital, so sustaining high dividends concurrently with reinvestment will require profit growth and improved capital turnover via inventory compression. Cash and deposits of ¥45.3B mean liquidity buffers are thin, and monitoring ability to handle seasonality and capex is necessary.
The net amount of special items contracted sharply from prior-year +¥21.9B to current +¥2.2B, causing Net Income to decline as one-off gains dissipated. The impairment of ¥13.9B indicates the existence of loss-making assets and a risk of further charges. Strengthening recurring earnings and reducing reliance on special items for Net Income are medium-term priorities. The positive trend in operating-level improvement continues; if gross margin recovery and inventory efficiency are realized, sustained expansion of Operating and Ordinary Income is expected from next fiscal year onward.
This report was automatically generated by AI analyzing XBRL financial statement data and is an earnings analysis document. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the firm from public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.