| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥813.8B | ¥918.4B | -11.4% |
| Operating Income / Operating Profit | ¥10.9B | ¥21.9B | -50.3% |
| Ordinary Income | ¥15.1B | ¥25.7B | -41.2% |
| Net Income | ¥0.1B | ¥28.3B | -99.5% |
| ROE | 0.0% | 5.4% | - |
The fiscal 2026 (year ended February 2026) results show Revenue ¥813.8B (YoY -¥104.6B -11.4%), Operating Income ¥10.9B (YoY -¥11.0B -50.3%), Ordinary Income ¥15.1B (YoY -¥10.6B -41.2%), and Net Income attributable to owners of the parent ¥2.4B (YoY -¥26.9B -91.9%), representing a significant decline in both revenue and profit. Following the November 2024 divestiture of apparel subsidiary Mac House, the company shifted to a single-segment (Footwear Business) structure, reducing sales scale and raising the relative burden of fixed costs, compressing the operating margin to 1.3% (down 1.1pt from 2.4% a year earlier). Pre-tax income of ¥11.5B was subject to corporate taxes of ¥9.2B, resulting in an abnormally high effective tax rate of 79.7%, which substantially reduced the bottom-line profit. Extraordinary losses of ¥4.3B (impairment losses ¥4.1B, loss on sales of subsidiary shares, etc.) also impaired earnings. Operating Cash Flow (OCF) was deeply negative at -¥41.3B, with inventory increases of ¥10.1B and decreases in accounts payable of ¥8.3B deteriorating working capital. Free Cash Flow (FCF) reached -¥44.6B, while total shareholder returns (dividends ¥15.2B + share buybacks ¥15.0B) significantly exceeded current-period earnings and FCF. Cash and deposits declined from ¥263.98B to ¥177.61B (-32.7% year-on-year), making recovery of cash generation capacity an urgent priority.
Revenue of ¥813.8B was down 11.4% YoY. The sale of Mac House eliminated prior-year apparel sales of ¥97.6B, and on a stand-alone Footwear Business basis sales were slightly down from ¥820.8B to ¥813.8B. With over 90% of sales to customers in Japan, the business is domestically concentrated; regional revenue breakdowns are not disclosed. Segment notes indicate the prior year recorded Operating Income of ¥29.9B for the Footwear Business and an Operating Loss of ¥8.0B for the Apparel Business; in the current period the single Footwear Business posted Operating Income of ¥10.9B, a large decline of 63.5% YoY. Gross profit was ¥383.2B (gross margin 47.1%, down 0.5pt from 47.6%), while SG&A was ¥372.3B (SG&A ratio 45.7%, up 0.5pt from 45.2%), pressuring profits. Advertising ¥35.8B, rents ¥84.5B, and other SG&A ¥123.3B were heavy fixed-cost burdens, and SG&A reductions were insufficient relative to the revenue decline (only -10.4% from ¥415.5B). Operating Income ¥10.9B (operating margin 1.3%) declined 50.3% from ¥21.9B a year earlier. Non-operating income ¥7.4B (foreign exchange gains ¥1.4B, interest income ¥1.0B, etc.) provided support, net of non-operating expense ¥3.2B, resulting in Ordinary Income ¥15.1B (ordinary income margin 1.9%). Extraordinary gains ¥0.7B (negative goodwill ¥0.1B, etc.) and extraordinary losses ¥4.3B (impairment losses ¥4.1B, loss on retirement and disposal of fixed assets and sale losses, etc.) produced Pre-tax Income ¥11.5B. After corporate taxes ¥9.2B (effective tax rate 79.7%) and non-controlling interests -¥3.6B, Net Income attributable to owners of the parent was ¥2.4B, a sharp decline of 91.9% from ¥28.3B. The divergence between Ordinary Income and Net Income was driven mainly by extraordinary losses and the abnormally high tax rate (limited recognition of deferred tax assets concentrated tax expense into the period). In conclusion, the results reveal structural issues of revenue and profit decline and deterioration in earnings quality.
In the prior year the company reported Operating Income ¥29.9B for the Footwear Business and an Operating Loss ¥8.0B for the Apparel Business; following the November 2024 sale of Mac House shares, the current period consists of the single Footwear Business. Footwear revenue ¥813.8B was nearly flat (down 0.9% from ¥820.8B), but Operating Income ¥10.9B declined sharply 63.5% from the prior-year Footwear standalone ¥29.9B. Segment assets were ¥710.2B (prior year ¥790.8B) and segment liabilities ¥210.5B (prior year ¥270.5B). Concentration on the Footwear Business after withdrawing from apparel increased the relative fixed-cost burden. Depreciation ¥7.3B (prior year ¥7.8B) and rents ¥84.5B (down 15.2% from ¥99.7B but still high at 10.4% of sales) weighed on profitability. Segment notes state that group revenue is recognized from contracts with customers and over 90% of sales are domestic. Regional details are not provided; the business model is presumed to be domestic store-centric.
Profitability: Operating margin 1.3% (down 1.1pt from 2.4%), Ordinary margin 1.9% (down 0.9pt from 2.8%), Net profit margin 0.3% (down 2.9pt from 3.2%). ROE 0.0% (prior year 5.7%), and ROA (ordinary) 2.0% (prior year 3.1%) show broad deterioration in profitability metrics. Gross margin 47.1% remains high within the industry, but SG&A ratio 45.7% is elevated and operating leverage is not functioning. EBIT margin is 1.3%, low. Cash quality: Operating Cash Flow (OCF) was -¥41.3B, yielding an OCF/Net Income ratio of -17.4x versus Net Income ¥2.4B, indicating severe issues converting profits to cash. EBITDA ¥18.2B (Operating Income ¥10.9B + depreciation ¥7.3B) gives OCF/EBITDA -2.3x and a significantly negative cash conversion. Inventory turnover days 178 days (worsened by +28 days from 150 days), receivables days 14 days, payables days 22 days, producing a Cash Conversion Cycle (CCC) of 170 days, extended. Investment efficiency: Total asset turnover 1.15x (prior year 1.16x) roughly unchanged. ROIC 1.7% is low and well below cost of capital. Capital expenditures ¥6.8B fell below depreciation ¥7.3B, indicating restrained investment. Financial soundness: Equity Ratio 70.4% (up 4.6pt from 65.8%), current ratio 280%, quick ratio 145% — liquidity metrics are sound. Interest-bearing debt is effectively zero (only lease liabilities ¥6.5B), D/E 0.04x, interest coverage 83.9x, indicating ample financial capacity. However, cash and deposits ¥177.6B fell -32.7% from ¥263.98B, and negative OCF plus shareholder returns have strained cash resources.
Operating Cash Flow was -¥41.3B, a severe deterioration of -246.4% from prior year ¥28.2B. Subtotal after adding back non-cash charges such as depreciation ¥7.3B was -¥39.0B, with deterioration in working capital the main driver. Inventory increase ¥10.1B (merchandise ¥210.0B, up ¥12.2B from prior year ¥197.8B) and decrease in accounts payable ¥8.3B (accounts payable ¥26.3B, down from ¥28.7B) drove cash outflow, while accounts receivable increased only slightly by ¥-0.6B. Corporate tax payments ¥3.2B, interest and dividends received ¥1.1B, interest paid ¥0.1B. Investing cash flow was -¥3.4B: capital expenditures ¥6.8B offset by proceeds from sale of subsidiary shares ¥1.6B and net increase in time deposits ¥7.1B, leading to modest net investment outflow. Financing cash flow was -¥32.9B, driven by dividend payments ¥15.2B, share buybacks ¥15.0B, and lease liability repayments ¥2.7B. Free Cash Flow was -¥44.6B (Operating CF -¥41.3B + Investing CF -¥3.4B), and cash and cash equivalents declined from opening ¥244.8B to closing ¥167.3B, a decrease of -¥77.5B. The OCF/EBITDA ratio of -2.3x shows profits are not converting to cash. Simultaneous inventory accumulation and decreases in payables highlight working capital management issues. Short-term priorities are inventory reduction and renegotiation of procurement terms; long-term priorities include improving demand forecasting accuracy and converting fixed costs to variable costs.
Of Ordinary Income ¥15.1B, Operating Income ¥10.9B is core-operating derived, but non-operating income ¥7.4B (foreign exchange gains ¥1.4B, interest income ¥1.0B, etc.) provided support, net of non-operating expenses ¥3.2B. The net non-operating income of ¥4.2B accounts for 27.8% of Ordinary Income, supplementing weak core profitability. Extraordinary gains ¥0.7B (negative goodwill ¥0.1B, etc.) and extraordinary losses ¥4.3B (impairment losses ¥4.1B, loss on disposal and sale of fixed assets ¥0.1B, etc.) resulted in Pre-tax Income ¥11.5B. The effective tax rate of 79.7% is abnormally high; although deferred tax assets ¥46.8B were recognized, current tax expense ¥9.2B exceeded pre-tax income, suggesting temporary factors (tax effect adjustments related to subsidiary sales and impairments). OCF/Net Income is -17.4x, showing extremely poor cash conversion of reported profit. The accrual (gap between profit and CF) is mainly attributable to inventory increase ¥10.1B and accounts payable decrease ¥8.3B, indicating persistent working capital management challenges. Excluding non-operating income and one-time items, sustainable core profitability remains at an operating margin of 1.3%, and improving fixed-cost burden and inventory efficiency are key to improving earnings quality.
Full-year guidance: Revenue ¥825.0B (YoY +1.4%), Operating Income ¥14.0B (YoY +28.3%), Ordinary Income ¥17.0B (YoY +12.7%), Net Income attributable to owners of the parent ¥16.0B (YoY +39.8%), EPS forecast ¥31.98. Year-to-date progress toward guidance is: Revenue 98.6%, Operating Income 77.9%, Ordinary Income 88.7%, Net Income attributable to owners of the parent 21.5%. There is notable shortfall at the operating stage (22.1% behind) and at the final stage (78.5% behind). The guidance dividend forecast of ¥27.0 per period aligns with actual annual dividend of ¥54 (semiannual ¥27 × 2). Guidance notes state the forecast is based on information currently available to the company and certain reasonable assumptions and is not a promise of achievement; actual results may differ materially due to various factors. Short-term prerequisites for achieving guidance include inventory reduction, fixed-cost savings, and normalization of tax burden; long-term prerequisites include improving same-store productivity and reducing discount rates.
The annual dividend is ¥54 per share (semiannual ¥27 × 2), unchanged from the prior year. Disclosed payout ratio is 40.9%, but with actual EPS ¥6.91 and dividend ¥54, the effective payout ratio is 781%, far exceeding current-period earnings. Total dividends amounted to ¥15.2B; combined with share buybacks ¥15.0B, total shareholder returns were ¥30.2B. Total shareholder return relative to Net Income was 1,258%, and FCF coverage vs total returns was -0.7x (negative), meaning returns were funded by retained cash and cash drawdown. Cash flow items related to shareholder returns: dividend payments ¥15.2B, share buybacks ¥15.0B, disposal of treasury stock ¥0.1B. Shares outstanding 34,359 thousand, treasury shares 410 thousand, weighted average shares during the period 34,396 thousand. BPS ¥1,471.75, carrying amount of treasury stock -¥5.7B (substantially reduced from -¥67.7B prior year), reflecting ongoing buybacks and cancellations. From a sustainability perspective, OCF/dividend ratio is -2.7x, FCF/total returns is -1.5x, indicating inadequate cash generation; cash and deposits ¥177.6B (35.5% of net assets) funded the returns. Going forward, normalization of OCF is a precondition for shareholder returns, and a profit-linked distribution policy (setting DOE targets or adjusting payout ratio to 30–50%) is recommended.
First, inventory stagnation risk. Inventory turnover days of 178 days (worsened +28 days from 150 days) and merchandise inventory ¥210.0B represent 25.8% of sales, the principal cause of OCF deterioration. Insufficient demand forecasting and accumulation of seasonal merchandise increase discounting and obsolescence costs, compressing gross margin (47.1%, down 0.5pt from 47.6%). Quantitatively, reducing inventory by ¥10B is expected to improve working capital and improve OCF by approximately ¥10B. Second, high fixed-cost burden. SG&A ratio 45.7% (up 0.5pt from 45.2%) with rents ¥84.5B (10.4% of sales) and labor costs among fixed expenses hinder operating leverage. Fixed-cost reductions have not kept pace with the revenue decline, leaving operating margin at 1.3%. If store network reorganization and automation investments can reduce SG&A ratio below 42%, operating margin could recover above 4%. Third, high tax burden and failure to convert profits to cash. Effective tax rate 79.7% is abnormally high with limited deferred tax recognition. OCF/Net Income -17.4x indicates cash conversion is not functioning; FCF -¥44.6B constrains funds available for shareholder returns and capex. Without inventory compression and tax normalization, cash and deposits ¥177.6B (down -32.7% from ¥264B) could decline further, creating liquidity risk.
Industry position (reference, company analysis): Compared to the retail industry 2025 median benchmark, operating margin 1.3% is well below the industry median 4.6%, placing the company below the 25th percentile. Net profit margin 0.3% is below the industry median 3.3%, indicating weaker profitability among peers. Inventory turnover days 178 days are 2.7x the industry median 65.7 days, showing significantly poor inventory efficiency. Conversely, Equity Ratio 70.4% exceeds the industry median 50.2%, indicating strong financial safety. ROE 0.0% lags the industry median 5.9%, showing poor capital efficiency. Current ratio 280% exceeds the industry median 184%, indicating good short-term liquidity, but cash conversion is significantly negative versus the industry median 1.57, with the lowest profit-to-cash conversion capability among peers. The disclosed payout ratio 40.9% is above the industry median 27%, but the level of distributions materially exceeds current earnings, raising sustainability concerns. As a specialized footwear retailer, gross margin 47.1% ranks high in the industry, but high SG&A and inventory stagnation push operating margin to the lower end. If inventory reduction and fixed-cost cuts proceed, convergence toward industry medians is possible, but near-term cash generation will remain well below peer averages.
Key points include: first, ample room to improve inventory management and working capital. Inventory turnover days of 178 days (2.7x the industry median of 65.7 days) suggest sizable potential OCF improvement through inventory reduction. A ¥20B inventory reduction could shorten CCC to about 145 days and potentially improve annual OCF by about ¥20B, directly enabling FCF turnaround and sustainable shareholder returns. Second, review of fixed-cost structure and recovery of operating leverage. The narrow gap between SG&A ratio 45.7% and gross margin 47.1% (only 1.4pt) highlights the need to reduce fixed costs (rents ¥84.5B, 10.4% of sales). Store network reorganization, rent negotiations, and automation investments to reduce SG&A ratio below 42% could restore operating margin above 4%, allowing approach to the industry median. Third, sustainability of dividend policy. Disclosed payout ratio 40.9% effectively corresponds to 7.8x the period profit, and cash and deposits ¥177.6B (down -32.7% YoY) are being drawn down. Going forward, with normalized OCF, setting clear profit-linked return policies (e.g., DOE target 5% or payout ratio 30–40%) is necessary for investor dialogue.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmark figures are reference information compiled by the company from publicly available financial statements. Investment decisions should be made at your own responsibility and, as necessary, after consulting a professional advisor.