| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥215.8B | ¥219.8B | -1.8% |
| Operating Income / Operating Profit | ¥9.4B | ¥14.3B | -34.1% |
| Ordinary Income | ¥11.0B | ¥14.6B | -24.5% |
| Net Income / Net Profit | ¥8.2B | ¥13.1B | -37.6% |
| ROE | 1.6% | 2.6% | - |
For the Q1 of the fiscal year ending February 2027, revenue was ¥215.8B (YoY -¥4.0B, -1.8%), Operating Income was ¥9.4B (YoY -¥4.9B, -34.1%), Ordinary Income was ¥11.0B (YoY -¥3.6B, -24.5%), and Net Income was ¥8.2B (YoY -¥4.9B, -37.6%). While revenue marginally declined, a 245bp deterioration in gross margin (48.1% vs. 50.5% prior year) was the primary driver of the operating profit decline. SG&A ratio improved by 36bp (43.7% vs. 44.1% prior year) but could not fully offset the gross margin deterioration, resulting in an operating margin of 4.4% (6.5% prior year), a 214bp decline. Non-operating income of ¥2.3B (including ¥0.7B foreign exchange gains and ¥0.3B interest income) supported the ordinary profit line, and an impairment loss of ¥1.5B was recorded as an extraordinary loss.
[Revenue] Revenue came in at ¥215.8B, a slight decrease of -1.8% YoY. As the company operates a single segment (Footwear Business), detailed segment disclosures are not provided, but inventories were ¥252.1B (YoY +¥42.1B, +20.1%) and trade receivables were ¥51.9B (YoY +¥20.1B, +63.0%), indicating that inventory build-up and higher receivables may have supported revenue maintenance while suggesting a deterioration in inventory turnover.
[Profitability] Gross profit decreased to ¥103.8B (gross margin 48.1%), down ¥7.3B YoY (-6.6%), with gross margin falling 245bp from 50.5% the prior year. This appears driven by higher purchase costs, increased discounts, and changes in product mix. SG&A was ¥94.4B (SG&A ratio 43.7%), down ¥2.4B YoY (-2.5%), improving the SG&A ratio by 36bp from 44.1% the prior year, but not enough to offset gross margin deterioration; Operating Income therefore fell to ¥9.4B (Operating margin 4.4%), a -34.1% YoY decline. On the non-operating side, non-operating income totaled ¥2.3B (including ¥0.7B FX gains and ¥0.3B interest income), offset by non-operating expenses of ¥0.8B (including ¥0.03B interest expense and ¥0.3B FX losses), resulting in Ordinary Income of ¥11.0B (YoY -24.5%). An impairment loss of ¥1.5B was recorded as an extraordinary loss, and after deducting corporate taxes and related items of ¥1.3B (effective tax rate 13.9%), Net Income was ¥8.2B (YoY -37.6%). In conclusion, both revenue and profit declined.
[Profitability] Operating margin was 4.4% (6.5% prior year), down 214bp, and Net Margin was 3.8% (5.9% prior year), down 211bp. ROE is low at 1.6%, which can be decomposed as Net Margin 3.8% × Asset Turnover 0.290 × Financial Leverage 1.49x; deterioration in Net Margin and a decline in Asset Turnover are the main contributors. [Cash Quality] DIO (Days Inventory Outstanding) is extremely long at 822 days, DSO (Days Sales Outstanding) is 88 days, and CCC (Cash Conversion Cycle) is 780 days, indicating severe cash tie-up. Inventory turnover is 0.44x/year and receivables turnover is 4.1x/year, both at low levels. [Investment Efficiency] ROIC is 2.3%, below the cost of capital, and Asset Turnover is 0.29x/year (0.31x/year prior) declining due to increases in inventory and receivables. [Financial Soundness] Equity Ratio is 67.0% (70.3% prior year), D/E ratio is 0.49x, current ratio is 244.5%, and quick ratio is 112.6%, indicating sufficient short-term payment capacity. Interest Coverage is 315x (Operating Income ¥9.4B ÷ Interest Expense ¥0.03B), showing very high interest resilience.
With an operating margin of 4.4% the core earning power is weak. Inventory increased by ¥42.1B YoY and trade receivables by ¥20.1B, while trade payables increased by ¥13.4B, so working capital expansion is pressuring cash flows. As CCC of 780 days indicates, conversion of inventory to cash and collection of receivables require an extremely long period, raising concerns over delayed cash realization of profits. Cash and deposits declined to ¥145.7B, down ¥31.9B YoY, suggesting working capital expansion likely absorbed cash. Future inventory reductions and stronger receivables collection will determine the sustainability of Operating Cash Flow (OCF) and Free Cash Flow (FCF).
Of Ordinary Income ¥11.0B, non-operating income ¥2.3B (1.1% of revenue) contributed, primarily foreign exchange gains ¥0.7B and interest income ¥0.3B. The proportion of non-operating income is moderate and the bulk of earnings originate from core operations. An impairment loss of ¥1.5B was recorded as an extraordinary loss and should be isolated as a temporary factor from recurring earning power. The gap between Ordinary Income ¥11.0B and Net Income ¥8.2B is attributable to the extraordinary loss ¥1.5B and corporate taxes ¥1.3B (effective tax rate 13.9%), suggesting limited structural divergence. However, the build-up of accruals reflected in increased inventory and receivables warrants attention as it can delay cash realization of profits.
The full year plan remains unchanged: Revenue ¥825.0B (YoY +1.4%), Operating Income ¥14.0B (YoY +28.3%), Ordinary Income ¥17.0B (YoY +12.7%), Net Income ¥11.0B. Progress at Q1 is Revenue 26.2%, Operating Income 67.5%, Ordinary Income 64.6%, Net Income 74.1%, materially exceeding the standard 25% progress for the period on profit lines. This reflects SG&A restraint, contributions from non-operating income (e.g., FX gains), and the effect of some one-off items securing early profits. If markdowns or valuation losses to correct inventory increase in H2, the excess progress could be offset, and guidance is therefore conservatively maintained.
The annual dividend forecast is maintained at ¥27 per share. Assuming shares outstanding (after treasury stock) of 33,949 thousand shares, the total annual dividend is approximately ¥0.92B. The payout ratio against the full-year Net Income plan of ¥11.0B is about 84%, which is high, but cash and deposits of ¥145.7B and low leverage (D/E 0.49x) provide a financial buffer supporting dividend stability. If inventory and receivables correction leads to cash generation, the likelihood of maintaining dividends would further increase.
Gross margin deterioration risk: Gross margin of 48.1% is down 245bp YoY, driven by higher purchase costs, increased discounts, and product mix changes. Continued price competition and intensifying e-commerce competition could further compress margins.
Inventory stagnation risk: Inventories are ¥252.1B (YoY +¥42.1B, +20.1%) with DIO at an extremely long 822 days and inventory turnover at 0.44x/year. Increased markdowns or valuation losses could impair profits and pressure cash flows.
Working capital expansion risk: Trade receivables rose to ¥51.9B (YoY +63.0%), with DSO 88 days and CCC 780 days, indicating severe cash tie-up. Working capital expansion could strain cash flow and incentivize discount sales.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.4% | 3.4% (0.8%–7.7%) | +1.0pt |
| Net Margin | 3.8% | 2.2% (0.5%–6.2%) | +1.5pt |
Profitability exceeds the industry median, indicating relative resilience.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -1.8% | 7.7% (0.8%–14.6%) | -9.5pt |
Revenue growth lags the industry median by 9.5pt, showing weaker growth momentum versus peers.
※Source: Company compilation
Recovery of gross margin and inventory correction are top priorities: Gross margin fell 245bp YoY, pushing operating margin down to 4.4%. Inventory rose ¥42.1B YoY and CCC is an extreme 780 days; improving inventory turnover and optimizing product mix to reverse gross margin will be key for both earnings and cash.
Full-year operating income progress 67.5% and conservative guidance: Q1 achieved 67.5% of the full-year operating income plan, well above standard progress, but the company maintained guidance considering the risk of H2 markdowns and valuation loss increases. Execution on inventory correction and trends in gross margin will determine full-year attainment.
Financial capacity is ample but capital efficiency is low: With Equity Ratio 67.0%, D/E 0.49x, and cash ¥145.7B, the balance sheet is conservative and stable, but ROIC 2.3% and ROE 1.6% indicate low capital efficiency. Improving inventory turnover of 0.44x/year is a prerequisite for better capital efficiency.
This report is an AI-generated earnings analysis document produced by analyzing XBRL earnings 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 earnings data. Investment decisions are your responsibility; consult a professional advisor as needed.