| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2233.0B | ¥2162.8B | +3.2% |
| Operating Income / Operating Profit | ¥72.3B | ¥77.7B | -6.9% |
| Ordinary Income | ¥74.8B | ¥79.7B | -6.1% |
| Net Income / Net Profit | ¥50.8B | ¥55.8B | -9.0% |
| ROE | 3.2% | 3.6% | - |
For FY2027 Q1, Revenue was ¥2233.0B (YoY +¥70.1B +3.2%), Operating Income was ¥72.3B (YoY -¥5.4B -6.9%), Ordinary Income was ¥74.8B (YoY -¥4.9B -6.1%), and Quarterly Net Income attributable to owners of the parent was ¥50.8B (YoY -¥5.0B -9.0%). Although revenue increased, an uptick in cost of sales ratio and higher selling, general and administrative expenses caused the operating margin to fall to 3.2% from 3.6% in the prior-year period (down 0.4pt), resulting in a decline in profit.
[Revenue] Revenue progressed steadily at ¥2233.0B (YoY +3.2%). By segment, the Retail Business was ¥2229.2B (YoY +3.2%), accounting for 99.8% of the total, and Others (credit card business, etc.) was ¥3.7B (YoY +7.2%). Revenue composition comprised ¥2221.4B from customer contracts and ¥11.6B from real estate rental income under lease accounting standards. The revenue increase was likely supported by food price revisions and higher ticket prices at existing stores, but gross margin declined to 29.9% from 30.2% in the prior-year period (down 0.3pt), suggesting impacts from price reductions, disposal losses, and product mix.
[Profit & Loss] Cost of sales rose to ¥1483.6B (cost of sales ratio 66.5%, YoY +0.3pt), leaving gross profit at ¥666.5B (gross margin 29.9%). SG&A was ¥677.0B (SG&A ratio 30.3%, YoY +0.1pt), increasing at a faster pace than sales and reflecting upward pressure from personnel expenses and store operation costs. As a result, Operating Income was ¥72.3B (Operating margin 3.2%), down 6.9% YoY. Non-operating items included dividend income ¥0.3B and interest income ¥0.3B against interest expense ¥0.9B, with total non-operating expenses of ¥1.1B, leaving Ordinary Income at ¥74.8B (YoY -6.1%). Extraordinary items were minor (extraordinary income ¥0.8B, extraordinary loss ¥0.0B), yielding profit before tax of ¥74.8B. After deducting corporate taxes of ¥24.0B (effective tax rate 32.1%), quarterly Net Income was ¥50.8B (YoY -9.0%), resulting in a revenue-up/profit-down outcome.
Segment profit for the Retail Business was ¥73.4B (YoY -6.6%), and Others was ¥1.4B (YoY +23.0%), totaling ¥74.8B, which aligns with Ordinary Income. The Retail Business, the core segment accounting for 99.8% of revenue, saw margin compression due to a decline in gross margin and an increase in SG&A ratio, contributing to the reduction in operating profit. The Others segment, while small, maintained a profit-increase trend.
[Profitability] Operating margin 3.2% (down 0.4pt from 3.6% in the prior-year period), Net margin 2.3% (down 0.3pt from 2.6%); margins deteriorated. ROE 3.2% (annualized) declined from 3.6% in the prior-year period, indicating relatively low return versus equity of 46.7%. [Cash Quality] Interest coverage 78.6x (Operating Income ¥72.3B ÷ Interest expense ¥0.9B) indicates negligible interest burden. Days sales outstanding (DSO) 44.5 days (worse by 8.9 days from prior-year 35.6 days), showing extended collection periods and lower working capital efficiency. Inventory days 80.1 days (improved 1.1 days from prior-year 81.2 days), so inventory levels are largely flat. [Investment Efficiency] Total asset turnover annualized 2.65x (prior-year 2.58x), a slight improvement. [Financial Soundness] Equity Ratio 46.7% (up 0.3pt from 46.4% prior-year), D/E ratio 17.4% (interest-bearing debt ¥274.7B ÷ Net assets ¥1576.1B), indicating low leverage and high financial resilience. Current ratio 84.5% and quick ratio 62.3% are low but reflect the retail characteristic of a negative working capital model led by payables (current liabilities ¥1468.1B vs. trade payables ¥887.2B). Cash and short-term investments totaled ¥294.4B (cash ¥111.4B + short-term investments ¥183.0B), securing short-term liquidity.
As the cash flow statement data is not disclosed, funding trends were analyzed from balance sheet movements. Accounts receivable rose to ¥272.3B from ¥211.0B in the prior-year period (+¥61.3B, +29.1%), significantly outpacing sales growth of +3.2%, suggesting lengthening collection periods or changes in credit terms. Inventories were ¥325.1B (YoY +¥7.1B +2.2%), largely flat; inventory days at 80.1 days were slightly improved from 81.2 days in the prior-year period but remain a source of cash tie-up. Accounts payable increased substantially to ¥887.2B (YoY +¥81.8B +10.1%), partially offsetting working capital through extended supplier payment terms. Bonus reserves rose to ¥60.3B from ¥33.0B (YoY +¥27.2B +82.6%), expanding unpaid personnel liabilities at quarter-end. Accrued corporate taxes decreased to ¥28.2B from ¥80.6B (YoY -¥52.4B -65.0%), reflecting cash outflows for prior-period tax payments. Cash and deposits were ¥111.4B (YoY +¥5.5B +5.2%), and marketable securities (current) were ¥183.0B (YoY +¥23.0B +14.4%), bringing total liquidity to ¥294.4B versus ¥266.6B in the prior-year period (increase ¥27.8B). Interest-bearing debt declined to ¥274.7B (short-term borrowings ¥109.6B + long-term borrowings ¥169.1B; down ¥20.5B from prior-year ¥295.2B), maintaining low leverage. While the sharp increase in accounts receivable and the rise in bonus reserves suggest working capital expansion, the increase in payables and reduction in interest-bearing debt indicate overall liquidity remained stable.
Quarterly Net Income of ¥50.8B contrasts with Comprehensive Income of ¥49.3B, a divergence of -¥1.5B. The breakdown: valuation differences on securities +¥0.5B, adjustments related to retirement benefits -¥1.5B. Non-operating income ¥3.6B consisted of dividend income ¥0.3B, interest income ¥0.3B, and other ¥1.2B; no unusual items were observed. Non-operating expenses ¥1.1B were mainly interest expense ¥0.9B, a recurring financial cost. Extraordinary income ¥0.8B and extraordinary loss ¥0.0B (impairment losses ¥0.0B, loss on disposal of fixed assets ¥0.0B) were immaterial, so the bulk of profit is derived from core operations. The effective tax rate of 32.1% on profit before tax of ¥74.8B is within a standard range, with no notable tax-specific items. Overall, earnings quality is centered on recurring core business performance, with limited distortion from one-off factors. However, the rapid increase in accounts receivable (+29.1%) suggests potential delays in cash conversion of earnings, warranting monitoring of future operating cash flow trends.
Full Year guidance is unchanged: Revenue ¥9225.0B, Operating Income ¥270.0B (YoY +3.8%), Ordinary Income ¥280.0B (YoY +3.4%), Net Income attributable to owners of the parent ¥190.0B, and EPS ¥219.61. Q1 progress ratios are: Revenue 24.2% (¥2233.0B ÷ ¥9225.0B), Operating Income 26.8% (¥72.3B ÷ ¥270.0B), Ordinary Income 26.7% (¥74.8B ÷ ¥280.0B), Net Income 26.7% (¥50.8B ÷ ¥190.0B), exceeding a quarter-on-quarter baseline of 25%. Considering seasonality in retail (year-end/New Year and summer demand), current progress is broadly on plan and the achievement of full-year guidance remains feasible. However, if declines in gross margin and increases in SG&A persist, the degree of operating leverage improvement in the second half will be key to meeting full-year targets.
The dividend at Q1-end was maintained at ¥32.5 per share (prior-year ¥32.5). Full-year dividend forecast is ¥35.0 per share. Dividend payout ratio relative to Q1 Net Income ¥50.8B (EPS ¥58.73) is 55.3%; relative to full-year Net Income forecast ¥190.0B (EPS ¥219.61) is 15.9%. On a full-year basis this is conservative, preserving retained earnings for reinvestment. Retained earnings are ample at ¥1440.0B, and with cash & short-term investments of ¥294.4B and low interest-bearing debt (D/E ratio 17.4%), dividend sustainability is high. No share buyback was disclosed; shareholder returns are dividend-focused.
Risk of declining gross margin: Gross margin at 29.9% is down 0.3pt from 30.2% in the prior-year period. Persistently high food, energy, and logistics costs, together with price cuts, disposal losses, and product mix changes, appear to be factors. Gross profit growth of +2.3% lags revenue growth of +3.2%, suggesting delayed cost pass-through. Continued pressure from raw material and labor cost increases could limit margin recovery.
Risk of deteriorating working capital efficiency: Accounts receivable increased to ¥272.3B (YoY +29.1%), far exceeding sales growth of +3.2%. Days sales outstanding worsened to 44.5 days from 35.6 days in the prior-year period, raising concerns about lengthening collection periods. While accounts payable rose to ¥887.2B, partially offsetting this via extended supplier terms, inventory days at 80.1 days combined with receivables increases may intensify working capital cash strain and weigh on operating cash flow generation.
Low profitability and resilience to external shocks: ROE 3.2% and Net margin 2.3% indicate a low-margin structure; Operating margin 3.2% is declining from 3.6% in the prior-year period. Current ratio 84.5% is low, and reliance on a payables-driven negative working capital model means abrupt changes in consumption or supplier payment terms could tighten short-term liquidity. Low leverage (D/E ratio 17.4%) and high interest coverage (78.6x) support financial resilience, but delayed margin improvements could further deteriorate capital efficiency.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating margin | 3.2% | 3.4% (0.8%–7.7%) | -0.1pt |
| Net margin | 2.3% | 2.2% (0.5%–6.2%) | +0.0pt |
Operating margin slightly underperforms the industry median, while Net margin is in line with the median.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth (YoY) | 3.2% | 7.7% (0.8%–14.6%) | -4.5pt |
Revenue growth trails the industry median of 7.7% by 4.5pt, placing the company at a relatively slower growth pace within the retail sector.
※ Source: Company compilation of public financial statements
Structure of revenue-up/profit-down and the path to margin recovery: Revenue rose +3.2%, but a 0.3pt decline in gross margin and 0.1pt rise in SG&A ratio led to an Operating margin of 3.2%, down 0.4pt from 3.6% in the prior-year period. Cost pressures (food, energy, labor) outpaced price/margin improvements, constraining operating leverage. Q1 progress is in the 26% range and broadly on plan for full-year guidance, but second-half recovery in gross margin (through margin management, reduced disposal loss, expansion of higher-value products) and SG&A efficiency (automation investments, store operation optimization) are prerequisites for achieving full-year targets.
Working capital expansion and impact on cash generation: Accounts receivable increased YoY +29.1%, far outpacing revenue growth, and DSO worsened by 8.9 days. Bonus reserves increased +82.6%, adding to working capital pressures. Although accounts payable rose +10.1% to partly offset this via extended supplier terms, combined with inventory days of 80.1 days these factors could burden operating cash flow generation. Low leverage (D/E ratio 17.4%) and cash & short-term investments ¥294.4B support funding stability, but normalization of receivables and inventory optimization will be key to improving cash quality.
This report is an AI-generated earnings analysis document created from 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 from public financial statements. Investment decisions are your own responsibility; consult a professional adviser as necessary.