Laox Holdings CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥39.47B
• Operating Income: ¥-1.15B
• Net Income: ¥-452M
• EPS: ¥-16.45

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: FY2025 Q3 was another loss-making quarter but with notable improvement in operating and ordinary losses, offset by a larger net loss due to below-the-line items. Revenue was 394.7, down 8.3% YoY, indicating continued top-line pressure in the core retail/solutions businesses. Gross profit was reported at 142.61 with a gross margin of 36.1%, which is respectable for the model but implies higher operating intensity given SG&A of 151.40. Operating income improved to -11.54 (+342.6% YoY), narrowing losses meaningfully versus the prior year. Ordinary income improved to -12.76 (+89.6% YoY), as non-operating items were modest (non-op income 0.49 vs expenses 0.69; net -0.20) and interest expense was small at 0.08. Profit before tax was -4.55, implying sizable extraordinary gains of roughly +8.2 not detailed in the dataset that partially offset operating/ordinary losses. Net income, however, was -15.03 (-47.8% YoY), indicating that one-off or non-operating adjustments and minority/other items drove a larger net loss than the ordinary loss trajectory suggests. Calculated ROE was -7.0%, driven by a negative net margin of -3.8% and modest asset turnover of 1.022 with financial leverage at 1.81x. Liquidity remains comfortable: current ratio 211.8% and quick ratio 154.7%, supported by cash and deposits of 80.38, receivables of 79.26, and inventories of 74.11 versus current liabilities of 129.89. Balance sheet leverage appears moderate with D/E at 0.81x and limited interest-bearing debt (short-term loans 25.50, long-term loans 4.46), suggesting low immediate refinancing pressure. Earnings quality cannot be assessed fully due to unreported operating cash flow, but the gap between ordinary income (-12.76) and PBT (-4.55) points to reliance on extraordinary items to cushion losses this quarter. ROIC was -7.1%, well below a 7–8% target range for value creation, signaling that capital remains under-earning. Interest coverage is flagged at -144.25x as operating income is negative, though nominal interest burden is low. Forward-looking, the company must deliver SG&A discipline and revenue stabilization to convert the improved loss trajectory into break-even. Near term focus will be on sustaining gross margin, reducing fixed costs, and avoiding over-reliance on one-off gains to support earnings.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-3.8%) × 1.022 × 1.81 ≈ -7.0%. Component changes vs last year cannot be fully quantified from the provided data, but the largest driver this quarter is the negative net margin, despite improved operating loss. Asset turnover at ~1.0x indicates relatively low efficiency for retail-like operations and suggests limited scale leverage on the current asset base. Financial leverage at 1.81x is moderate and not the dominant driver of ROE. Business reason: revenue contraction (-8.3% YoY) alongside high SG&A (151.40) kept operating losses, even with a 36.1% gross margin; this cost structure pressures the net margin most. Sustainability: the margin improvement at operating/ordinary levels appears driven by better gross profit retention and cost control, but reliance on extraordinary gains to lift PBT suggests non-recurring support; sustainable improvement requires continued SG&A reduction or revenue recovery. Concerning trends: SG&A (absolute) exceeds gross profit this quarter (151.40 vs 142.61), keeping operating margin negative (-2.9%); with revenue down, operating deleverage remains a risk unless fixed costs are trimmed.

Growth Assessment

Revenue declined 8.3% YoY to 394.7, pointing to demand softness or portfolio downsizing. Gross margin at 36.1% is consistent with a higher-value merchandise/solutions mix, but insufficient to offset overhead at current scale. Operating loss narrowed significantly (+342.6% YoY improvement), indicating early benefits from cost measures or mix improvement. Ordinary loss also narrowed (+89.6% YoY), but net loss worsened (-47.8% YoY), likely due to below-the-line factors and tax/minority effects. Non-operating income/expense net was small (-0.20), so the key swing appears to be extraordinary items that improved PBT but not NI on a YoY basis. Outlook: to sustain growth, the company needs to stabilize traffic/sales and further align SG&A with the new revenue base. Near-term catalysts include seasonal sales recovery, store portfolio optimization, and any restructuring benefits flowing through. Risks to growth include macro softness, inbound variability, and competitive pricing pressure that could erode gross margin if used to stimulate volume.

Financial Health

Liquidity is strong: current ratio 211.8% and quick ratio 154.7%, comfortably above benchmarks. No warning on current ratio (<1.0) or D/E (>2.0); D/E is 0.81x, indicating moderate leverage. Cash and deposits (80.38), receivables (79.26), and inventories (74.11) provide ample coverage against current liabilities (129.89), mitigating maturity mismatch risk; short-term loans total 25.50 and are well covered by cash on hand. Long-term loans are modest at 4.46, limiting longer-term solvency risk. While interest coverage is negative on an EBIT basis due to operating loss, the absolute interest burden (0.08) is small. No off-balance sheet obligations are disclosed in the provided data; lack of disclosure does not preclude their existence (e.g., leases, guarantees). Overall, solvency is adequate, but continued operating losses could slowly erode equity if not reversed.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are unreported, preventing a quantitative OCF/NI assessment or FCF coverage check. As such, OCF/Net Income cannot be compared to the 0.8 threshold. Given negative operating income and ordinary income, underlying OCF could be pressured unless working capital released cash (e.g., inventory reduction) this period. With cash of 80.38 and moderate debt, near-term liquidity is acceptable even without OCF detail. No evidence of working capital manipulation is identifiable from the limited snapshot; however, significant swings in receivables or inventories versus revenue would merit monitoring in subsequent quarters. Dividend and capex outflows are unreported, so FCF sustainability versus shareholder returns and investment is indeterminable.

Dividend Sustainability

Dividend information is unreported. With net income at -15.03 and ROE at -7.0%, distributable capacity from earnings is weak. The calculated payout ratio (-12.4%) is not meaningful given negative earnings; in practice, sustainable payouts would rely on free cash flow, which is unreported. Balance sheet liquidity is adequate, but recurring losses argue for a conservative stance on distributions until profitability normalizes. Policy outlook is likely to prioritize reinvestment and stabilization over cash returns near term.

Risk Assessment

Business Risks:

• Revenue contraction (-8.3% YoY) indicating demand softness and competitive pressures.
• High fixed cost base with SG&A (151.40) exceeding gross profit (142.61), risking continued operating losses.
• Margin sensitivity to pricing and mix; need to maintain 36.1% gross margin amid potential discounting.
• Execution risk in restructuring and cost reductions to reach break-even.
• Potential reliance on extraordinary gains to offset operating losses.

Financial Risks:

• Negative operating income resulting in poor interest coverage (-144.25x), albeit with low nominal interest burden.
• Risk of equity erosion if losses persist (ROE -7.0%, ROIC -7.1%).
• Refinancing risk is limited currently, but short-term loans (25.50) require rollover supported by cash flows.
• Working capital risk if inventories (74.11) do not turn efficiently amid lower sales.

Key Concerns:

• Sustained negative ROIC (-7.1%) well below value-creation thresholds.
• Dependence on cost cuts rather than revenue growth to improve profitability, which may have limits.
• Data limitations: no OCF/FCF disclosure, obscuring earnings quality and dividend capacity.
• Discrepancy between reported gross profit and cost of sales figures may reflect classification differences; continued clarity is needed in future disclosures.

Investment Implications

Key Takeaways:

• Top-line declined 8.3% YoY to 394.7; operating loss narrowed to -11.54 but remains negative.
• Gross margin of 36.1% is constructive, yet SG&A still exceeds gross profit, capping operating leverage.
• Ordinary loss improved to -12.76, while net loss widened to -15.03, highlighting below-the-line pressure.
• Liquidity is strong (current ratio 211.8%, quick 154.7%); leverage moderate (D/E 0.81x).
• ROE -7.0% and ROIC -7.1% indicate subpar capital efficiency; turnaround execution is critical.

Metrics to Watch:

• Quarterly revenue trajectory and same-store/inbound trends (if disclosed).
• Gross margin stability versus pricing actions.
• SG&A run-rate and cost-to-sales ratio progress.
• Operating cash flow and working capital turns (AR and inventory vs sales).
• Extraordinary items impact vs recurring profitability.
• Debt maturity profile and interest cost evolution.

Relative Positioning: Within Japan-listed consumer/retail names, the company exhibits weaker profitability and ROIC but stronger liquidity than many distressed peers; sustained cost normalization and revenue stabilization are required to converge toward sector averages.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis