| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1476.8B | ¥1365.7B | +8.1% |
| Operating Income / Operating Profit | ¥44.5B | ¥38.2B | +16.3% |
| Ordinary Income | ¥45.0B | ¥37.8B | +19.0% |
| Net Income / Net Profit | ¥27.1B | ¥24.8B | +9.6% |
| ROE | 7.1% | 6.9% | - |
For the fiscal year ending February 2026, Revenue was ¥1,476.8B (YoY +¥111.2B, +8.1%), Operating Income was ¥44.5B (YoY +¥6.3B, +16.3%), Ordinary Income was ¥45.0B (YoY +¥7.2B, +19.0%), and Net Income was ¥27.1B (YoY +¥2.4B, +9.6%). The operating margin improved to 3.0% from 2.8% a year earlier (+0.2pt), driven by revenue growth and a reduction in SG&A ratio (21.8%, improving 0.3pt from 22.1%). Gross margin was stable at 21.1% (prior year 21.0%). By category, Food expanded the most to ¥563.9B (from ¥498.2B, +13.2%), the primary driver of consolidated revenue growth. While growth and profit expansion were maintained, Operating Cash Flow (OCF) declined to ¥40.2B (YoY -26.1%) from ¥54.4B due to working capital outflows (inventory -¥5.5B, accounts payable -¥13.6B) that compressed cash generation. Capital expenditure was ¥41.6B, 1.37x depreciation of ¥30.4B, indicating an active investment phase; Free Cash Flow was negative ¥-10.7B.
[Revenue] Revenue increased steadily to ¥1,476.8B (YoY +8.1%). By product category, Food ¥563.9B (YoY +13.2%), Lifestyle ¥187.9B (YoY +8.6%), and Consumer Electronics ¥202.3B (YoY +5.1%) led growth, reflecting resilient demand for everyday necessities. HBC (Health & Beauty Care) was ¥277.1B (YoY +4.7%) and Home Living ¥125.0B (YoY +4.3%), with all categories exceeding the prior year. Regionally, domestic sales account for over 90% of total sales; while detailed disclosure is limited, expansion of the domestic store network and strengthened same-store sales likely underpinned the revenue increase.
[Profitability] Operating Income rose to ¥44.5B (YoY +16.3%), outpacing revenue growth. Cost of goods sold ratio was 78.9% (prior year 79.0%), keeping gross margin at 21.1% (up 0.1pt from 21.0%). SG&A was ¥322.4B (YoY +6.9%), controlled below the revenue growth rate (+8.1%), improving the SG&A ratio to 21.8% (from 22.1%, -0.3pt). This positive operating leverage contributed to the operating margin improvement (2.8% → 3.0%, +0.2pt). Non-operating items were small, with non-operating income ¥3.4B (dividend income ¥0.3B, subsidy income ¥0.7B, etc.) offset by non-operating expenses ¥2.9B (interest expense ¥1.6B, etc.), yielding a net ¥0.5B improvement that pushed Ordinary Income growth (+19.0%) above Operating Income growth (+16.3%).
Extraordinary losses were ¥4.8B (prior year ¥0.9B), including impairment losses ¥2.6B and loss on retirement of fixed assets ¥2.1B. These were one-off items; pre-tax income was ¥40.2B (YoY +8.7%). After deduction of income taxes of ¥13.1B, Net Income was ¥27.1B (YoY +9.6%). Net profit margin remained at 1.8% (prior year 1.8%), with the increase in extraordinary losses restraining margin improvement. Overall, top-line growth and absorption of fixed costs drove the revenue and profit increase.
The Group operates in a single segment of retail and related businesses, so segment-level operating profit disclosure is not provided. By product, Food (share 39.7%, YoY +13.2%) was the largest category and the primary driver of overall revenue growth, followed by Consumer Electronics (14.2%, +5.1%) and Lifestyle (13.2%, +8.6%). HBC (19.5%, +4.7%) and Home Living (8.8%, +4.3%) also remained firm; Apparel (4.9%, +0.8%) increased marginally. Eliminations of -¥3.9B reflect deductions for variable consideration, etc., slightly expanded from -¥3.3B in the prior year but had negligible impact on total revenue.
[Profitability] ROE was 7.1%, roughly flat with the prior year, Operating Margin 3.0% (up 0.2pt from 2.8%), and Net Margin 1.8% (flat). The ROE of 7.1% decomposes as Net Margin 1.8% × Total Asset Turnover 1.70x × Financial Leverage 2.26x, with an improvement in asset efficiency (Total Asset Turnover up from 1.64x to 1.70x) being a major contributor. Operating Margin of 3.0% is below the industry median of 4.6% (FY2025, IQR 1.7%-8.2%), placing the company in the lower range within the industry. Gross margin of 21.1% remained unchanged, suggesting intense price competition; suppression of SG&A ratio to 21.8% (from 22.1%) was the primary driver of margin improvement.
[Cash Quality] Operating Cash Flow / Net Income is a healthy 1.48x, but Operating Cash Flow / EBITDA (Operating Income + Depreciation) fell to 0.54x (¥40.2B ÷ ¥74.9B), reflecting deterioration in working capital (inventory increase -¥5.5B, accounts payable decrease -¥13.6B) that compressed cash conversion efficiency. The accrual ratio is -1.5%, indicating sound accrual quality; however, cash conversion (OCF / Net Income) of 1.48x is slightly below the industry median of 1.57x (FY2025, IQR -0.03–2.75). [Investment Efficiency] CAPEX / Depreciation is 1.37x, indicating aggressive investment and exceeding the industry median of 1.16x (FY2025, IQR 0.75–1.92). Total Asset Turnover of 1.70x is well above the industry median of 1.17x (IQR 0.85–1.55), reflecting strong asset efficiency for a retailer. Inventory turnover days are approximately 33 days (¥133.4B ÷ ¥1,476.8B × 365) versus the industry median of 65.7 days (IQR 17.4–111.4), indicating relatively high inventory efficiency.
[Financial Soundness] Equity Ratio is 44.2%, improving 0.9pt from 43.3% and slightly below the industry median of 50.2% (FY2025, IQR 40.1%–63.6%) but within a stable range. Current Ratio is 72.1% (¥206.3B ÷ ¥286.1B), substantially below the industry median of 184% (IQR 126%–254%), indicating short-term liquidity challenges. Quick Ratio is 25.8% ((Cash ¥21.1B + Accounts Receivable ¥37.0B) ÷ ¥286.1B) and is low; cash ¥21.1B contrasts with short-term borrowings ¥12.0B, bonds maturing within one year ¥8.9B, and long-term borrowings due within one year ¥56.6B, demonstrating significant near-term debt repayment burden. Interest-bearing debt totals ¥110.3B (short-term borrowings ¥12.0B + bonds maturing within one year ¥8.9B + bonds ¥25.2B + long-term borrowings due within one year ¥56.6B + long-term borrowings ¥98.1B - double-counting adjustments), and Debt/EBITDA (Operating Income + Depreciation) is 1.47x, a healthy level. Interest coverage, measured as OCF ¥40.2B ÷ interest paid ¥1.7B = 23.6x, shows ample headroom.
Operating Cash Flow was ¥40.2B, down 26.1% from ¥54.4B in the prior year. Operating cash flow before working capital changes (OCF subtotal) was ¥58.0B and remained solid, but deterioration in working capital offset cash inflows. Specifically, inventory increase -¥5.5B (inventory ¥133.4B, up from ¥127.9B, +4.3%), accounts receivable increase -¥2.2B, and accounts payable decrease -¥13.6B (accounts payable ¥82.8B, down from ¥96.1B, -13.8%) were the main factors. The large reduction in accounts payable suggests changes in procurement terms or shortened payment cycles and warrants attention for potential reversal in the next period (normalization of accounts payable levels). Income tax payments were -¥16.4B (prior year -¥13.1B), and interest paid was -¥1.7B (prior year -¥1.3B). Investing Cash Flow was -¥50.9B, primarily due to CAPEX -¥41.6B (prior year -¥18.0B) and acquisition of investment securities -¥7.1B. CAPEX / Depreciation of 1.37x indicates an active investment posture, likely funding store and logistics facilities expansion. Repayment of lease liabilities -¥3.3B and net payments for deposits and guarantees -¥1.9B (payments -¥2.8B, collections +¥4.4B) also affected investing cash flow. Free Cash Flow was -¥10.7B (Operating CF ¥40.2B + Investing CF -¥50.9B), a significant deterioration from ¥36.2B in the prior year. Financing Cash Flow was an inflow of ¥14.3B, with long-term borrowings proceeds ¥65.0B and bond issuance ¥15.0B as primary funding sources, used to cover long-term borrowings repayment -¥60.9B, bond redemption -¥5.9B, dividend payments -¥7.7B, and lease liability repayments -¥3.3B. Cash and cash equivalents increased by ¥3.6B from ¥17.5B at the beginning of the period to ¥21.1B at the end, showing that negative Free Cash Flow was supplemented by financing activities.
Quality of earnings is generally sound: Operating Income ¥44.5B is nearly identical to Ordinary Income ¥45.0B, indicating a core-business centric earnings structure. Non-operating income ¥3.4B is minor at 0.23% of revenue and includes dividend income ¥0.3B and subsidy income ¥0.7B, at a recurring level. Of non-operating expenses ¥2.9B, interest expense ¥1.6B implies an interest burden of about 1.5% on interest-bearing debt of ¥110B, which is within a reasonable range. Extraordinary losses ¥4.8B (impairment losses ¥2.6B, loss on retirement of fixed assets ¥2.1B) are one-off and may provide upside to baseline earnings going forward. OCF / Net Income is 1.48x, and accrual ratio ((Net Income - OCF) / Total Assets) of -1.5% is within a healthy range, indicating strong cash realization of profits. However, OCF / EBITDA is low at 0.54x (¥40.2B ÷ ¥74.9B), with working capital deterioration (accounts payable -¥13.6B, inventory +¥5.5B) lowering cash conversion efficiency. Comprehensive income was ¥30.6B, ¥3.5B higher than Net Income ¥27.1B, mainly due to valuation differences on available-for-sale securities ¥2.9B and adjustments related to retirement benefits ¥0.5B. Investment securities rose substantially to ¥17.1B (from ¥5.7B, +¥11.3B, +198%), contributing unrealized gains to equity and comprehensive income but increasing market price risk. The divergence between Ordinary Income and Net Income is due to extraordinary losses; there is no structural dependence on non-operating income, and earnings quality can be assessed as business-centric and recurring.
Full-year guidance is Revenue ¥1,570.0B (progress 94.1%), Operating Income ¥48.5B (progress 91.6%), Ordinary Income ¥47.0B (progress 95.7%), and Net Income ¥31.0B (progress 87.6%). Remaining to achieve the full-year forecast are Revenue ¥93.2B (+5.9%) and Operating Income ¥4.0B (+9.0%), implying that growth and profit improvement in Q4 are required to meet guidance. Net Income progress at 87.6% is -12.4pt off standard progress (100%), with extraordinary losses (impairment ¥2.6B, retirement loss ¥2.1B) being a downside factor. Operating Income progress of 91.6% is -8.4pt off, necessitating maintenance of gross margin and continued absorption of SG&A in Q4. EPS versus full-year forecast (95.96 yen) is actual 81.51 yen (progress 84.9%). Dividend guidance shows zero yen at year-end (a year-end dividend of 27 yen has already been paid). The divergence with dividend guidance is likely due to disclosure timing, but achieving the full year requires working capital optimization through inventory rationalization, maintenance of price/mix, and continued fixed cost absorption.
Year-end dividend was ¥27 per share, with a payout ratio of 30.9% (total dividends ¥7.7B ÷ Net Income ¥27.1B × adjusted weighted average shares outstanding). A year-end dividend was also paid in the prior year (total dividends ¥7.7B, same amount), suggesting a stable dividend policy. However, Free Cash Flow was negative ¥-10.7B, and dividends of ¥7.7B were not covered by Operating Cash Flow, relying on financing cash inflows (net ¥80B from long-term borrowings and bond issuance). Cash and deposits are thin at ¥21.1B, with Current Ratio 72.1% and Quick Ratio 25.8%, so dividend sustainability depends on recovery of OCF and reallocation of investment. Debt/EBITDA is 1.47x and interest coverage 23.6x, indicating capacity to sustain dividends in the mid-term at payout ratios in the 30% range; however, in scenarios of continued large CAPEX or inventory build-up, dividend policy flexibility may be applied. Payout Ratio of 30.9% is at the upper range of the industry median of 27% (FY2025, IQR 20%–34%), indicating relatively generous shareholder returns within the industry.
Profit volatility due to low-margin structure: Operating Margin of 3.0% is below the industry median of 4.6%, making results sensitive to fixed costs and price competition. Stable gross margin at 21.1% suggests limited room for price measures, making continued suppression of SG&A ratio (21.8%) a prerequisite for protecting profits. In periods of rising labor or energy costs, a 1pt decline in operating margin would reduce Operating Income by approximately ¥15B.
Short-term liquidity risk and working capital management: Current Ratio 72.1% and Quick Ratio 25.8% indicate vulnerable short-term liquidity. Cash and deposits ¥21.1B are far exceeded by tangible liabilities maturing within one year (short-term borrowings ¥12.0B, bonds maturing within one year ¥8.9B, long-term borrowings due within one year ¥56.6B) totaling ¥77.5B. Continued deterioration in working capital (accounts payable -¥13.6B, inventory +¥5.5B) could strain liquidity and increase borrowing dependence. Attention is required on normalization of accounts payable and potential inventory valuation losses.
CAPEX burden and market risk of investment securities: CAPEX ¥41.6B is 1.37x depreciation and reflects an active investment phase; delays in investment payback or underperformance of new/renovated stores could pressure margins and cash flow. Investment securities rose sharply to ¥17.1B (from ¥5.7B, +198%), and valuation gains of ¥2.9B boosted comprehensive income, but market downturns could create unrealized losses and impairments. Investment securities / Equity is 4.5%—small but requires monitoring of investment policy and market volatility.
[Industry Position] (Reference data, company analysis) Operating Margin of 3.0% is below the retail industry median of 4.6% (FY2025, IQR 1.7%-8.2%, n=47), placing the company in the lower range. Net Margin 1.8% also trails the industry median of 3.3% (IQR 0.9%-5.8%), highlighting the low-margin profile. Conversely, Total Asset Turnover 1.70x substantially exceeds the industry median of 1.17x (IQR 0.85–1.55), indicating high asset efficiency. ROE 7.1% slightly exceeds the industry median of 5.9% (IQR 2.6%–12.0%), with asset efficiency offsetting low margins to sustain ROE near industry levels. Revenue growth of +8.1% outpaces the industry median of 4.3% (IQR 2.2%-13.0%), placing top-line growth among the industry leaders. EPS growth +9.5% exceeds the industry median of 6% (IQR -27%–46%), reflecting favorable earnings momentum. Current Ratio 72.1% is well below the industry median of 184% (IQR 126%–254%), placing the company in the lower range for short-term liquidity. Equity Ratio 44.2% is slightly below the industry median of 50.2% (IQR 40.1%–63.6%) but mid-range within the industry. Payout Ratio 30.9% sits at the upper bound of the industry median 27% (IQR 20%–34%), indicating relatively active shareholder returns. Inventory turnover days of about 33 days are below the industry median of 65.7 days (IQR 17.4–111.4), demonstrating superior inventory efficiency. Overall, the company combines asset efficiency, growth, and shareholder returns that rank well in the industry, while profitability and liquidity lag—improvement in fixed cost absorption and cash conversion are keys to enhancing industry positioning.
Key points are as follows. First, the company achieved revenue growth +8.1% and Operating Income +16.3%, improving Operating Margin to 3.0% (from 2.8%, +0.2pt). Suppression of SG&A ratio (21.8%, down 0.3pt from 22.1%) was the main driver, indicating positive operating leverage. Nevertheless, Operating Margin 3.0% remains below the industry median of 4.6%, so significant scope for margin improvement remains. Second, OCF / Net Income is 1.48x (healthy) but OCF / EBITDA fell to 0.54x due to working capital deterioration (accounts payable -¥13.6B, inventory +¥5.5B) that weakened cash conversion. The large decline in accounts payable warrants attention for potential reversal in the next period; inventory optimization and recovery of OCF / EBITDA are focal points. Third, Current Ratio 72.1% and Quick Ratio 25.8% indicate weak short-term liquidity, with cash ¥21.1B versus near-term liabilities ¥77.5B, creating a maturity mismatch. CAPEX is 1.37x depreciation and Free Cash Flow is negative ¥-10.7B, with dividends ¥7.7B financed by borrowing. Debt/EBITDA 1.47x and interest coverage 23.6x suggest debt capacity, but improving short-term liquidity (faster inventory turnover, optimization of payable terms, lengthening funding maturities) is key to financial stability. In sum, top-line growth and fixed-cost absorption are positive, but low margins, deteriorating cash conversion, and weak short-term liquidity remain structural concerns.
This report was generated by AI analyzing XBRL financial statement data and is an automated earnings analysis document. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by our firm based on public financial statements. Investment decisions are your responsibility; consult professionals as necessary before making investment decisions.