AOKI Holdings Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥84.03B
• Operating Income: ¥3.94B
• Net Income: ¥2.78B
• EPS: ¥22.45

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

AOKI Holdings reported FY2026 Q2 consolidated results under JGAAP with modest top-line growth but weaker profitability and earnings. Revenue was ¥84.0bn, up 1.3% YoY, while operating income fell 5.6% to ¥3.94bn, indicating operating deleverage despite stable gross profitability. Gross profit of ¥33.0bn implies a solid gross margin of 39.3%, but SG&A intensity rose: implied SG&A was approximately ¥29.1bn, or 34.6% of sales, pressuring the operating margin to 4.7%. Ordinary income was ¥3.76bn, and net income declined 32.4% YoY to ¥1.89bn, driving the net margin down to 2.25%. The sharp decline in net versus ordinary income suggests non-operating/extraordinary losses or adjustments between ordinary profit and income before taxes under JGAAP. The implied pre-tax income derived from net income and taxes is roughly ¥3.00bn, indicating an estimated effective tax rate around 37%, despite the reported metric showing 0.0% (which should be viewed as undisclosed, not zero). Cash generation was resilient: operating cash flow reached ¥3.76bn, yielding an OCF/net income ratio of 1.99x, supportive of earnings quality. Leverage and liquidity remain comfortable, with total liabilities of ¥90.8bn against equity of ¥139.0bn and a computed equity ratio near 65.9% (the 0.0% reported equity ratio appears undisclosed). The current ratio is 157.7% and the quick ratio 112.8%, supported by ¥79.8bn in current assets and ¥50.6bn in current liabilities. Interest coverage is strong at 31.5x on low interest expense (¥125m), underscoring solvency strength. Operating leverage appears unfavorable this half, as low single-digit revenue growth did not translate into profit growth, implying cost inflation or higher selling expenses. The DuPont framework shows a low ROE of 1.36%, constrained by a modest net margin and slow asset turnover (0.399x), though leverage is conservative at 1.52x assets-to-equity. Free cash flow cannot be robustly assessed because investing cash flows/capex were not disclosed (values shown as 0 indicate unreported). Dividend metrics are also not disclosed (DPS and payout show 0.00 as placeholders), limiting visibility on shareholder return policy in this period. Overall, fundamentals show a stable revenue base, solid gross margin, healthy liquidity and coverage, but weaker bottom-line performance driven by higher operating costs and likely extraordinary charges. Outlook hinges on SG&A control, normalization of one-off items, and improved asset efficiency. Data limitations (notably cash, capex/investing CF, and per-share book data) require caution when interpreting cash returns and capital intensity.

Profitability Analysis

ROE is 1.36%, decomposed via DuPont as net profit margin 2.25% × asset turnover 0.399 × financial leverage 1.52. The low ROE is primarily a function of compressed net margin rather than excessive leverage, with leverage relatively conservative. Operating margin stands at 4.7% (¥3.94bn operating income on ¥84.03bn revenue), down YoY despite a solid 39.3% gross margin, indicating SG&A deleverage. Implied SG&A of ¥29.10bn represents 34.6% of sales, suggesting cost pressures in selling, logistics, or labor. EBITDA of ¥8.90bn yields a 10.6% margin; the EBITDA-to-EBIT gap reflects ¥4.96bn in depreciation/amortization, highlighting meaningful fixed cost absorption and operating leverage sensitivity. Ordinary income of ¥3.76bn trails operating income only slightly, but the implied pre-tax income (¥3.00bn) indicates extraordinary losses or adjustments under JGAAP that weighed on bottom-line profitability. Interest burden is light (¥125m), with interest coverage of 31.5x, so financing costs are not the driver of margin compression. Overall margin quality is mixed: gross profitability is healthy, but the translation to operating and net margins weakened due to higher operating costs and non-recurring/extraordinary impacts.

Growth Assessment

Revenue grew 1.3% YoY to ¥84.0bn, indicating modest top-line resilience. However, operating income declined 5.6% YoY to ¥3.94bn, demonstrating negative operating leverage in the period. Net income fell 32.4% YoY to ¥1.89bn, implying additional pressure below operating line—likely from extraordinary losses or valuation items typical under JGAAP. With gross margin at 39.3%, revenue quality appears intact, but SG&A escalation limited profit conversion. Sustainability of revenue growth will depend on consumer demand, store productivity, and pricing/promotion balance in the core businesses, while cost control becomes critical to restore operating margin. Profit quality is supported by cash conversion (OCF/net income 1.99x), suggesting earnings are backed by cash flows this half. Outlook near term: stabilization requires normalization of one-off items and tighter expense discipline; absent stronger sales growth, profit recovery will rely on SG&A savings and fixed-cost leverage.

Financial Health

Balance sheet strength is solid with total assets of ¥210.8bn and equity of ¥139.0bn; the computed equity ratio is approximately 65.9% (equity/assets), despite the reported equity ratio field showing 0.0% as undisclosed. Total liabilities are ¥90.8bn, yielding a liabilities-to-equity ratio of 0.65x. Liquidity is comfortable: current assets of ¥79.8bn versus current liabilities of ¥50.6bn give a current ratio of 157.7% and a quick ratio of 112.8% (inventory ¥22.7bn). Working capital is ¥29.2bn, offering operational flexibility. Interest expense is modest at ¥125m, and interest coverage is strong at 31.5x, indicating low refinancing risk. While detailed debt composition and cash balances are undisclosed here (cash & equivalents shown as 0 meaning not reported), the overall solvency profile appears conservative given substantial equity and limited interest burden.

Cash Flow Quality

Operating cash flow was ¥3.76bn versus net income of ¥1.89bn, yielding an OCF/net income ratio of 1.99x, which supports earnings quality and suggests favorable working capital dynamics this half. Depreciation and amortization of ¥4.96bn significantly exceed interest expense and are a key non-cash driver of OCF. Free cash flow cannot be reliably derived because investing cash flow and capex are not disclosed in this dataset (the 0 values indicate items not reported). Financing cash flow was an outflow of ¥4.98bn, likely reflecting debt repayments, lease obligations, or shareholder returns; with DPS/payout undisclosed here, we cannot apportion this precisely. Working capital appears well-managed given the quick ratio of 112.8% and inventory of ¥22.7bn, though without prior-period turnover data we cannot assess changes in inventory efficiency. Overall, cash conversion is solid, but visibility on capital intensity and discretionary cash flow is limited due to missing investing data.

Dividend Sustainability

Dividend information appears undisclosed in this dataset (DPS and payout reported as 0.00 should be treated as not provided). As such, payout ratio assessment and FCF coverage cannot be established from the provided numbers. On fundamentals, the company generated ¥3.76bn in OCF in the half and maintains a conservative balance sheet with strong coverage ratios, which would typically support some capacity for distributions. However, absent capex and investing CF disclosure, sustainable free cash flow cannot be assessed, and extraordinary losses indicated by the gap between ordinary and pre-tax income caution against assuming normalized distributable earnings. Policy outlook is therefore unclear based solely on this release; monitoring official dividend guidance and full-year forecasts is necessary.

Risk Assessment

Business Risks:

• Operating deleverage risk if sales growth remains low while fixed costs (rent, labor, depreciation) stay elevated
• Potential extraordinary losses under JGAAP affecting bottom-line volatility
• Consumer demand sensitivity in discretionary categories, impacting same-store sales and markdowns
• Cost inflation in logistics, utilities, and labor pressuring SG&A
• Inventory management risk affecting gross margin via markdowns

Financial Risks:

• Limited visibility on cash and capex due to undisclosed investing CF and cash balances
• Potential refinancing and lease obligation considerations not detailed despite low interest expense
• Earnings sensitivity to extraordinary/non-operating items affecting interest coverage and covenants (if any)

Key Concerns:

• Net income declined 32.4% YoY despite revenue growth, pointing to cost and one-off pressures
• ROE is low at 1.36% due to thin net margins and slow asset turnover
• Free cash flow cannot be assessed without capex data, limiting payout and deleveraging visibility

Investment Implications

Key Takeaways:

• Top-line grew 1.3% YoY but operating income fell 5.6%, indicating negative operating leverage
• Gross margin is strong at 39.3%, but SG&A at ~34.6% of sales constrained operating margin to 4.7%
• Net income dropped 32.4% YoY, likely influenced by extraordinary/non-operating items
• Balance sheet appears conservative with an estimated equity ratio of ~65.9% and interest coverage of 31.5x
• OCF/net income at 1.99x supports earnings quality, but FCF is not derivable due to missing investing data

Metrics to Watch:

• SG&A ratio and trend versus prior year/plan
• Extraordinary gains/losses bridge from ordinary income to income before taxes
• Capex and maintenance versus growth investment once disclosed
• Inventory levels and turnover; gross margin versus markdowns
• Same-store sales and price/mix to assess revenue sustainability
• Cash and net debt profile, including lease liabilities if applicable

Relative Positioning: Within Japanese discretionary/retail peers, AOKI’s balance sheet is comparatively conservative and interest burden light, but profitability momentum is softer this half due to SG&A deleverage and likely non-recurring losses; asset turnover remains modest, keeping ROE below peer averages absent a recovery in margins or sales efficiency.

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