| Indicator | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥2526.6B | ¥2501.5B | +1.0% |
| Operating Income | ¥18.8B | ¥13.3B | +41.4% |
| Ordinary Income | ¥19.7B | ¥14.4B | +36.8% |
| Net Income | ¥2.1B | ¥-24.1B | +49.1% |
| ROE | 0.3% | -3.2% | - |
For the fiscal year ended February 2026, Revenue was ¥2,526.6B (YoY +¥25.1B +1.0%), Operating Income was ¥18.8B (YoY +¥5.5B +41.4%), Ordinary Income was ¥19.7B (YoY +¥5.3B +36.8%), and Net Income attributable to owners of the parent turned profitable to ¥2.6B (from a loss of ¥-23.8B in the prior year). While top-line growth was modest, the Company achieved significant profit improvement. Selling, general and administrative expense (SG&A) restraint improved the operating margin from 0.53% to 0.74% (21bp improvement). A reduced special loss (¥12.7B) compared with the prior year’s large impairment allowed pre-tax profit to turn positive to ¥7.8B. Improvement through the ordinary income stage was steady, but a high effective tax rate of 63.6% and special losses limited growth in Net Income, leaving capital efficiency low with ROE at 0.3%.
[Revenue] A modest increase of +1.0% (¥+25.1B). As a single-segment Supermarket Business, store count and customer traffic growth were limited, but improved operational efficiency at existing stores and other operating revenue of ¥90.7B (3.6% of Revenue) supported the top line. Cost of sales was ¥1,731.1B (cost ratio 68.5%), yielding a gross margin of 26.3%, a slight improvement from 26.1% the prior year, driven by pricing mix and better merchandise loss control.
[Profitability] Operating Income rose substantially by +41.4% (¥+5.5B). SG&A totaled ¥776.6B (SG&A ratio 30.7%), up ¥9.8B from ¥766.8B a year earlier; however, SG&A ratio remained roughly flat from 30.6% the prior year. Depreciation was ¥60.1B, rent ¥77.2B, and utilities ¥55.7B, indicating high fixed costs, but labor-saving and energy-saving measures improved the operating margin to 0.74%. Non-operating items included dividend income ¥1.1B and interest income ¥0.2B versus interest expense ¥1.9B, with net non-operating income of ¥0.9B supported by equity-method investment gains of ¥0.3B, bringing Ordinary Income to ¥19.7B (ordinary income margin 0.78%). In extraordinary items, securities sale gain ¥0.6B was recorded, but impairment losses on stores and equipment ¥10.9B (reduced from ¥39.2B prior year) and loss on disposal of fixed assets ¥1.1B resulted in special losses of ¥12.7B, leaving pre-tax profit at ¥7.8B. After corporate taxes and others of ¥5.0B (effective tax rate 63.6%) and non-controlling interests of ¥0.2B, Net Income attributable to owners of the parent was ¥2.6B (net margin 0.1%), a modest profit and a turnaround from a prior-year loss of ¥-24.1B. Conclusion: revenue and profit both increased.
[Profitability] Operating margin 0.74% (improved 21bp from 0.53% prior year), Ordinary Income margin 0.78%, Net margin 0.1%. EBITDA was ¥82.9B (Operating Income ¥18.8B + Depreciation ¥64.1B), giving an EBITDA margin of 3.3%. ROE 0.3% (improved from -3.3% prior year), ROA 0.2% — capital efficiency remains low. Operating leverage was modestly positive, and SG&A restraint contributed to higher Operating Income. [Cash Quality] Operating Cash Flow (OCF) was ¥76.2B, 29.3x Net Income ¥2.6B, yielding an extremely high cash conversion (OCF/Net Income). OCF/EBITDA was 0.92x, indicating solid cash generation. Accrual ratio was -5.7%, reflecting significant non-cash items; the non-cash impairment of ¥10.9B depressed Net Income while cash remained abundant. Free Cash Flow (FCF) was ¥18.7B, covering dividends of ¥10.7B by 1.7x, indicating dividend payment capacity. [Investment Efficiency] ROIC was 1.2% (NOPAT / Invested Capital), likely below the cost of capital, indicating room for improvement in capital efficiency. Total asset turnover was 1.96x/year (Revenue ¥2,526.6B ÷ Total Assets ¥1,292.2B), high as typical for retail, but thin margins constrain profitability. Capital expenditures were ¥57.5B versus depreciation ¥64.1B, and reduced investing outflows supported a favorable conversion from OCF to FCF. [Financial Soundness] Equity Ratio was 57.8% (prior year 57.7%), solid. Interest-bearing debt was ¥172.4B (short-term borrowings ¥48.5B + long-term borrowings ¥123.9B), with Debt/EBITDA 2.08x, within investment-grade range. Interest coverage was 9.9x (EBIT ¥18.8B ÷ Interest expense ¥1.9B), showing resilience to interest burden. However, current ratio 85.2% (current assets ¥306.5B ÷ current liabilities ¥359.8B) and quick ratio 55.3% indicate short-term liquidity is at a watch level—liquid funds ¥113.7B versus sizeable current liabilities requires careful maturity mismatch management. Debt-to-equity ratio 0.73x and Debt/Capital 18.8% reflect a conservative capital structure.
OCF was ¥76.2B (YoY +¥10.2B +15.5%), expanding steadily. Pre-tax profit ¥7.8B plus depreciation ¥64.1B and impairment loss ¥10.9B and other non-cash items yielded subtotal OCF before working capital changes of ¥79.3B. Working capital absorbed funds: accounts receivable increase -¥2.3B and inventory increase -¥1.1B, while accounts payable decrease -¥2.8B also reduced operating liabilities, resulting in net working capital change of -¥6.2B (small cash outflow). After corporate taxes paid -¥2.5B, OCF settled at ¥76.2B. Investing CF was -¥57.5B (narrowed from -¥88.8B prior year), mainly for acquisition of tangible fixed assets, with a shift to selective investment. Financing CF was -¥20.2B (prior year -¥28.9B): proceeds from long-term borrowings ¥40.0B versus long-term borrowings repayments -¥36.8B, share buybacks -¥10.0B, dividends paid -¥10.9B, and lease liabilities repayments -¥2.6B. FCF (OCF + Investing CF) was ¥18.7B, covering dividends ¥10.7B by 1.7x; however, total shareholder returns including share buybacks of ¥10.0B totaled ¥20.7B, slightly exceeding FCF, leaving a thin buffer for cash allocation. Cash and cash equivalents decreased slightly from ¥111.5B at the beginning of the period to ¥110.0B at the end (-¥1.5B); despite curtailed investing and expanded OCF securing FCF, prioritization of shareholder returns kept the cash position roughly flat.
Operating earnings (Operating Income ¥18.8B and net non-operating income +¥0.9B) formed the earnings base, with most operating revenue from core retail sales and related other operating revenue of ¥90.7B (tenant income, etc.). Non-operating income was ¥3.1B (dividend income ¥1.1B, interest income ¥0.2B, other ¥0.8B), representing 0.12% of Revenue and indicating high dependence on core operations. Extraordinary items comprised securities sale gain ¥0.6B versus impairment loss ¥10.9B and loss on disposal of fixed assets ¥1.1B totaling ¥12.7B in losses; these one-off items equaled about 162% of pre-tax profit, meaning Net Income was heavily influenced by one-time charges. The fact that OCF is 29.3x Net Income stems from the non-cash nature of impairment and high depreciation of ¥64.1B added back to OCF under the accrual structure. OCF/EBITDA 0.92x shows good cash conversion, and limited changes in receivables and inventory indicate high accrual quality. Comprehensive income was ¥22.4B (¥22.2B attributable to owners of the parent), where Net Income ¥2.6B was augmented by ¥8.7B in securities valuation differences and ¥10.9B in actuarial gains/losses adjustments for retirement benefits, so other comprehensive income ¥19.6B greatly exceeded Net Income. This divergence is due to valuation gains and pension remeasurements and is expected to be neutral to future earnings. If impairment normalizes and the effective tax rate declines, the divergence between Net Income and OCF should narrow and earnings quality improve.
The full-year plan forecasts Revenue ¥2,555.0B (YoY +1.1%), Operating Income ¥21.0B (YoY +11.8%), Ordinary Income ¥21.0B (YoY +6.4%), Net Income attributable to owners of the parent ¥6.5B (YoY +146%), and EPS ¥15.98. An operating margin improvement to approximately 0.82% is assumed, premised on further SG&A efficiency and store portfolio optimization. Net Income is expected to increase from ¥2.6B to ¥6.5B (+¥3.9B), reflecting a reduction in one-time losses such as impairments. Dividend guidance is ¥13.00 per annum, a practical halving from this fiscal year’s ¥26.00 (interim ¥13 + year-end ¥13); the payout ratio relative to next-year projected EPS ¥15.98 is about 81%, indicating normalization from this year’s excess payout (payout ratio 407%) and a shift toward a conservative policy prioritizing alignment with earnings and FCF. Revenue growth of +1.1% assumes modest same-store growth plus new store openings, but risks to achieving this include price competition and rising energy costs. Operating Income growth of +11.8% depends on SG&A restraint and gross margin maintenance, with continued restraint in investing CF intended to stabilize FCF. Next fiscal year could see room for improvement in ROE and ROIC due to a reversal of one-off losses and continued cost efficiency; together with normalized payout, this is positioned as a transition toward a sustainable shareholder return framework.
This fiscal year’s dividend was interim ¥13.00 and year-end ¥13.00, totaling ¥26.00, with total dividends paid of ¥10.7B. The payout ratio relative to Net Income attributable to owners of the parent (¥2.6B) was 407%, extremely high and raising sustainability concerns on a net-income basis. However, OCF ¥76.2B and FCF ¥18.7B cover dividends by 1.7x, indicating dividend capacity on a cash basis. Share buybacks of ¥10.0B were executed in financing CF, bringing total shareholder returns to ¥20.7B (dividends ¥10.7B + share buybacks ¥10.0B). Total return ratio was 795% relative to Net Income and 111% relative to FCF, slightly exceeding cash generation this period. Treasury stock increased from ¥1.99B at the beginning of the period to ¥11.78B at the end (a 492% increase), intended to enhance per-share value and capital efficiency, but this compresses liquidity buffers. Next year’s dividend forecast is ¥13.00 per annum (interim and year-end each ¥13.00), effectively halving from this year’s ¥26.00. The payout ratio relative to next-year projected EPS ¥15.98 is about 81%, remaining high but reflecting a conservative shift to align dividend amounts with earnings. Recovery in Net Income, ROE, and stable FCF would improve dividend sustainability.
[Short-term Liquidity Risk] Current ratio 85.2% and quick ratio 55.3% indicate short-term liquidity is at a watch level. Cash and deposits ¥113.7B versus current liabilities ¥359.8B create maturity mismatch risk. The combined amount of short-term borrowings ¥48.5B and current portion of long-term borrowings ¥45.4B equals ¥93.9B, which does not exceed cash and deposits, but substantial operating liabilities such as accounts payable ¥130.0B and contract liabilities ¥18.9B mean that delays in inventory turnover or receivables collection could immediately strain liquidity. While retail’s negative working capital (¥-53.3B) supports operations, changes in payment terms or sharp declines in sales would thin buffers.
[Risk of Continued One-off Losses] This fiscal year recorded impairment losses ¥10.9B (reduced from ¥39.2B prior year) and loss on disposal of fixed assets ¥1.1B, totaling special losses ¥12.7B. Impairments and closure-related costs from store portfolio reviews may continue. Impairments are non-cash and do not directly impact CF but can destabilize Net Income and ROE, amounting to roughly 162% of pre-tax profit and constraining profitability. If unprofitable stores are rationalized, impairment risk should decline, but short-term recurrence of one-off charges is possible.
[Price Competition & Rising Cost Risk] Although gross margin is maintained at 26.3%, intensified price competition among peers could exert downward pressure on margins. SG&A ratio 30.7% is standard, but rising energy, logistics, and labor costs could increase SG&A; if revenue growth slows, operating margin improvement could reverse. Utilities ¥55.7B (2.2% of Revenue) and rent ¥77.2B (3.1% of Revenue) are heavy fixed costs, and weak traffic growth at existing stores would negatively affect operating leverage.
[Industry Position] (Reference data — company analysis) The Company’s operating margin of 0.74% is well below the industry median of 4.6% (IQR 1.7%–8.2%), placing it low within the industry. Net margin 0.1% also trails the industry median of 3.3% (IQR 0.9%–5.8%), indicating weak profitability relative to peers. ROE 0.3% is below the industry median 5.9% (IQR 2.6%–12.0%), and ROA 0.2% is below industry median 3.3% (IQR 1.2%–5.8%), showing lower capital efficiency. Equity Ratio 57.8% is in the upper range relative to the industry median 50.2% (IQR 40.1%–63.6%), indicating solid financial soundness. Current ratio 85.2% is well below the industry median 184.0% (IQR 126.0%–254.0%), signaling weak short-term liquidity versus peers. Total asset turnover 1.96x exceeds the industry median 1.17x (IQR 0.85–1.55), reflecting good asset efficiency typical of retail, but thin margins constrain profitability. Inventory turnover days are about 15.5 days (inventory ¥107.4B ÷ daily sales ¥6.9B), far lower than the industry median 65.7 days, showing high inventory efficiency. Payout ratio 407% (next-year forecast 81%) far exceeds the industry median 27% (IQR 20%–34%); this year’s payout was excessive, but normalization is expected next year. Cash conversion ratio (OCF/EBITDA 0.92x) is slightly below the industry median 1.57x but remains solid. Overall, while gross margin and rent ratio maintain some competitive positioning, operating margin, ROE, and ROIC lag industry averages and require improvement. Cash generation is stable and financial resilience is mid-range, but short-term liquidity is weak relative to peers and maturity mismatch management is critical.
[Durability of Operating Margin Improvement from SG&A Restraint] Operating margin improved from 0.53% to 0.74% (21bp), demonstrating the effects of SG&A restraint and labor/energy-saving measures. The Company expects operating margin to improve to 0.82% next year, but continued cost control is vital given muted revenue growth. Rent of ¥77.2B (3.1% of Revenue) is low relative to peers, and further logistics efficiency and store portfolio optimization could create mid-term margin expansion opportunities.
[Cash Generation and Normalization of Shareholder Returns] With OCF ¥76.2B and FCF ¥18.7B, cash generation is solid and dividends are covered 1.7x on a cash basis. Although this year’s dividend ¥26.00 was an excess payout relative to Net Income, the planned halving to ¥13.00 next year and normalization to a payout ratio of 81% indicates a conservative shift to align distributions with earnings. If impairments normalize and the effective tax rate declines, recovery in Net Income and ROE would enhance dividend sustainability.
[Balancing Short-term Liquidity and Capital Efficiency] Current ratio 85.2% signals short-term liquidity risk, but retail’s negative working capital (¥-53.3B) and high inventory turnover support liquidity. ROE 0.3% and ROIC 1.2% show low capital efficiency and considerable room for improvement; raising operating margin, reducing impairment risk, and optimizing tax burden are key to improving ROIC. In the short term, liquidity management and monitoring of maturity mismatch are essential; in the medium term, margin expansion and capital efficiency improvement are focal points.
This report was automatically generated by AI analyzing XBRL financial statement data to produce a financial results analysis. It does not constitute a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; please consult professionals as necessary before making such decisions.