SHIMAMURA Co.,Ltd. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥525.51B
• Operating Income: ¥48.18B
• Net Income: ¥35.15B
• EPS: ¥478.14

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

Verdict: Solid topline growth with slightly compressed margins and mixed cash conversion; balance sheet remains exceptionally strong. Revenue grew 5.6% year over year to 5,255.06 (100M JPY), while operating income increased 3.5% to 481.77 and net income rose 4.5% to 351.47. Operating margin was 9.17%, down ~19 bps from ~9.36% in the prior period. Net margin was 6.69%, down ~7 bps from ~6.76% a year ago. Gross margin printed at 35.0% (prior-year gross margin not disclosed), indicating healthy merchandise profitability in a discount apparel environment. Ordinary income rose 4.7% to 499.75, supported by net non-operating gains (interest income 7.46, dividends 2.19). EPS (basic) was 478.14 JPY. On quality, operating cash flow was 312.66 versus net income of 351.47, yielding OCF/NI of 0.89x (below the >1.0x high-quality benchmark but above the 0.8x concern threshold). Cash conversion (OCF/EBITDA) was flagged low at 0.59x, suggesting working capital drag and seasonal effects. Capex was elevated at 157.74 versus depreciation of 50.30 (CapEx/Depreciation 3.14x), consistent with a growth and refurbishment cycle. The balance sheet is conservative with current ratio 469% and D/E 0.18x; cash and deposits are 1,389.92, comfortably exceeding current liabilities of 835.81. DuPont ROE is 6.7% (net margin 6.7% × asset turnover 0.852 × leverage 1.18x), below 8% and thus sub-par on CFA benchmarks, reflecting deliberately low leverage. Tax burden is normal at 0.710 and interest burden above 1.0 (1.027) reflects net interest income, not high debt. Forward-looking, investments should support mid-single-digit revenue growth and store productivity, but near-term OCF may remain pressured by inventory and payables timing. Dividend capacity appears intact with a calculated payout ratio of 42%, given strong liquidity and modest leverage, though FCF details are partially unreported. Overall, the quarter shows steady execution in sales and profit with disciplined cost control, while cash conversion and slightly compressed margins warrant monitoring.

Profitability Analysis

ROE decomposition (3-factor): ROE 6.7% = Net Profit Margin (6.7%) × Asset Turnover (0.852) × Financial Leverage (1.18x). Within the 5-factor lens: Tax Burden (NI/EBT) 0.710, Interest Burden (EBT/EBIT) 1.027, EBIT Margin 9.2%, Asset Turnover 0.852, Equity Multiplier 1.18x. The dominant constraint on ROE is modest net margin and intentionally low leverage; asset turnover is adequate for a specialty apparel retailer. Operating margin declined ~19 bps YoY (9.17% vs ~9.36%), and net margin compressed ~7 bps (6.69% vs ~6.76%), indicating mild deleveraging of fixed costs or slightly higher merchandise costs/promotions. Non-operating income (interest income and dividends) provided a small tailwind, reflected in an interest burden >1.0 (indicative of net financial income). Business drivers likely include: continued traffic gains and merchandising mix supporting gross profit, offset by cost inflation (wages, utilities) and selective promotions. Sustainability: the low leverage and stable gross profit suggest margins can be maintained, but structural ROE improvement requires either higher asset turnover (store productivity, e-commerce contribution) or margin expansion (private label mix, supply-chain efficiency). Concerning trends: unable to validate SG&A growth vs revenue growth due to missing SG&A breakdown and prior-year SG&A; however, the slight margin compression implies SG&A growth may be tracking at or above revenue growth.

Growth Assessment

Revenue grew 5.6% YoY to 5,255.06 (100M JPY), a healthy pace for value apparel. Operating income increased 3.5% to 481.77, lagging revenue growth due to ~19 bps margin compression. Ordinary income and net income rose 4.7% and 4.5% respectively, supported by modest non-operating gains. EBITDA was 532.07 with an EBITDA margin of 10.1%. Growth drivers likely include steady same-store sales, assortment optimization, and store network productivity; exact comps and traffic/ticket details are not disclosed. Elevated capex (157.74) vs depreciation (50.30) indicates ongoing investment in stores, logistics, and IT that should support medium-term growth. Outlook: mid-single-digit revenue growth appears achievable given positioning in value, though margin expansion may be capped by input cost inflation and competitive pricing. Non-operating income (interest/dividends) should remain a small net positive given the cash-rich balance sheet. Key swing factors: weather-sensitive seasonal demand, FX impacts on imported merchandise costs, and wage/utility inflation.

Financial Health

Liquidity is very strong: current ratio 469.1% and quick ratio 469.1% (no inventory figure disclosed), with cash and deposits 1,389.92 exceeding current liabilities of 835.81. No warning on current ratio as it is well above 1.0. Solvency is conservative: total liabilities 945.36 vs equity 5,223.66 implies D/E of 0.18x. Interest-bearing debt is unreported, but interest burden >1 and recognized interest income suggest net cash. Maturity mismatch risk appears low as short-term obligations (dominated by accounts payable of 509.52) are amply covered by cash and current assets (3,920.78). No off-balance sheet obligations are disclosed in the provided data. Equity increased from 5,009.76 to 5,223.66, supported by retained earnings accumulation.

Cash Flow Quality

OCF was 312.66 versus net income of 351.47, for OCF/NI of 0.89x. This is below the >1.0x high-quality threshold but above the 0.8x concern level, indicating acceptable but not robust conversion this period. Cash conversion (OCF/EBITDA) was 0.59x, flagged as low, likely driven by working capital investment (inventory build for seasonal sales and/or timing of payables/receivables). Accruals ratio is low at 0.6%, supportive of earnings quality from an accrual standpoint. CapEx/Depreciation is 3.14x, signaling a heavy investment phase; while positive for growth, it weighs on near-term FCF. Using a proxy FCF (OCF minus CapEx), FCF would be approximately 154.9 (312.66 - 157.74), but full investing CF is unreported, so this estimate excludes other investing flows. Sustainability: with strong liquidity and low leverage, the company can fund capex and dividends internally; however, continued low cash conversion would limit incremental cash buildup if capex remains elevated. No clear signs of working capital manipulation are evident; accounts payable (509.52) are significant but supported by high cash and current assets.

Dividend Sustainability

The calculated payout ratio is 42.0%, within the <60% sustainable range. Dividend per share and total dividends paid were unreported, but financing cash outflows of -150.60 likely include dividends alongside minor buybacks (-0.16). Proxy FCF as calculated (OCF - CapEx) of ~154.9 suggests reasonable coverage of ordinary dividends, though this is an estimate given incomplete investing CF disclosure. Balance sheet strength (D/E 0.18x, cash 1,389.92) provides additional buffer. Policy outlook: with stable earnings and conservative leverage, maintaining or modestly increasing dividends appears feasible, contingent on working capital normalization and capex cadence.

Risk Assessment

Business Risks:

• Weather-sensitive demand and seasonality impacting traffic and inventory sell-through
• Intense price competition in value apparel compressing gross and operating margins
• FX fluctuations affecting import costs and pricing power
• Supply chain and logistics disruptions affecting inventory availability and costs
• Store productivity risk from sub-optimal assortment or execution during expansion/remodels

Financial Risks:

• Low cash conversion (OCF/EBITDA 0.59) indicating working capital drag
• Elevated CapEx relative to depreciation (3.14x) creating near-term FCF pressure
• Potential exposure to interest rate shifts on cash yields and any unreported leases/debt
• Concentration in accounts payable (509.52) requiring continued vendor terms stability

Key Concerns:

• ROE at 6.7% below 8% benchmark, constrained by low leverage and modest margins
• Slight margin compression (~19 bps operating, ~7 bps net) despite revenue growth
• Partial data gaps (inventories, investing CF, interest-bearing debt, DPS) limit full diagnostics

Investment Implications

Key Takeaways:

• Topline momentum (+5.6% YoY) with stable profitability profile; slight margin compression to monitor
• Earnings quality mixed: accruals low (0.6%) but cash conversion weak (OCF/EBITDA 0.59)
• Balance sheet exceptionally strong (current ratio 469%, D/E 0.18x) enabling self-funded growth and dividends
• Capex elevated (3.14x depreciation) consistent with strategic investment; near-term FCF sensitivity to working capital
• ROE of 6.7% below preferred thresholds; improvement depends on margin mix and asset efficiency rather than leverage

Metrics to Watch:

• Same-store sales and gross margin by category to assess pricing/mix resilience
• Working capital turns (inventory days, payables days) and OCF/NI aiming for >1.0x
• CapEx trajectory versus store openings/remodels and logistics/IT projects
• EBIT margin trend and SG&A efficiency versus revenue growth
• FX pass-through on COGS and promotional intensity

Relative Positioning: Among Japanese value apparel retailers, Shimamura demonstrates conservative financial posture and steady mid-single-digit growth, trading off best-in-class balance sheet strength for below-peer ROE; execution on inventory efficiency and store productivity will be key to closing the return gap.

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
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