| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥1816.6B | ¥1683.7B | +7.9% |
| Operating Income | ¥178.9B | ¥153.1B | +16.8% |
| Ordinary Income | ¥187.9B | ¥158.1B | +18.9% |
| Net Income | ¥128.6B | ¥108.0B | +19.0% |
| ROE | 2.6% | 2.2% | - |
For the Q1 results for the fiscal year ending February 2027, Revenue was ¥1,816.6B (¥+132.9B YoY +7.9%), Operating Income was ¥178.9B (¥+25.8B YoY +16.8%), Ordinary Income was ¥187.9B (¥+29.8B YoY +18.9%), and Net Income was ¥128.6B (¥+20.6B YoY +19.0%). Profit expansion outpaced sales growth, with an Operating Margin of 9.8% (up +0.7pt from 9.1% a year earlier) and a Net Margin of 7.1% (up +0.7pt from 6.4%). The Japan segment accounted for 98.6% of Revenue and delivered Operating Income of ¥177.2B (+16.0%), while the Overseas segment, though small, improved materially with Revenue of ¥25.2B (+22.2%) and Operating Income of ¥1.7B (+438.7%). SG&A ratio improved to 25.3% (down -0.7pt from 26.0%), reflecting economies of scale and tighter cost control that supported margin expansion. Non-operating income of ¥9.0B was limited at 0.5% of Revenue, indicating profit growth was driven by core operations. Operating Cash Flow (OCF) turned positive to ¥37.7B (prior year -¥34.6B), but remained only 29% of Net Income; increases in working capital such as Inventories +¥171.3B and Accounts Receivable +¥111.4B constrained cash generation. Investing Cash Flow was -¥813.6B, primarily due to net acquisitions of short-term securities, while tangible capital expenditure rose sharply to ¥169.6B from ¥2.1B a year earlier.
[Revenue] Revenue reached ¥1,816.6B (+7.9%). By segment, Japan was ¥1,791.4B (+7.7%), representing 98.6% of the total and continuing stable growth as the core business. Overseas Revenue was ¥25.2B (+22.2%), a double-digit increase but still limited in scale. Japan’s revenue increase was driven by steady same-store performance and expanded selling space from new openings. Cost of Sales was ¥1,181.7B, Gross Profit was ¥635.0B, and Gross Margin improved slightly to 35.0% (from 34.9%), aided by reduced markdowns and product-mix optimization.
[Profitability] From Gross Profit of ¥635.0B, SG&A of ¥459.3B was deducted to produce Operating Income of ¥178.9B (+16.8%). Operating Margin improved to 9.8% (up +0.7pt from 9.1%), reflecting revenue leverage and improved cost efficiency. SG&A ratio was 25.3% (down -0.7pt from 26.0%), with economies of scale and efficient expense management contributing. Non-operating income was ¥9.0B (interest income ¥4.7B, dividend income ¥2.0B, foreign exchange gains ¥1.2B, etc.), representing 0.5% of Revenue; non-operating expense was ¥0.0B, resulting in Ordinary Income of ¥187.9B (+18.9%). Extraordinary losses were minor at ¥2.1B (impairment loss ¥1.0B, loss on disposal of fixed assets ¥1.0B), leaving Profit Before Tax at ¥185.9B (+18.5%). After income taxes of ¥57.3B (effective tax rate 30.8%), Net Income was ¥128.6B (+19.0%). Comprehensive income was ¥119.8B, ¥8.8B lower than Net Income mainly due to valuation losses on securities of -¥8.4B, indicating high quality of recurring earnings.
The Japan segment reported Revenue of ¥1,791.4B (+7.7%) and Operating Income of ¥177.2B (+16.0%), maintaining high profitability with a margin of 9.9% as the core business. Operating income growth outpaced revenue growth, reflecting improved cost efficiency. The Overseas segment delivered Revenue of ¥25.2B (+22.2%) and Operating Income of ¥1.7B (from ¥0.3B prior year, +438.7%), with a margin of 6.6% and expanding profitability. Although small in scale, the trend of profitability improvement is notable. Japan accounted for 99.1% of consolidated Operating Income, underscoring the high domestic concentration of the business.
[Profitability] Operating Margin 9.8% (prior year 9.1%) and Net Margin 7.1% (prior year 6.4%) both improved. ROE was 2.6% (Net Margin 7.1% × Total Asset Turnover 0.315 × Financial Leverage 1.17x), remaining low but assisted by improved Net Margin. Total Asset Turnover was 0.315, suppressed by accumulation of Inventories and short-term securities, which reduced asset efficiency.
[Cash Quality] OCF/Net Income was 0.29x, and OCF/EBITDA (Operating Income ¥178.9B + Depreciation ¥18.6B = ¥197.5B) was 0.19x—both low—reflecting working capital absorption from Inventory increase ¥171.3B and Accounts Receivable increase ¥111.4B. Accounts Payable increase ¥150.6B partially offset this, but cash conversion lagged Net Income. Inventory Days were 241 days (Inventory ¥780.8B ÷ annualized Cost of Sales per day), and Cash Conversion Cycle (CCC) was 168 days, indicating room to improve working capital efficiency.
[Investment Efficiency] Capital expenditure of ¥169.6B was aggressive at 9.1x depreciation ¥18.6B, supporting store openings, logistics, and IT. Tangible fixed assets were ¥1,727.7B, representing 29.9% of Total Assets, reflecting a large stock of store and land assets.
[Financial Soundness] Equity Ratio was 85.4% (prior year 88.1%), D/E (debt-to-equity) 0.17x, Current Ratio 440.7%, Quick Ratio 336.4%—all indicating very strong balance sheet health. Cash and Deposits ¥417.2B plus Short-term Securities ¥1,794.7B totaled ¥2,211.9B, accounting for 67.1% of Current Assets and maintaining ample liquidity.
Operating Cash Flow was ¥37.7B (turning positive from -¥34.6B a year earlier) but remained only 29% of Net Income. Operating cash flow before working capital changes was ¥123.2B; after cash taxes paid -¥91.3B, Inventory increase -¥171.3B, Accounts Receivable increase -¥111.4B, and Accounts Payable increase ¥150.6B, net working capital build absorbed cash. Inventory increases were driven by spring/summer season purchases and expansion/MD strengthening for new stores and include temporary factors, but Inventory Days of 241 remain elevated. Investing Cash Flow was -¥813.6B, primarily due to net acquisition of short-term securities (purchases -¥1,680.0B, maturities ¥1,056.0B, net -¥624.0B); substantive capex was -¥169.6B, resulting in real investment of -¥171.2B including intangible asset investments -¥1.6B. Free Cash Flow (Operating CF + Investing CF) was -¥775.9B. Financing Cash Flow was -¥79.0B, mainly due to dividend payments of -¥79.0B; share buybacks were -¥0.0B and negligible. Cash and deposits decreased by -¥474.7B from opening balance ¥1,271.8B to closing balance ¥417.2B, but liquidity including short-term securities remained ample at ¥2,211.9B. On working capital metrics, Days Sales Outstanding 52 days and Days Payable Outstanding 126 days yielded CCC of 168 days; improving inventory efficiency is key for sustainable cash generation.
Net Income of ¥128.6B originated from Operating Income of ¥178.9B, with modest non-operating income of ¥9.0B, minor extraordinary losses of ¥2.1B, and taxes of ¥57.3B—reflecting an operating-led profit structure. Non-operating income of ¥9.0B is small at 0.5% of Revenue and is mainly financial income: interest income ¥4.7B, dividend income ¥2.0B, and foreign exchange gains ¥1.2B; non-recurring elements are limited. Extraordinary losses ¥2.1B (impairment loss ¥1.0B, loss on disposal of fixed assets ¥1.0B) represent only 0.1% of Revenue and are immaterial. Comprehensive income of ¥119.8B was ¥8.8B below Net Income, primarily due to valuation losses on securities of -¥8.4B driven by market mark-to-market changes, with no impact on recurring earnings. OCF/Net Income of 0.29x and OCF/EBITDA of 0.19x are low, highlighting cash conversion delays from increased Inventory and Receivables; improvements in working capital management would enhance earnings quality.
Full Year (FY) forecast remains Revenue ¥7,291.9B (+4.2%), Operating Income ¥668.4B (+8.7%), Ordinary Income ¥688.2B (+8.1%), Net Income ¥473.2B, and EPS ¥227.92. Q1 progress vs. full year is Revenue 24.9%, Operating Income 26.8%, Ordinary Income 27.3%, and Net Income 27.2%. Versus a standard seasonality benchmark (Q1 = 25%), Operating, Ordinary, and Net Income are ahead by +1.8–+2.3pt, aided by cost-efficiency gains. The company made no revisions to guidance during the quarter, and current trends are consistent with the full-year plan. The key focus going forward is normalization of working capital; if inventory efficiency improves, cash generation in H2 should accelerate and increase the likelihood of achieving full-year targets.
During Q1 the company paid cash dividends of ¥79.0B. Full-year forecasted dividend is ¥40 per share; based on weighted-average shares outstanding of 207,632 thousand, total dividends are approximately ¥83B, implying a Payout Ratio of about 17.6% against forecasted Net Income of ¥473.2B—conservative. Share buybacks were ¥0.0B and negligible, so Total Return Ratio is roughly in line with the payout ratio. Q1 Free Cash Flow was -¥775.9B, but liquidity including short-term securities of ¥2,211.9B is ample, so dividend sustainability is not a concern. As working capital normalizes and OCF improves, internal funding coverage for dividends could strengthen. Note the 3-for-1 stock split effective February 21, 2026; the full-year dividend forecast of ¥40 is on a post-split basis.
Inventory efficiency deterioration risk: Inventory Days 241 and CCC 168 are elevated, and Inventory increase of ¥171.3B is absorbing working capital. While increases were partly due to spring/summer season purchasing and expansion/MD strengthening, sustained elevation could pressure Gross Margin via markdowns and cause persistent delays in cash generation. Low OCF/Net Income 0.29x and OCF/EBITDA 0.19x underscore the urgency of improving inventory efficiency.
Domestic demand concentration risk: The Japan segment accounts for 98.6% of Revenue and 99.1% of Operating Income, so geographic diversification is limited. The company is therefore more exposed to domestic consumption slowdowns, adverse weather, or intensified competition. Overseas operations remain small (Revenue ¥25.2B, Operating Income ¥1.7B), so diversification benefits are limited.
Working capital pressure on cash flows risk: Inventory increase ¥171.3B and Accounts Receivable increase ¥111.4B suppressed OCF, and capex ¥169.6B plus dividends ¥79.0B contributed to a -¥474.7B decrease in Cash and Deposits. Liquidity including Short-term Securities ¥1,794.7B is ample, but if working capital management does not improve, balancing sustained growth investment and shareholder returns could become constrained.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.8% | 3.4% (0.8%–7.7%) | +6.5pt |
| Net Margin | 7.1% | 2.2% (0.5%–6.2%) | +4.8pt |
Profitability substantially exceeds industry medians and is above the upper quartile, highlighting advantages in cost control and product mix.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 7.9% | 7.7% (0.8%–14.6%) | +0.2pt |
Revenue growth is in line with the industry median, reflecting a stable growth pace.
※ Source: Company compilation
Improvement in core operating margins is evident: Operating Margin +0.7pt and Net Margin +0.7pt, driven by lower SG&A ratio and cost efficiency. Versus peers, Operating Margin 9.8% (median 3.4%, +6.5pt) and Net Margin 7.1% (median 2.2%, +4.8pt) remain high, sustaining competitive profitability. Revenue growth +7.9% is also close to the industry median 7.7%, indicating steady expansion despite domestic concentration.
Improving working capital efficiency is key to sustainable growth. Inventory Days 241, CCC 168, and OCF/Net Income 0.29x are bottlenecks for cash generation. Inventory increase ¥171.3B includes seasonality and expansion/MD investments, but if elevated levels persist, gross margin pressure and poorer capital efficiency could result. Conversely, strong liquidity (¥2,211.9B), Current Ratio 440.7%, and Equity Ratio 85.4% provide a solid financial foundation; if working capital improves, there is scope to expand shareholder returns given the conservative Payout Ratio of 17.6%.
Capex was active at ¥169.6B (9.1x depreciation), supporting growth platforms in stores, logistics, and IT. Full-year progress is slightly ahead for Operating Income (26.8%) and Net Income (27.2%), and continued cost-efficiency gains would increase the probability of meeting targets. However, 98.6% domestic revenue concentration implies regional risk, and progress in expanding overseas scale or new business models will be important for medium-to-long-term assessment.
This report is an AI-generated financial analysis document created by analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by the company from publicly available financial statements and are for reference only. Investment decisions are your responsibility; please consult a professional advisor as needed.