HASEGAWA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥11.04B
• Operating Income: ¥303M
• Net Income: ¥135M
• EPS: ¥7.47

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

Hasegawa Co., Ltd. (82300) reported FY2026 Q2 (cumulative) consolidated results under JGAAP showing top-line growth but notable profit compression. Revenue rose 7.4% year over year to ¥11.045bn, while operating income declined 41.9% to ¥303m, highlighting significant margin pressure. Gross profit of ¥6.986bn implies a high gross margin of 63.3%, but the operating margin compressed to 2.7%, indicating elevated SG&A intensity or mix effects overwhelming gross margin strength. Ordinary income was ¥283m, below operating income due to net non-operating costs, including ¥24m of interest expense. Net income fell 58.0% to ¥135m, placing the net margin at 1.22%. DuPont decomposition shows a calculated ROE of 1.07% (Net margin 1.22% × Asset turnover 0.532 × Financial leverage 1.65), underscoring that subdued profitability, not leverage or turnover, is the chief drag on returns. EBITDA was ¥427m with a 3.9% margin, signaling modest operating cash-generating capacity relative to sales. Liquidity appears sound, with a current ratio of 184% and working capital of ¥3.451bn, supported by a conservative balance sheet (liabilities-to-equity of 0.59x). Interest coverage is healthy at 12.6x, suggesting low near-term refinancing risk. Cash conversion looks solid: operating cash flow (OCF) of ¥331m equates to 2.45x net income, although visibility is limited given unreported detail on working capital line items. The reported effective tax rate metric shows 0.0% in the summary panel, but based on disclosed taxes of ¥147m versus ordinary income of ¥283m, the implied tax rate is closer to about 52%, indicating that the listed 0.0% likely reflects a calculation display issue rather than economic reality. Inventory, cash, investing CF, and equity ratio figures are shown as zero in the dataset, which we treat as undisclosed rather than actual zero per the provided instruction; this constrains depth of cash and working capital diagnostics. The company did not pay a dividend (DPS ¥0.00) for the period, consistent with a payout ratio of 0%, which conserves cash amid margin pressure. Overall, the story is one of resilient sales with deteriorating operating leverage, but acceptable liquidity and solvency, and generally decent cash earnings quality in the half. Sustained improvement requires controlling SG&A, protecting gross margin, and stabilizing the tax rate. Key watchpoints include the trajectory of operating margin into H2, working capital discipline during seasonal peaks, and any update to dividend policy.

Profitability Analysis

ROE decomposition (DuPont): Net margin 1.22% × Asset turnover 0.532 × Financial leverage 1.65 = ROE 1.07% (matches reported). The principal headwind is low net margin; leverage is moderate and asset turnover is modest for a specialty retailer. Gross margin is high at 63.3%, but the operating margin is just 2.7% (¥303m / ¥11,045m), indicating SG&A absorption is heavy. EBITDA margin sits at 3.9%, only 120bp above operating margin, implying limited non-cash add-backs beyond depreciation (¥124m), and hence constrained operating cushion. Ordinary income (¥283m) below operating income suggests non-operating drag (interest and other items), though interest is small (¥24m). The implied tax burden is heavy (~52% using ¥147m taxes / ~¥283m pre-tax proxy), further compressing net margin. Operating leverage appears unfavorable in H1: revenue grew 7.4% YoY while operating income fell 41.9% YoY, implying negative incremental margin, likely from higher fixed cost base, promotional activity, or mix shifts. With interest coverage at 12.6x, financial costs are not the core profitability constraint; improving SG&A efficiency and maintaining gross margin are the key levers.

Growth Assessment

Revenue growth of 7.4% YoY indicates demand resilience and/or successful commercial initiatives. However, profit growth is negative: operating income declined 41.9% YoY and net income fell 58.0% YoY, showing deteriorating conversion of sales to earnings. The disconnect between high gross margin (63.3%) and low operating margin (2.7%) suggests SG&A inflation, scale inefficiencies, or increased marketing/store expenses. Ordinary income below operating income indicates minor non-operating headwinds, but these are secondary to operating cost pressure. Given the seasonality often present in retail, H2 performance will be pivotal; stabilization of operating margin will drive full-year earnings quality. Cash flow quality is currently better than earnings (OCF/NI 2.45x), signaling that reported profit shortfall may be partly timing-related in working capital, but the absence of inventory/cash detail tempers certainty. Near-term outlook hinges on expense discipline, maintaining pricing and mix to defend gross margin, and managing the effective tax rate. Sustained revenue growth without margin recovery is unlikely to lift ROE meaningfully.

Financial Health

Liquidity: Current assets ¥7.546bn vs current liabilities ¥4.095bn yields a current ratio of 184% and working capital of ¥3.451bn, indicating solid short-term coverage. Quick ratio equals current ratio due to undisclosed inventory; therefore, true quick liquidity is not determinable but appears adequate given the headline metrics. Solvency: Total liabilities ¥7.373bn vs equity ¥12.597bn results in liabilities-to-equity of 0.59x and financial leverage (assets/equity) of 1.65x, a conservative capital structure. Interest coverage is strong at 12.6x, implying low refinancing risk and manageable debt service. The equity ratio shown as 0.0% is treated as undisclosed; based on totals, equity/asset ratio would approximate 60.7% (¥12.597bn/¥20.752bn), reinforcing balance sheet strength.

Cash Flow Quality

Earnings quality appears decent: OCF of ¥331m equals 2.45x net income (¥135m), indicating solid cash conversion in the half. The gap between EBITDA (¥427m) and OCF suggests some working capital inflow, but itemized components (inventory, receivables, payables) are not disclosed, limiting attribution. Free cash flow cannot be reliably computed as investing cash flow is undisclosed (displayed as zero per instruction). Depreciation is modest (¥124m), and leverage is low, suggesting maintenance capex is likely manageable, but the lack of capex detail prevents firm conclusions. Overall, cash generation from operations is supportive relative to earnings despite margin compression.

Dividend Sustainability

The company reported DPS of ¥0.00 for the period, implying no dividend and a payout ratio of 0%. With OCF positive and leverage low, capacity for future distributions depends more on restoring operating margins than on balance sheet flexibility. FCF coverage is not assessable due to unreported investing cash flows; thus, any prospective dividend policy should be evaluated against full-year cash generation and capex needs. In the near term, conserving cash aligns with the decline in profitability; clarity on H2 earnings trajectory and capex will inform sustainability of any reinstatement or increase.

Risk Assessment

Business Risks:

• Demand volatility in core memorial and household religious goods categories amid demographic and lifestyle shifts
• High SG&A intensity and fixed-cost leverage in a primarily brick-and-mortar footprint
• Pricing pressure and promotional intensity affecting gross-to-operating margin conversion
• Supply chain and procurement costs (including imported components) impacting gross margin
• Seasonality around key holidays potentially amplifying H2 sensitivity
• Store productivity dispersion and potential cannibalization in mature markets

Financial Risks:

• Margin compression reducing interest coverage and cash buffers if prolonged
• Working capital swings (especially inventory) affecting OCF, with limited disclosure in this period
• Tax rate volatility (implied ~52% in H1) depressing net income and ROE
• Potential exposure to lease liabilities not visible in provided figures

Key Concerns:

• Sharp YoY decline in operating and net income despite revenue growth
• Low operating margin (2.7%) despite high gross margin, indicating SG&A pressure
• Limited visibility on inventory, cash, and capex due to undisclosed items
• Dependence on H2 performance to stabilize full-year profitability and cash generation

Investment Implications

Key Takeaways:

• Top-line growth of 7.4% YoY offset by severe margin compression; ROE at 1.07%
• Balance sheet conservative with liabilities-to-equity at 0.59x and strong interest coverage (12.6x)
• OCF/NI at 2.45x signals decent cash conversion, but FCF unassessable due to missing investing CF
• Effective tax burden appears high (~52%), dampening net profitability
• Dividend suspended (DPS ¥0), preserving cash amid earnings pressure

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio in H2
• Gross margin resilience versus procurement and pricing dynamics
• Same-store sales and store-level productivity indicators
• Working capital days (inventory, receivables, payables) and OCF/NI conversion
• Capex and investing cash flows to gauge true FCF
• Effective tax rate normalization and drivers
• Leverage and interest coverage under varying profit scenarios

Relative Positioning: Within Japanese specialty retail, Hasegawa exhibits a conservative balance sheet and high gross margin but lags on operating efficiency, resulting in subpar ROE; stabilization of SG&A and improved cost discipline are needed to close the gap with more efficient peers.

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