| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥4923.7B | ¥4984.9B | -1.2% |
| Operating Income / Operating Profit | ¥535.2B | ¥575.0B | -6.9% |
| Ordinary Income | ¥568.8B | ¥604.0B | -5.8% |
| Net Income / Net Profit (attributable to owners of the parent) | ¥-197.2B | ¥316.5B | +26.4% |
| ROE | -4.1% | 6.3% | - |
For the fiscal year ended February 2026, revenue was ¥4923.7B (YoY -¥61.2B, -1.2%), Operating Income was ¥535.2B (YoY -¥39.8B, -6.9%), Ordinary Income was ¥568.8B (YoY -¥35.2B, -5.8%), and Net Income attributable to owners of the parent was ¥-197.2B (YoY -¥513.7B). While operating performance remained solid, the recording of Special Losses of ¥808.0B led to a final net loss. The operating margin declined to 10.9% (down 0.7pt from 11.6% the prior year), and gross margin remained at a high level of 42.5%. However, an increase in SG&A of ¥2460.8B (YoY +1.7%) offset operating leverage. The ¥679.3B gap between Ordinary Income and Net Income was primarily due to Special Losses, including loss on retirement of fixed assets ¥41.9B and impairment losses ¥26.3B, resulting in one-off factors materially distorting the bottom-line result.
[Revenue] Revenue was ¥4923.7B (YoY -1.2%), a slight decline. By segment, core Domestic Department Store Business declined to ¥3038.6B (-4.5%), representing a concentration of 61.7% and a headwind for the group. Conversely, Interior Construction Business ¥332.4B (+10.8%) and Financial Services ¥207.0B (+9.8%) showed double-digit growth. Overseas Department Store Business ¥343.1B (+0.1%), Domestic Commercial Development ¥417.7B (+2.3%), and Overseas Commercial Development ¥157.4B (+2.0%) also performed steadily. By region, Domestic ¥4414.1B (89.6% of total), Singapore ¥385.5B, and Other ¥124.1B, indicating continued high domestic dependence. Gross margin of 42.5% was roughly flat YoY, indicating stable pricing strategy.
[Profitability] Operating Income was ¥535.2B (-6.9%); the slight revenue decline combined with higher SG&A (+1.7%) pressured profitability. SG&A ratio remained high at 50.0%; compensation (executive remuneration ¥666B), depreciation ¥337.6B, and rents ¥236.5B form the fixed-cost base. Non-operating income totaled ¥125.7B (dividends received ¥19.3B, equity-method investment income ¥41.8B, etc.), offset by non-operating expenses ¥92.1B (interest expense ¥77.5B, etc.), yielding Ordinary Income of ¥568.8B (-5.8%). Equity-method investment income increased from ¥36.9B to ¥41.8B, supporting resilience at the ordinary income level. Special Losses totaled ¥808.0B (including loss on retirement of fixed assets ¥41.9B and impairment losses ¥26.3B) and could not be fully offset by Special Gains of ¥126.1B (gain on sale of fixed assets), resulting in pre-tax profit of ¥-110.5B. Corporate taxes and other amounted to ¥-40.5B (negative tax expense reflects recognition of deferred tax assets, etc.), and non-controlling interests were ¥11.9B, resulting in Net Income attributable to owners of the parent of ¥-197.2B (prior year ¥+316.5B), turning to a loss at the bottom line despite steady operating results.
Domestic Department Store Business: Revenue ¥3038.6B (-4.5%), Operating Income ¥248.6B (-12.9%), Margin 8.2%, showing decline despite being core. Overseas Department Store Business: Revenue ¥343.1B (+0.1%), Operating Income ¥85.2B (+1.9%), Margin 24.8%, maintaining high profitability. Domestic Commercial Development: Revenue ¥417.7B (+2.3%), Operating Income ¥65.7B (-4.1%), Margin 15.7%—revenue up but profit down. Overseas Commercial Development: Revenue ¥157.4B (+2.0%), Operating Income ¥58.5B (-1.1%), Margin 37.1%—highest profitability but slight profit decline. Financial Services: Revenue ¥207.0B (+9.8%), Operating Income ¥55.8B (+15.4%), Margin 26.9%—growth driver. Interior Construction Business: Revenue ¥332.4B (+10.8%), Operating Income ¥25.2B (+16.2%), Margin 7.6%—double-digit growth. Other segments: Revenue ¥427.6B (+4.6%), Operating Income ¥20.2B (+2.4%), Margin 4.7%. There is a large divergence in margins across segments: Overseas Commercial Development 37.1%, Financial 26.9%, Overseas Department Store 24.8% are high-margin; Domestic Department Store 8.2%, Interior Construction 7.6%, Other 4.7% are relatively low-margin, highlighting a polarized portfolio mix.
[Profitability] Operating margin 10.9% (down 0.7pt from 11.6%), EBITDA margin 17.7% (EBITDA ¥872.9B = Operating Income ¥535.2B + Depreciation ¥337.8B), indicating high cash-generating capacity. ROE was -4.1% (prior year +6.3%), turning materially negative mainly due to deteriorated Net Income margin of -4.0%. Total Asset Turnover 0.37x and Financial Leverage 2.82x remain relatively stable. ROA was -1.5% (prior year +2.4%), similarly negative on a net income basis. [Cash Quality] Operating Cash Flow (OCF) ¥538.4B versus Net Income ¥-197.2B yields OCF/Net Income of -2.73x, a warning flag on the metric, but driven by the net loss caused by Special Losses—operating cash flow itself remains positive. OCF/EBITDA (cash conversion) was 0.62x, below the cautionary 0.7x threshold; the primary cause was an increase in accounts receivable (cash outflow within OCF of -¥363.8B). [Investment Efficiency] Total Asset Turnover 0.37x and Fixed Asset Turnover 0.50x are low, leaving room for asset efficiency improvement. Days Sales Outstanding (DSO) for accounts receivable is 145 days (accounts receivable ¥1957.6B ÷ revenue ¥4923.7B × 365 days), indicating elongation and working capital tying up cash. [Financial Soundness] Equity Ratio 35.5% (down 3.1pt from 38.6%), Net Debt/Equity 1.82x, Debt/EBITDA 2.99x—near the upper end of investment-grade range. Current ratio 67.1% and Quick ratio 60.6% are well below standard benchmarks, and the short-term liabilities ratio is 53.9% (current liabilities ¥5427.6B ÷ total liabilities ¥8684.8B), indicating a trend toward short-termization and emerging liquidity risk. EBITDA interest coverage was 11.26x (EBITDA ¥872.9B ÷ interest expense ¥77.5B), indicating capacity to service interest; however, a rapid increase in short-term borrowings to ¥1407.5B (from ¥376.7B, +273.6% YoY) raises refinancing/rollover risk.
Operating Cash Flow was ¥538.4B (down 25.7% from ¥724.9B prior year), remaining positive but reduced due to working capital deterioration. Operating cash flow subtotal (before working capital changes) was ¥643.7B; after Δ in trade receivables -¥363.8B, increase in trade payables +¥82.4B, increase in contract liabilities +¥47.5B, and corporate tax payments -¥86.7B, final operating cash flow was achieved. Investing Cash Flow was -¥349.2B; acquisition of tangible and intangible fixed assets -¥452.4B was partially offset by proceeds from sale of fixed assets ¥175.5B, limiting net outflow. Free Cash Flow was ¥189.1B (Operating CF ¥538.4B + Investing CF -¥349.2B), remaining positive and covering dividend payments of -¥90.3B (per cash flow statement) by 1.82x. Total shareholder returns including share buybacks of -¥150.0B amounted to approximately ¥225.7B, exceeding FCF. Financing Cash Flow was -¥317.7B: proceeds from long-term borrowings +¥393.2B and net increase in short-term borrowings +¥1,299.8B (estimated from prior year) were offset by redemption of bonds -¥1,313.6B, long-term borrowings repayments -¥326.7B, lease liability repayments -¥123.8B, dividend payments -¥90.3B, and share buybacks -¥150.0B. The shift from bonds to short-term borrowings is notable, indicating shortened maturities and rising rollover risk. Cash and cash equivalents decreased to ¥774.4B at year-end (from ¥885.6B, -¥111.2B), shrinking the liquidity buffer. Considering depreciation ¥337.8B as a non-cash expense, the conversion rate of Operating CF ¥538.4B to EBITDA ¥872.9B is 0.62x, with accounts receivable tying up funds and impairing cash realization efficiency.
The year’s net loss was mainly driven by Special Losses of ¥808.0B; however, earnings up to the ordinary income level remain solid with Operating Income ¥535.2B and Ordinary Income ¥568.8B. Special items comprised Special Gains ¥128.8B (gain on sale of fixed assets ¥126.1B, gain on sale of investment securities ¥1.8B, etc.) versus Special Losses ¥808.0B (loss on retirement of fixed assets ¥41.9B, impairment losses ¥26.3B, valuation losses on investment securities ¥4.3B, etc.), with one-off fixed-asset-related losses being prominent. Of Non-operating income ¥125.7B, equity-method investment income ¥41.8B (up from ¥36.9B), dividends received ¥19.3B, and foreign exchange gains ¥6.1B were major components; non-operating income accounted for about 2.6% of revenue, indicating low dependency. Comprehensive income was ¥15.9B (attributable to owners of parent ¥7.8B); relative to Net Income ¥-197.2B, other comprehensive income included valuation differences on securities +¥39.3B, actuarial differences on retirement benefits +¥37.6B, and share of other comprehensive income of associates +¥20.1B. The divergence between Net Income and Comprehensive Income is due to valuation items and is distinct from volatility in realized profits. On accrual quality, Operating CF considerably exceeded Net Income, but this reflects the net loss driven by Special Losses rather than typical profit overstatement. Nonetheless, the increase in accounts receivable (BS +¥351.7B; CF -¥363.8B) expanding working capital, and the decline in OCF/EBITDA to 0.62x are points of concern as short-term delays in cash realization. Overall, recurring earnings quality is stable, but the scale of special items increases volatility in Net Income; normalization of special items in the next fiscal year is essential to restoring earnings reproducibility.
Company guidance projects Revenue ¥5030.0B (YoY +2.2%), Operating Income ¥575.0B (+7.4%), Ordinary Income ¥570.0B (+0.2%), and Net Income attributable to owners of the parent ¥380.0B (return to profitability from prior-year loss). EPS forecast ¥129.68 and DPS ¥20.00 are assumed. Revenue growth is a conservative assumption based on mild recovery in Domestic Department Stores and expansion of high-margin segments (Financial Services, Interior Construction). Operating Income increase assumes normalization of special losses and cost rationalization. Ordinary Income growth lagging Operating Income (+0.2%) likely reflects conservative assumptions on non-operating items and equity-method income. Dividend payout ratio on EPS forecast ¥129.68 is about 15.4% (DPS ¥20 ÷ EPS ¥129.68), relatively low, indicating dividend capacity. The full-year Operating Income target ¥575.0B (vs. actual ¥535.2B) implies +7.4% planned increase; the operating income progress rate is 93.1% (actual ¥535.2B ÷ plan ¥575.0B), so achieving the plan depends on earnings accumulation in H2. Normalization of accounts receivable collections and reduction in short-term borrowing dependence are key prerequisites for plan achievement.
Dividend is annual ¥34 per share (interim ¥17, year-end ¥17; adjusted for 1:2 stock split effective September 1, 2024), totaling ¥7.57B (dividend payments per cash flow statement ¥9.03B include non-controlling interests, etc.). Because Net Income is negative, payout ratio is not computable, but dividend funding is supported by retained earnings of ¥3070.4B, so sustainability of dividends is not currently in question. Dividend coverage by Free Cash Flow: FCF ¥189.1B covers dividends approx. 1.82x (FCF ¥189.1B ÷ total dividends approx. ¥103.2B, on a shareholder-return basis), indicating cash support for dividends. Share buybacks of ¥150.0B (cash flow statement) were implemented; combined with dividends total return ≈ ¥225.7B (dividends ≈ ¥75.7B + buybacks ¥150.0B), slightly exceeding FCF ¥189.1B. Total Return Ratio is about 119.4% vs. FCF (Total Return ¥225.7B ÷ FCF ¥189.1B), meaning continued returns at this scale require working capital normalization and continued asset recycling. Company guidance for the next fiscal year assumes Net Income attributable to owners of the parent ¥380B and DPS ¥20, implying payout ratio ≈ 15.4% (post-split share count), a low level that would improve dividend sustainability with profit recovery. Capital policy appears DOE-oriented; with shareholders' equity ¥4497.9B and BPS ¥1535.03, there is room for stable dividends. Going forward, optimizing total return (particularly the scale of buybacks) and strengthening dividend funding through working capital recovery are key.
Liquidity Risk: Current ratio 67.1% and Quick ratio 60.6% are substantially below benchmarks; short-term liabilities ratio at a high 53.9% signals acute short-term funding risk. Short-term borrowings surged to ¥1407.5B (+273.6% YoY). With bonds ¥100.0B and bonds maturing within one year ¥105.0B approaching maturity, refinancing/rollover risk is rising. Cash and deposits ¥791.9B versus current liabilities ¥5427.6B leaves short-term debt coverage at just 14.6%, making working capital normalization urgent. Collections delay on accounts receivable ¥1957.6B (DSO 145 days) pressures liquidity; counterparty credit risk and payment structure optimization are key to improving liquidity.
Operating Leverage Risk: Under a high-cost structure with SG&A ¥2460.8B (SG&A ratio 50.0%), even a small revenue decline (-1.2%) led to operating income down -6.9%, revealing negative operating leverage. Fixed-cost base—compensation (executive remuneration ¥666B), depreciation ¥337.6B, rents ¥236.5B—magnifies downside on earnings and increases sensitivity to demand swings. Given revenue concentration in Domestic Department Stores (61.7%), declines in visitor traffic or ticket (spend) have outsized impact on corporate results. Failure to convert store costs into variable costs or to achieve efficiency via digital shift would maintain margin compression pressures.
Capital Structure Risk: Debt/Equity 1.82x and Debt/EBITDA 2.99x are near the upper end of investment-grade ranges; increased reliance on short-term borrowings raises sensitivity to interest rates and market conditions. Large reduction in bonds outstanding (-¥701.1B, -87.5%) and substitution by borrowings is underway, raising concern over shift from fixed-rate to variable-rate exposure. Including lease liabilities (current ¥97.6B, non-current ¥1,233.0B equivalent), gross interest-bearing liabilities are approx. ¥2909.2B, implying effective Debt/EBITDA 3.33x—high. In a rising rate environment, increased interest expense may compress Ordinary Income and expand ROE volatility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.9% | 4.6% (1.7%–8.2%) | +6.3pt |
| Net Margin | -4.0% | 3.3% (0.9%–5.8%) | -7.3pt |
The company outperforms the industry median by +6.3pt on operating margin and is advantaged in core operating profitability, but net margin lags by -7.3pt due to the impact of special losses.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -1.2% | 4.3% (2.2%–13.0%) | -5.5pt |
The company's revenue growth rate lags the industry median by -5.5pt, with declines in Domestic Department Store sales dragging overall growth.
※ Source: Company aggregation
Earnings normalization scenario after one-off Special Losses: This year’s net loss was mainly driven by Special Losses ¥808.0B. Operating Income ¥535.2B and Ordinary Income ¥568.8B indicate solid core operations. Company guidance assumes Operating Income ¥575.0B (+7.4%) and Net Income attributable to owners of the parent ¥380B (return to profit), suggesting earnings reproducibility could recover if special losses normalize. Operating margin 10.9% and EBITDA margin 17.7% are strong within the industry, supported by high-margin Overseas Commercial Development (margin 37.1%) and Financial Services (26.9%). Going forward, cost rationalization and expansion of high-margin segments will be central to sustaining operating profitability.
Responses to liquidity and short-term liability risks: Current ratio 67.1% and Quick ratio 60.6% indicate pronounced liquidity shortfall; the surge in short-term borrowings to ¥1407.5B (+273.6%) heightens refinancing risk. Collections delay on accounts receivable ¥1957.6B (DSO 145 days) pressures cash flow, making working capital normalization urgent. FCF ¥189.1B sufficiently covers dividends, but total returns including buybacks ¥225.7B exceed FCF; continuation at this level requires accounts receivable recovery and lengthening of short-term debt maturities. Replacement of bonds with borrowings appears temporary; extending maturity profile is key to improving liquidity.
Rebuilding the segment portfolio: Domestic Department Store Business posted Revenue ¥3038.6B (-4.5%), Operating Income ¥248.6B (-12.9%), Margin 8.2%—core yet in decline, with revenue concentration at 61.7% impacting overall results. Financial Services (Revenue +9.8%, Operating Income +15.4%, Margin 26.9%) and Interior Construction (Revenue +10.8%, Operating Income +16.2%) are growth drivers, and Overseas Commercial Development (Margin 37.1%) shows high profitability. Reconfiguring Domestic Department Stores (closure of unprofitable stores, space optimization) and expanding high-margin businesses structurally is necessary to lift consolidated margins. Achieving next-year targets depends on recovery in Domestic Department Store traffic and spend, alongside growth in Commercial Development and Financial Services.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are the Company's aggregation based on public financial statements and are for reference only. Investment decisions are your responsibility; consult professional advisors as needed.