| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥6802.1B | ¥6817.6B | -0.2% |
| Operating Income / Operating Profit | ¥323.9B | ¥348.3B | -7.0% |
| Ordinary Income | ¥345.1B | ¥359.1B | -3.9% |
| Net Income / Net Profit | ¥308.3B | ¥356.8B | -13.6% |
| ROE | 9.5% | 11.4% | - |
For the fiscal year ended March 2026, Revenue was ¥6,802.1B (YoY -15.4B -0.2%), Operating Income was ¥323.9B (YoY -24.4B -7.0%), Ordinary Income was ¥345.1B (YoY -14.0B -3.9%), and Net Income was ¥308.3B (YoY -48.5B -13.6%). Slight revenue decline led to decreases across profit lines from operating income to net income. Operating margin was 4.8% (down 0.3pt from 5.1% prior year), and net margin was 4.5% (down 0.7pt from 5.2%), reflecting weaker profitability. In extraordinary items, gain on sales of investment securities of ¥134.0B was recorded, while impairment losses of ¥106.4B were recognized, leaving net contribution from extraordinary items at only ¥9.7B and compressing pre-tax income relative to the prior year's net extraordinary gain of ¥154.2B.
[Revenue] Revenue was ¥6,802.1B (YoY -0.2%), a slight decline. By segment, Department Store Business recorded ¥1,860.6B (-3.5%), Commercial Facility Business ¥377.7B (-6.7%), and Food Supermarket Business ¥4,177.4B (+0.7%). Revenue mix was Food SM 61.4%, Department Store 27.4%, Commercial Facilities 5.6%. Resilient same-store performance at Food SM supported companywide revenue, while weak traffic at department stores and reduced rental income at commercial facilities were negative contributors. Gross margin improved to 45.3% (about +0.2pt YoY), suggesting lower cost of goods sold (improved markup).
[Profitability] Operating Income was ¥323.9B (YoY -7.0%). SG&A was ¥2,757.8B (+1.2%), with SG&A ratio at 40.5% (up 0.5pt from 40.0%), where personnel expenses ¥803.9B and rent expenses ¥494.5B were major fixed-cost burdens. Operating margin was 4.8% (down 0.3pt from 5.1%). By segment, Department Store operating income was ¥237.8B (-15.8%), a significant decline, with margin 12.8% (down 1.8pt from 14.6%) pressured by increased promotion and fixed costs. Food Supermarket operating income was ¥100.2B (+12.0%), margin 2.4% (up 0.2pt from 2.2%) benefiting from cost-efficiency measures and delivering double-digit profit growth. Ordinary Income was ¥345.1B (YoY -3.9%), with non-operating income of ¥44.3B (including dividend income ¥13.2B) and non-operating expenses of ¥23.1B (including interest expense ¥9.2B), which boosted operating profit by ¥21.2B. Pre-tax income was ¥354.8B (YoY -30.9%), down over 30%. Extraordinary gains were ¥169.1B (gain on sales of investment securities ¥134.0B, gain on sales of property, plant and equipment ¥20.8B) and extraordinary losses were ¥159.4B (impairment losses ¥106.4B, loss on retirement of fixed assets ¥34.3B), netting to ¥9.7B. The sharp decline from prior-year net extraordinary items of ¥154.2B pressured pre-tax income. Income taxes ¥46.4B (effective tax rate 13.1%) and non-controlling interests ¥8.8B were deducted, resulting in Net Income ¥308.3B (YoY -13.6%). In conclusion, gross margin improvement was offset by higher SG&A ratio leading to operating decline, and the drop in extraordinary items resulted in lower bottom-line results.
Department Store Business: Revenue ¥1,860.6B (YoY -3.5%), Operating Income ¥237.8B (YoY -15.8%), margin 12.8% (down 1.8pt from 14.6%). Declining traffic, increased promotions, and higher fixed costs compressed margins. Review of stores/assets proceeded with impairment losses of ¥83.8B (72.7% of segment total). Food Supermarket Business: Revenue ¥4,177.4B (+0.7%), Operating Income ¥100.2B (+12.0%), margin 2.4% (up 0.2pt from 2.2%). Strong same-store sales and cost efficiency delivered double-digit profit growth, functioning as a stable earnings pillar. Commercial Facility Business: Revenue ¥377.7B (YoY -6.7%), Operating Income ¥38.3B (YoY -2.2%), margin 10.1% (down 0.2pt from 10.3%), a slight decline due to lower rental income and recorded impairments.
[Profitability] Operating margin 4.8% (down 0.3pt from 5.1%), Net margin 4.5% (down 0.7pt from 5.2%), indicating weaker profitability. ROE 9.5% is composed of Net margin 4.5% × Total asset turnover 0.95x × Financial leverage 2.20x, where the decline in net margin is the primary deterioration factor. Cost of goods sold ratio 54.7%, gross margin 45.3% (≈+0.2pt), SG&A ratio 40.5% (+0.5pt), with gross margin improvement offset by higher SG&A. In non-operating items, dividend income ¥13.2B and equity-method investment income ¥7.0B contributed, while interest expense ¥9.2B was a burden. [Cash Quality] Operating Cash Flow (OCF) ¥483.3B is 1.6x Net Income ¥308.3B, indicating good cash conversion. OCF/EBITDA was 0.85x (EBITDA ¥571.2B = Operating Income ¥323.9B + Depreciation & Amortization ¥247.8B - Goodwill amortization ¥11.9B), showing somewhat weak cash conversion efficiency. Working capital movements included Accounts Payable increase ¥31.8B and Advances received increase ¥18.7B as cash inflows, while Inventories increased ¥6.9B as an outflow. Free Cash Flow (FCF) was ¥436.1B (OCF ¥483.3B + Investing CF -¥47.2B), ample. [Investment Efficiency] Capex ¥163.4B / Depreciation ¥247.8B = 0.66x, indicating restrained replacement investment and a short-term focus on cash generation. Total asset turnover 0.95x (slightly improved from 0.93x prior year). [Balance Sheet Health] Equity Ratio 45.5% (up 2.6pt from 42.9%), Debt/EBITDA 1.87x, Interest Coverage 35.3x (OCF ¥483.3B / interest paid ¥13.7B), indicating strong debt tolerance. Current ratio 83.9%, quick ratio 73.8% are below 1x, so short-term liquidity requires attention, but negative working capital of -¥324B (current assets ¥1,691.6B - current liabilities ¥2,015.6B), driven by retail-specific advances received and payables, is acceptable for the business model.
OCF was ¥483.3B (YoY +4.5%), 1.6x Net Income ¥308.3B, indicating high quality. Operating cash subtotal before working capital changes was ¥632.3B (including non-cash adjustments such as Depreciation & Amortization ¥247.8B and impairment losses ¥106.4B), from which corporate taxes and other payments ¥136.2B were deducted. Working capital contributed with Trade receivables decrease ¥25.0B, Accounts payable increase ¥31.8B, Advances received increase ¥18.7B as inflows, while Inventories increase ¥6.9B was an outflow. Investing CF was -¥47.2B, with outflows including Capex ¥163.4B, intangible asset acquisition ¥92.9B, additional acquisition of subsidiary shares ¥118.6B, partially offset by proceeds from sale of securities ¥149.9B (recognizing gain on sale ¥134.0B) and proceeds from subsidiary sales ¥13.5B. Financing CF was -¥414.4B, with long-term debt repayments ¥474.7B against new borrowings ¥270.0B, share buybacks ¥150.0B, and dividend payments ¥52.7B, resulting in net cash outflow. FCF ¥436.1B covers dividends ¥52.7B by 8.3x and total shareholder returns ¥202.7B (including buybacks) by 2.2x, indicating ample capacity for returns. Cash and deposits were ¥578.1B (up 4.0% from ¥555.9B prior year), and robust OCF supports financial flexibility.
Operating Income ¥323.9B versus OCF ¥483.3B yields OCF/Operating Income 1.49x, indicating good cash realization of earnings. Of non-operating income ¥44.3B, dividend income ¥13.2B and equity-method investment income ¥7.0B are recurring, while foreign exchange gains ¥1.2B reflect market fluctuations. Net contribution from extraordinary items ¥9.7B is transitory, mainly composed of gain on sales of investment securities ¥134.0B (sale of strategic holdings) and impairment losses ¥106.4B (restructuring of unprofitable stores/assets). The gap from prior-year net extraordinary items ¥154.2B (-¥144.5B) is the main reason for the significant decline in pre-tax income, and combined with weaker core operating income, compressed Net Income. Comprehensive income ¥320.5B exceeded Net Income ¥308.3B by ¥12.2B, primarily due to foreign currency translation adjustments ¥17.6B offset by unrealized gains on securities -¥8.6B. Some accruals indicate delayed cash conversion from working capital movements, but overall accrual accumulation risk is limited. Quality of earnings is challenged by reduced recurring operating income, yet cash generation is solid and sustainability is high.
Full-year guidance is Revenue ¥7,120.0B (+4.7%), Operating Income ¥325.0B (+0.4%), Ordinary Income ¥330.0B (-4.4%). With planned flat Operating Income, first-half results of Operating Income ¥323.9B represent 99.7% progress, effectively nearly achieved. Full-year Operating Income increase is minimal and depends on both gross margin improvement and SG&A control; slow recovery at department stores is a risk to achieving the plan. Revenue growth of +4.7% assumes expansion of same-store sales at Food SM and recovery in department store traffic, but variability is possible depending on consumption conditions from Q3 onward. EPS forecast is ¥199.99 versus actual ¥254.39, a conservative assumption (-21.4%). Ordinary Income plan is -4.4% despite flat Operating Income, implying expectations of weaker non-operating income or higher non-operating expenses. Dividend forecast is annual ¥24 (including interim ¥22 already paid) with payout ratio 12.0%, maintaining a low level and suggesting room for share buybacks.
Annual dividend is ¥46 (interim ¥22, year-end ¥24), payout ratio 18.1%, a healthy level. The year-on-year dividend increase from prior-year ¥20 (+130%) appears to reflect a change in the aggregation method for actual dividends disclosed. Against Net Income ¥308.3B, total dividends ¥52.7B correspond to 12.1% of FCF ¥436.1B and 10.9% of OCF ¥483.3B, indicating very high dividend sustainability. A share buyback of ¥150.0B was conducted during the period, making total shareholder returns ¥202.7B (dividends ¥52.7B + buybacks ¥150.0B) and a Total Return Ratio of 65.8%, a well-balanced level. FCF covers total returns by 2.2x, signaling ample capacity. During the period, treasury shares of 10,198 thousand shares (acquisition cost ¥150.0B) were held, demonstrating a focus on per-share value enhancement and capital efficiency.
Structural risk of declining operating margin: Operating margin declined to 4.8% (from 5.1% prior year), falling below 5%. SG&A ratio rose to 40.5% (up 0.5pt), reflecting higher fixed costs such as personnel and rent; strengthened promotions and weak traffic at department stores are pressuring margins. If fixed-cost leverage reverses under slow revenue growth, a trend deterioration in operating margin risk could materialize.
Liquidity tightening and short-term funding risk: Current ratio 83.9% and quick ratio 73.8% are below 1x, with current liabilities ¥2,015.6B exceeding current assets ¥1,691.6B by ¥324B. Advances received ¥369B and accounts payable ¥757B are liability-driven working capital acceptable for retail, but buffer is thin against seasonal shocks or concentrated payment periods. Strong OCF ¥483.3B supports liquidity, but rapid changes in short-term borrowings or payment terms require cautious response.
Dependence on extraordinary items and earnings volatility: Extraordinary items were dominated by gain on sales of investment securities ¥134.0B and impairment losses ¥106.4B; the drop from prior-year net extraordinary items ¥154.2B reduced pre-tax income by over 30%. While staged sales of strategic holdings and review of unprofitable assets are constructive structurally, future one-off contributions are uncertain, leaving risk to Net Income stability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.8% | 4.6% (1.7%–8.2%) | +0.2pt |
| Net Margin | 4.5% | 3.3% (0.9%–5.8%) | +1.2pt |
Profitability metrics are slightly above medians, maintaining a standard industry-level standing.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -0.2% | 4.3% (2.2%–13.0%) | -4.5pt |
Revenue growth lags industry median by 4.5pt, trailing peers on topline expansion.
※ Source: Company compilation
Strong cash generation and sound capital allocation: OCF ¥483.3B and FCF ¥436.1B demonstrate cash generation well above earnings, and Total Return Ratio 65.8% (dividends + buybacks ¥202.7B / Net Income ¥308.3B) is well balanced. Debt/EBITDA 1.87x and Interest Coverage 35.3x indicate high debt tolerance and very high dividend sustainability. Tight short-term liquidity (current ratio 83.9%) requires attention, but the negative working capital model and strong OCF can mitigate concerns.
Polarized segment earnings structure: Food Supermarket (61.4% of Revenue, Operating Income ¥100.2B +12.0%) drives stable earnings and, despite low margin (2.4%), achieved double-digit profit growth via same-store strength and cost efficiency. Department Stores (27.4% of Revenue, Operating Income ¥237.8B -15.8%) retain high margins (12.8%) but face ongoing profit declines from weaker traffic, increased promotions, and higher fixed costs, with impairment losses ¥83.8B reflecting structural adjustments. Stabilizing earnings mid-term hinges on Food SM growth and department store structural reforms.
Trend decline in operating margin and conservative next-year guidance: Operating margin fell to 4.8% (from 5.1%), with SG&A ratio increase offsetting gross margin improvement and pushing margin below 5%. Full-year guidance assumes Revenue +4.7% and Operating Income +0.4% (essentially flat), presuming gross margin improvement and SG&A containment. First-half performance achieved 99.7% of the plan, but execution in the second half—particularly department store recovery pace and Food SM margin maintenance—is critical to meet guidance.
This report was automatically generated by AI analyzing XBRL financial statement disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.
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