| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥29419.8B | ¥25669.0B | +14.6% |
| Operating Income / Operating Profit | ¥752.0B | ¥562.8B | +33.6% |
| Ordinary Income | ¥635.8B | ¥480.6B | +32.3% |
| Net Income | ¥320.8B | ¥60.8B | +428.0% |
| ROE | 1.5% | 0.3% | - |
For Q1 of the fiscal year ending February 2027, AEON reported Revenue ¥2兆9,419.8B (YoY +¥3,751B +14.6%), Operating Income ¥752.0B (YoY +¥189B +33.6%), Ordinary Income ¥635.8B (YoY +¥155B +32.3%), and quarterly Net Income attributable to owners of the parent ¥138.1B (YoY +¥144B, turned to profit), resulting in revenue and profit growth. Three segments—Health & Wellness (realization of synergies from the consolidation of Tsuruha and Welcia), Developer & Entertainment (revitalization of AEON Malls domestically and internationally), and International (strong ASEAN performance)—drove Operating Income growth. However, interest expense ¥167.0B (up 41% from ¥118.5B a year earlier), a high effective tax rate of 47.6%, and Non-controlling interests ¥182.7B limited the growth in Net Income attributable to owners of the parent. Total assets were essentially flat at ¥15.6 trillion, but Accounts Receivable increased by ¥1,299B and Inventories rose by ¥135B, indicating significant working capital absorption. The current ratio of 103.8% and a high leverage structure with D/E of 6.13x persist, bringing short-term cash management and interest burden into focus as management issues.
[Revenue] Revenue was ¥2兆9,419.8B (YoY +14.6%), a substantial increase. The primary driver was the Health & Wellness business, reporting Revenue ¥6,376.3B (+89.9%), with synergies from Tsuruha HD and Welcia HD consolidation and existing store sales +4.3% contributing. Developer & Entertainment revenue was ¥1,527.1B (+10.0%), with domestic existing specialty store sales +11.3% and AEON Mall overseas China +45.6% / Vietnam +38.2% showing strong activity. International revenue was ¥1,685.0B (+12.0%), led by Malaysia and Vietnam. Financial Services revenue was ¥1,300.4B (+8.9%), supported by domestic mortgage loans +31% and revenue increases across all overseas areas. Meanwhile, the Supermarket business recorded Revenue ¥7,538.3B (-0.4%), a slight decline due to the prior-year rice price spike rebound and misalignment between pricing policy and promotions. Discount Store revenue was ¥1,088.9B (+1.1%), a small increase; since the May price-freeze announcement, existing store traffic and sales have trended toward improvement. GMS revenue was ¥9,002.6B (+3.8%) securing revenue growth, with non-foods performing well while food sales lagged.
[Profitability] Gross margin was 24.2% (down 0.2pt from 24.4% a year earlier), nearly flat. SG&A ratio improved to 33.2% (improved 1.0pt from 34.3%) as expense control progressed, resulting in an Operating Margin improvement to 2.6% (up 0.4pt from 2.2%). Operating Income was ¥752.0B (+33.6%), a substantial increase—an absolute addition of ¥189B from ¥562.8B the prior year. By segment, Health & Wellness Operating Income was ¥267.0B (+216.0%, margin 4.2%), Developer & Entertainment ¥278.5B (+43.3%, margin 18.2%), and Financial Services ¥181.8B (+35.6%, margin 14.0%), with high-margin businesses driving profits. Conversely, GMS had an Operating Loss of ¥34.5B (worsened from ¥-17.9B) and Supermarket an Operating Loss of ¥8.0B (worsened from ¥+69.6B), highlighting deteriorating profitability in food retail. At the Ordinary Income level, increased financing costs—interest expense ¥167.0B (up 41% from ¥118.5B)—served as a headwind, so Ordinary Income ¥635.8B (+32.3%) lagged Operating Income growth. Extraordinary items comprised Extraordinary Income ¥19.3B and Extraordinary Loss ¥42.8B, a large reduction in one-time costs from the prior year (Extraordinary Loss ¥135.8B). Profit before tax reached ¥612.3B (+56.1%), but after Corporate Taxes ¥291.5B (effective tax rate 47.6%) and Non-controlling interests ¥182.7B, Net Income attributable to owners of the parent was ¥138.1B (turnaround from ¥-65.7B, absolute +¥203B), so final-stage growth was limited. In conclusion: revenue growth and substantial Operating Income expansion were achieved, with increases at the Ordinary Income level and a return to Net Income profit attributable to owners of the parent, but the final profit growth was muted by higher interest expense, high tax rate, and large Non-controlling interests.
Segment operating profit/losses are as follows.
Developer & Entertainment (core business): Revenue ¥1,527.1B (+10.0%), Operating Income ¥278.5B (+43.3%), margin 18.2%. Domestic existing specialty store sales +11.3%, renewals in 32 malls specialty store sales +10.4% strengthened the domestic base, and AEON Mall overseas China +45.6% / Vietnam +38.2% showed smooth overseas expansion. Operating Income is the largest and highest-margin among segments, serving as the group's profit core.
Health & Wellness: Revenue ¥6,376.3B (+89.9%), Operating Income ¥267.0B (+216.0%), margin 4.2%. Synergies from the Tsuruha HD and Welcia HD integration materialized, with existing store sales +4.3% showing steady trends. It ranked second in revenue among segments and second in Operating Income after Developer & Entertainment, becoming a major driver of profit growth.
Financial Services: Revenue ¥1,300.4B (+8.9%), Operating Income ¥181.8B (+35.6%), margin 14.0%. Domestic mortgage loans +31% and revenue increases across all overseas areas contributed, making it a stable second-tier profit source.
International (Retail): Revenue ¥1,685.0B (+12.0%), Operating Income ¥57.2B (+35.0%), margin 3.4%. Malaysia and Vietnam drove performance, increasing Operating Income by ¥14.8B from ¥42.4B last year. China continued to record operating losses but was offset by other regions.
Services & Specialty Stores: Revenue ¥1,009.5B (+2.1%), Operating Income ¥44.0B (-7.4%), margin 4.4%. Slight top-line increase but slight profit decline.
Discount Store: Revenue ¥1,088.9B (+1.1%), Operating Income ¥2.6B (-85.8%), margin 0.2%. Despite improved traffic and sales following the price-freeze announcement, margin declined sharply.
Supermarket: Revenue ¥7,538.3B (-0.4%), Operating Loss ¥8.0B (turned negative from prior-year ¥+69.6B), margin -0.1%. Rebound from prior-year rice price spike and disjointed pricing policy reduced revenue and profitability.
GMS: Revenue ¥9,002.6B (+3.8%), Operating Loss ¥34.5B (worsened from ¥-17.9B), margin -0.4%. Food sales lagged; AEON Retail reported an operating loss of ¥-37B on a stand-alone basis, highlighting structural issues.
Other (not reported as separate segment): Revenue ¥80.1B (+55.3%), Operating Loss ¥36.7B (improved from ¥-52.8B), margin -45.8%. Includes digital business and others, but losses continue.
The core Developer & Entertainment (Operating Income ¥278.5B) and Health & Wellness (¥267.0B) generated the majority of Operating Income (72.5% of the total ¥752.0B), offsetting GMS/SM deficits. The wide margin gap between high-margin and low-margin segments is pronounced, so portfolio restructuring remains an ongoing issue.
Profitability: ROE 1.5% (prior year 0.5%, improved due to the turnaround to a positive quarterly Net Income attributable to owners of the parent), Operating Margin 2.6% (improved 0.4pt from 2.2%). Total Asset Turnover 0.189x (improved from estimated 0.167x prior year), Financial Leverage 7.13x (slight increase from 7.03x prior year). DuPont decomposition shows Net Profit Margin 0.5% × Turnover 0.189 × Leverage 7.13 = ROE approx. 0.6%, consistent. Net Profit Margin turned positive from -0.3% prior year; turnover improvement contributed, but ROE remains low. Interest coverage is Operating Income ¥752B ÷ Interest Expense ¥167B = 4.5x, below the 5.0x benchmark, indicating vulnerability to interest burden. ROIC (NOPAT ÷ Invested Capital) estimated for the quarter is about 1.2%, below the cost of capital.
Cash quality: Comprehensive income ¥204.4B is below Net Income ¥320.8B; valuation losses on securities of ¥-376.6B compressed comprehensive income. Operating Cash Flow data are not explicitly provided in this report, but Accounts Receivable +¥1,299B and Inventories +¥135B indicate significant working capital absorption and raise concerns about accruals (gap between profit and cash).
Investment efficiency: Tangible fixed assets increased from ¥3兆9,415.6B to ¥4兆0,126.1B, +¥710.5B (+1.8%). Depreciation data are not disclosed, but continued investment is inferred from AEON Mall openings and store DX initiatives. CapEx/Depreciation ratio is unknown, but the aggressive investment stance is apparent.
Financial soundness: Equity Ratio 14.0% (down 0.3pt from 14.3% prior year), Current Ratio 103.8% (Current Assets ¥9.84 trillion ÷ Current Liabilities ¥9.48 trillion), Quick Ratio 94.9% (Quick Assets ÷ Current Liabilities). D/E ratio 6.13x (Interest-bearing debt ¥13.21 trillion ÷ Equity ¥2.16 trillion) indicates high leverage; Debt/Capital ratio 51.3% (Total interest-bearing debt ÷ (Total interest-bearing debt + Equity)) significantly exceeds the investment-grade threshold of 40%. Cash and deposits ¥1,213.52B and marketable securities (current) ¥1,278.38B secure total liquidity assets of ¥2,491.90B. Compared with estimated short-term interest-bearing liabilities (from current liabilities breakdown: short-term borrowings ¥420.16B + bonds maturing within 1 year ¥181.06B + CP ¥17.01B etc.), the buffer is approximately 2.89x, but the current ratio of 103.8% provides a thin margin; cash management requires attention.
The report does not include a cash flow statement, so detailed analysis is not possible, but balance sheet movements suggest the following. As a proxy for Operating Cash Flow, Accounts Receivable +¥1,299B and Inventories +¥135B indicate working capital absorption, a headwind to Operating Cash Flow generation. Accounts Payable increased by +¥1,534B (from ¥1.47596 trillion to ¥1.62939 trillion), reflecting higher purchases accompanying revenue growth, but the estimated DPO (Accounts Payable days; estimate = Accounts Payable ¥1.63 trillion ÷ daily cost of goods sold ¥0.02 trillion ≈ ~318 days) is at a high level, indicating working capital efficiency issues. Investing Cash Flow likely includes tangible fixed asset increases +¥710B, presumed for store openings and DX investments, including AEON Mall overseas (two malls in Vietnam planned to open in H2). Financing Cash Flow shows cash and deposits decreased by -¥136.5B, while current liabilities +¥198.4B and non-current liabilities +¥43.4B increased, partially financing the changes; interest-bearing debt (excluding financial subsidiaries, estimated) increased by about +¥114.4B, suggesting growing debt dependence. FCF cannot be calculated without Operating CF, but with higher tangible asset additions and working capital absorption, the situation is likely strained. Cash-generation assessment: due to working capital absorption, high leverage, and rising interest burden—"monitoring required."
Operating Income ¥752.0B versus Ordinary Income ¥635.8B (Operating Income -15.4%)—the gap is limited. Non-operating income ¥85.4B (interest income ¥11.1B, dividend income ¥4.2B, foreign exchange gains ¥9.1B, etc.) is small at 0.29% of Revenue. Non-operating expenses ¥201.6B (mainly Interest Expense ¥167.0B) pressured the ordinary income line. The shift from Ordinary Income to Profit before tax ¥612.3B includes Extraordinary items net ¥-23.6B (Extraordinary Income ¥19.3B − Extraordinary Loss ¥42.8B), reflecting a reduction of one-off impacts from the prior year (Extraordinary Loss ¥135.8B), improving earnings quality. Major items of Extraordinary Loss were impairment losses ¥14.8B and loss on retirement of fixed assets ¥8.1B; one-time costs narrowed significantly compared with Financial Services impairment ¥68.5B in the prior year. After Corporate Taxes ¥291.5B (effective tax rate 47.6%), Net Income was ¥320.8B, but Net Income attributable to owners of the parent remained ¥138.1B due to Non-controlling interests ¥182.7B (57% of Net Income). Comprehensive income ¥204.4B was well below Net Income ¥320.8B, primarily due to valuation losses on securities ¥-376.6B compressing comprehensive income; deferred hedge gains ¥137.9B and foreign currency translation adjustments ¥132.8B contributed positively, but equity securities valuation losses weighed heavily. Accrual risk (gap between Net Income and Operating CF) remains a concern given Accounts Receivable +¥1,299B and Inventories +¥135B.
Full Year guidance remains: Revenue ¥12.0 trillion (+12.0% YoY), Operating Income ¥340.0B (+25.7%), Ordinary Income ¥290.0B (+19.3%), Net Income attributable to owners of the parent ¥730.0B (+0.4%). Q1 progress rates vs. FY guidance: Revenue 24.5% (¥2.94 trillion ÷ ¥12.0 trillion), roughly in line with standard Q1 progress of 25%; Operating Income progress 22.1% (¥75.2B ÷ ¥340.0B) lagging the standard by -11.6%; Net Income attributable to owners of the parent progress 18.9% (¥138B ÷ ¥730B), lagging by -24.4%. The lag in Operating Income progress is due to continued deficits in GMS/SM, increased interest expense (Interest Expense ¥167B), and large Non-controlling interests compressing final profit. The company expects a H2-weighted recovery driven by seasonality (continuation of cooling-related proposals, year-end sales), further realization of Health & Wellness synergies, and AEON Mall overseas openings (two malls in Vietnam). In food retail, 200 Topvalu mega items will be introduced group-wide from July to drive price appeal and improve promotion alignment to recover existing store traffic and target H2 profit growth. There is no revision to full-year guidance; the company considers the progress within expectations, but correction of GMS/SM profitability and improvement of working capital efficiency (normalization of DSO/DIO) are preconditions. Order backlog data are not provided in this report.
Dividends are set at annual ¥15 per share (effectively equivalent to ¥45 after stock split adjustments; interim ¥20 → post-split ¥7, year-end ¥21 → post-split ¥7), including commemorative dividends of ¥0.5 × 2. Dividend payout ratio versus FY EPS forecast ¥26.39 is approximately 56.8%, within a sustainable range (<60%). There is no mention of share buybacks; the Total Return Ratio is approximately the same ~56.8%. Under high leverage (D/E 6.13x), maintaining dividends depends on improving working capital efficiency and managing interest burden, so improvement in Operating Cash Flow generation is essential. Liquidity of cash deposits ¥1.2 trillion and marketable securities ¥1.3 trillion exists, but given short-term debt rollovers and investment needs, distributable capacity is limited and upside risk to Total Return Ratio is low.
[Short-term]
[Long-term]
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.6% | 3.4% (0.8%–7.7%) | -0.8pt |
| Net Profit Margin | 1.1% | 2.2% (0.5%–6.2%) | -1.2pt |
| Both Operating Margin and Net Profit Margin are below industry medians, with high SG&A ratio, interest burden, and Non-controlling interests contributing to lower profitability within the industry. |
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 14.6% | 7.7% (0.8%–14.6%) | +6.9pt |
| Revenue growth outperformed the industry median by +6.9pt, driven by M&A (e.g., Tsuruha HD consolidation) and high-growth segments (H&W, Developer & Entertainment), placing the company among the top performers in the industry for growth. |
※ Source: Company compilation
Continued losses in GMS/SM and delayed structural reforms: GMS Operating Loss ¥34.5B (worsened from ¥-17.9B), SM Operating Loss ¥8.0B (turned negative from ¥+69.6B). Deteriorating profitability in food retail is pronounced. AEON Retail recorded an operating loss of ¥-37B on a stand-alone basis. If format optimization, specialty store conversion, and SKU/price optimization progress slower than assumed, group Operating Margin could further deteriorate and full-year guidance may be missed.
High leverage and rising interest burden pressuring capital efficiency: D/E 6.13x and Debt/Capital 51.3% maintain a high-leverage structure, with Interest Expense ¥167.0B (up 41% from ¥118.5B) and rapidly increasing financing costs. Interest coverage of 4.5x is below the 5.0x standard, heightening vulnerability to interest rate rises or deterioration in refinancing conditions. Reliance on short-term debt rollovers (Current Ratio 103.8%) compounds cash management risk and keeps capital costs pressuring ROE/ROIC.
Working capital stagnation and weakening cash-generation risk: Accounts Receivable +¥1,299B and Inventories +¥135B accumulation sustain high DSO 250 days and DIO 165 days. Inventory risks include discounting and valuation losses; receivables risk prolonged collections and potential bad debts. Combined with a cash deposit decrease (-¥136.5B), investment capacity and dividend resources could be constrained.
Progress in portfolio shift toward high-growth segments: Developer & Entertainment (Operating Income ¥278.5B, margin 18.2%) and Health & Wellness (¥267.0B, margin 4.2%) accounted for 72.5% of total Operating Income, clarifying diversification and higher profitability sources. International (ASEAN) also grew Operating Income +35.0%, so if M&A synergies and overseas momentum persist, medium- to long-term profit growth potential is substantial.
Food retail and working capital efficiency improvements are key to shareholder value recovery: Ongoing deficits in GMS/SM (combined -¥42.5B) and working capital stagnation (DSO 250 days, DIO 165 days) are main drivers of low capital efficiency (ROE 1.5%, ROIC 1.2%). Depending on progress of Topvalu mega item expansion (200 items from July), store DX, and expanded group procurement, H2 profitability and working capital normalization could enable achievement of full-year Operating Income target (+25.7%) and recovery in cash generation, supporting dividend sustainability and investment capacity.
Under high leverage, interest cost management and tax normalization are prerequisites for expanding final profits: Interest Expense ¥167B, effective tax rate 47.6%, and heavy non-operating costs meant Operating Income +33.6% but Net Income attributable to owners of the parent only +0.4%. Reducing financing costs (deleveraging / shifting to longer-term lower-rate funding) and tax burden normalization (one-off factors subsiding / tax optimization) are essential to improve ROE and expand shareholder return capacity.
This report was automatically generated by AI integrating XBRL financial statement data and PDF earnings presentation materials to produce an earnings analysis. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on publicly available financial statements. Investment decisions are your responsibility; please consult professionals as needed.