Quick View
| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥4560.1B | ¥4449.0B | +2.5% |
| Operating Income / Operating Profit | ¥133.1B | ¥133.6B | -0.4% |
| Ordinary Income | ¥146.1B | ¥146.4B | -0.2% |
| Net Income / Net Profit | ¥95.4B | ¥88.3B | +8.0% |
| ROE | 4.8% | 4.6% | - |
Executive Summary
For the consolidated fiscal year ended February 2026, Revenue was ¥4,560.1B (YoY +¥111.1B +2.5%), Operating Income was ¥133.1B (YoY -¥0.5B -0.4%), Ordinary Income was ¥146.1B (YoY -¥0.3B -0.2%), and Net Income attributable to owners of the parent was ¥95.4B (YoY +¥7.1B +8.0%). Despite revenue growth, operating and ordinary stages remained largely flat, and Net Income increased due to improvements in extraordinary profit/loss. Revenue was driven by solid comparable-store performance in the Retail Business and expansion of service income; Gross Margin improved to 28.1% (YoY +0.4pt). However, SG&A increased to ¥1,526.6B (YoY +¥47.7B +3.2%), causing the Operating Margin to decline to 2.9% (down 0.1pt).
Drivers of Performance
Revenue of ¥4,560.1B (+2.5%) was driven by the Retail Business at ¥4,323.5B (+2.6%), with Merchandise Sales ¥4,179.8B (+2.6%) and Service Income ¥209.2B (+5.3%) both increasing. Retail-related Business was ¥68.7B (+3.6%), and Other Businesses were ¥167.9B (-0.9%). Gross margin improved to 28.1% (up 0.4pt YoY) due to price management and mix improvement.
On the profit side, Operating Income was ¥133.1B (-0.4%). SG&A of ¥1,526.6B grew +3.2%, outpacing revenue growth. Key increases included Salaries and Allowances ¥662.1B (YoY +¥24.9B), Depreciation ¥138.2B (YoY +¥6.5B), and Rent ¥136.9B (YoY +¥2.2B). Rising personnel costs and depreciation impaired operating leverage, and the SG&A ratio rose to 33.5% (YoY +0.5pt). Non-operating items contributed +¥12.9B, driven by Interest Income ¥1.4B, Dividend Income ¥0.8B, Fee Income ¥6.2B, while Interest Expense was ¥1.3B and financial costs were negligible. Ordinary Income was ¥146.1B (-0.2%), essentially flat.
Extraordinary items resulted in a net loss of ¥-9.2B (Extraordinary Income ¥7.7B, Extraordinary Loss ¥16.9B), deteriorating from a net gain of ¥+5.8B in the prior year. Gains on sales of investment securities ¥2.6B and gains on disposal of fixed assets ¥1.3B partially offset impairment losses ¥6.4B and loss on retirement of fixed assets ¥4.7B. Profit before income taxes was ¥136.8B (YoY -¥28.5B -17.2%); after income taxes of ¥41.6B (effective tax rate 30.4%) and non-controlling interests of ¥1.1B, Net Income attributable to owners of the parent was ¥95.4B (+8.0%). Although extraordinary income was larger in the prior year, the current period’s Net Income increased despite higher extraordinary losses. In summary: revenue up, operating profit down, net profit up.
Segment Analysis
The Retail Business recorded Revenue of ¥4,323.5B (YoY +2.6%) and Segment Profit of ¥126.5B, accounting for 94.8% of consolidated revenue. Both Merchandise Sales and Service Income grew, reflecting solid comparable-store performance. Retail-related Business posted Revenue of ¥68.7B (+3.6%) and Segment Profit of ¥19.9B, supported by real estate leasing, shopping center operations, and building maintenance. Other Businesses (including foodservice) had Revenue of ¥167.9B (-0.9%) and Segment Profit of ¥7.7B, a slight decline. Revenue concentration in the Retail Business is high, limiting diversification of income sources.
Key Financial Metrics
Profitability: Operating Margin was 2.9% (prior year 3.0%), down 0.1pt; ROE was 4.8% (prior year 5.7%), down 0.9pt. Net Profit Margin slightly improved to 2.1% (prior year 2.0%), but deterioration at the operating level suppressed ROE. ROE can be decomposed as Net Profit Margin 2.1% × Asset Turnover 1.46 × Financial Leverage 1.58; Net Profit Margin slightly increased, turnover slightly improved, and leverage was unchanged.
Cash quality: Operating Cash Flow (OCF) / Net Income was 1.86x, indicating cash-backed earnings. Accrual ratio was -2.7%, reflecting high earnings quality. However, OCF/EBITDA was 0.66x, low, as reductions in retirement benefit liabilities of ¥68.3B (pension contributions) and increases in inventory and receivables caused cash outflows in working capital, suppressing cash conversion efficiency.
Investment efficiency: Total Asset Turnover was 1.46x (prior year 1.45x), slightly improved; ROA was 4.7% (prior year 4.7%), unchanged. Capital Expenditure / Depreciation was 1.26x, indicating continued growth investment.
Financial soundness: Equity Ratio was 63.2% (prior year 61.7%), improving. Interest-bearing debt totaled ¥212.4B (short-term borrowings ¥92.8B, long-term borrowings ¥119.6B), Debt/EBITDA was 0.78x, and Interest Coverage was 105x, indicating very low leverage and strong financial resilience. However, Current Ratio was 75.1% and Quick Ratio 51.3%, both low, and Short-term Debt Ratio was 43.7%, indicating liquidity management needs attention. Cash and Deposits of ¥232.3B cover short-term borrowings by 2.5x, maintaining short-term payment capacity.
Cash Flow Analysis
Operating Cash Flow was ¥177.8B (YoY -¥51.9B -22.6%). Starting from Net Income ¥95.4B, adding Depreciation ¥138.2B, impairment losses ¥6.4B and other non-cash charges produced subtotal Operating Cash Flow before working capital changes of ¥216.3B. However, reductions in retirement benefit liabilities ¥68.3B (pension contributions), increase in trade receivables ¥16.1B, and increase in inventories ¥2.7B drained cash, partially offset by an increase in trade payables ¥15.2B. After income tax payments of ¥38.8B, OCF declined year-on-year.
Investing Cash Flow was ¥-164.7B (prior year ¥-146.5B), primarily due to acquisitions of tangible and intangible fixed assets totaling ¥-173.6B. Store equipment renewals and labor-saving investments continued; proceeds from disposals were only ¥2.9B. Free Cash Flow (OCF + Investing CF) was ¥13.1B, modest, and Financing Cash Flow was ¥-51.3B, driven by Dividend Payments ¥-33.0B, Treasury Stock Purchases ¥-27.0B, and net increase in long-term borrowings ¥18.2B (proceeds ¥85.0B - repayments ¥66.8B). Cash and Cash Equivalents decreased by ¥37.2B from ¥228.8B at prior year-end to ¥191.7B, with short-term investments and shareholder returns pressuring the cash balance.
Quality of Earnings
There is divergence between Ordinary Income ¥146.1B and Net Income attributable to owners of the parent ¥95.4B, primarily due to extraordinary items and tax burden. Operating Income ¥133.1B shows core business earning power, and Non-operating Income +¥12.9B is mainly Interest Income ¥1.4B, Dividend Income ¥0.8B, Fee Income ¥6.2B, indicating low dependence on non-operating items. Extraordinary items netted ¥-9.2B: impairment losses ¥6.4B, loss on retirement of fixed assets ¥4.7B, gains on sales of investment securities ¥2.6B, and gains on sales of fixed assets ¥1.3B. Impairments and retirements are one-off factors; recurring earning power should be evaluated at the Operating and Ordinary Income levels. Effective tax rate is 30.4% and Deferred Tax Assets amount to ¥23.1B. OCF ¥177.8B is 1.86x Net Income ¥95.4B and accrual ratio -2.7% is good; overall earnings quality is healthy.
Forecasts & Guidance
Full Year guidance projects Revenue ¥4,780.0B (YoY +4.8%), Operating Income ¥143.0B (YoY +7.4%), Ordinary Income ¥152.0B (YoY +4.1%), Net Income attributable to owners of the parent ¥98.0B (YoY +2.7%), and EPS forecast ¥198.16. Progress versus guidance: Revenue 95.4%, Operating Income 93.1%, Ordinary Income 96.1%, Net Income 97.3%, indicating results are broadly on track. The company’s forecast assumes continued SG&A inflation but expects improved Operating Margin to 3.0% through traffic and average spend improvements at existing stores and realization of labor-saving investments. Dividend forecast is annual ¥33 per share (interim and year-end each ¥33), maintaining prior fiscal year payout of ¥66 (interim ¥33 + year-end ¥33), signaling a policy of stable dividends.
Shareholder Returns
Annual dividend is interim ¥33 and year-end ¥33, totaling ¥66, with Payout Ratio 30.1% (on Net Income), and Total Dividend Amount ¥3,296M. As prior year annual dividend was ¥30, a per-share increase of ¥36 was implemented. Treasury stock repurchases amounted to ¥2,700M, equivalent to approximately 669k shares (back-calculated from the period-average share price). Total shareholder return amounted to ¥5,996M (Dividends ¥3,296M + Buybacks ¥2,700M), substantially exceeding Free Cash Flow ¥1,310M. Total Return Ratio (Total Return Amount / Net Income) was 62.9%, and FCF Coverage was 0.22x, indicating returns are funded from on-hand cash and financial capacity afforded by low leverage. Further increases in dividends or buybacks will require stronger OCF and improved FCF through disciplined investment.
Risk Factors
- Structural risk of rising SG&A: Salaries ¥662.1B (14.5% of Revenue) and Depreciation ¥138.2B (3.0% of Revenue) rose YoY; if wage increases and higher depreciation from labor-saving investments continue, Operating Margin could fall into the low-2% range. If recent SG&A growth rate +3.2% continues to outpace Revenue growth +2.5%, operating leverage will be impaired.
- Liquidity management risk: Current Ratio 75.1% and Quick Ratio 51.3% are low, Short-term Debt Ratio 43.7% is high, creating refinancing and maturity mismatch risk for Short-term Borrowings ¥92.8B. Although Cash & Deposits ¥232.3B can cover short-term needs, continued OCF weakness could erode liquidity buffers.
- Future burden of asset retirement obligations: Asset Retirement Obligations ¥89.3B (7.8% of liabilities) reflect estimated restoration costs on store exits and renovations; if store network restructuring accelerates mid-term, concentrated cash outflows could pressurize FCF.
Industry Benchmark (Reference — Company Analysis)
Industry Position (reference): Within the retail sector, Operating Margin 2.9% is well below the industry median 4.6% (IQR 1.7%–8.2%), placing profitability in the lower tier. Net Profit Margin 2.1% is below the industry median 3.3% (IQR 0.9%–5.8%), indicating room to improve cost structure. ROE 4.8% is below the industry median 5.9% (IQR 2.6%–12.0%), mainly due to low leverage (Financial Leverage 1.58x vs industry median 1.88x); improving capital efficiency depends on improving profitability. Total Asset Turnover 1.46x exceeds the industry median 1.17x (IQR 0.85–1.55), suggesting relatively good asset efficiency. Equity Ratio 63.2% is above the industry median 50.2% (IQR 40.1%–63.6%), placing financial soundness among the top of the industry. Current Ratio 75.1% is well below the industry median 184% (IQR 126%–254%), indicating weak liquidity. Net Debt/EBITDA 0.78x is on the positive side compared with the industry median -0.59x (IQR -2.61–1.32) but remains within low leverage territory and indicates limited debt burden. CapEx/Depreciation 1.26x is in line with the industry median 1.16x (IQR 0.75–1.92), signaling a typical growth investment stance. Payout Ratio 30.1% is close to the industry median 27% (IQR 20%–34%), indicating shareholder return levels are broadly industry-standard. Overall, financial soundness is high, while profitability and liquidity management require improvement.
Key Takeaways from the Results
Key points are: 1) Continued structure where SG&A growth outpaces Revenue: increases in personnel expenses and depreciation are impairing operating leverage; improvement in Gross Margin and realization of labor-saving investment effects are prerequisites for next-period profit growth. Controlling SG&A ratio at 33.5% and restoring Operating Margin to the 3% range are focal points for medium-term profitability assessment. 2) Low OCF/EBITDA (0.66x) and weak FCF generation: while OCF is high relative to Net Income, pension contributions and working capital increases suppress cash conversion, and FCF ¥1,310M is far short of Dividends + Buybacks ¥5,996M. Strengthening OCF and improving investment discipline are necessary for sustainable shareholder returns. 3) Importance of liquidity management: Current Ratio 75.1% and Short-term Debt Ratio 43.7% place liquidity low in the industry; managing refinancing and maturities for Short-term Borrowings ¥92.8B is a key management priority. Low leverage and Cash on Hand ¥232.3B limit short-term risks, but sustained OCF deterioration would thin liquidity buffers.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company from publicly available financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.