| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥8142.6B | ¥8089.3B | +0.7% |
| Operating Income / Operating Profit | ¥112.2B | ¥129.5B | -13.4% |
| Ordinary Income | ¥125.3B | ¥143.2B | -12.5% |
| Net Income / Net Profit | ¥163.3B | ¥161.8B | +0.9% |
| ROE | 7.2% | 7.4% | - |
For FY2026, Revenue amounted to ¥8,142.6B (¥+53.3B YoY +0.7%), a modest increase, while Operating Income declined to ¥112.2B (¥-17.3B YoY -13.4%), highlighting a deterioration in profitability. Ordinary Income decreased to ¥125.3B (¥-17.9B YoY -12.5%) following the reduction at the operating level, but Net Income rose slightly to ¥163.3B (¥+1.5B YoY +0.9%). At the operating level, Selling, General & Administrative Expenses increased, driving the operating margin down to 1.4% (approx. -0.2pt YoY). In extraordinary items, investment securities gains on sale of ¥103.7B coexisted with impairment losses of ¥118.8B, and an effective tax rate of -0.3% (corporate taxes, etc. -¥0.3B) supported the bottom-line. Operating Cash Flow (OCF) improved materially to ¥377.4B (¥+225.4% YoY), with increases in accounts payable and improved working capital efficiency enhancing cash generation.
Revenue: Revenue was ¥8,142.6B (+0.7%), essentially flat. Operating revenue was ¥7,738.9B plus other operating revenue of ¥105.8B (¥+0.5B YoY). The core Retail Business showed only marginal growth. Cost of sales was ¥5,645.0B, yielding gross profit of ¥2,497.6B; gross margin was 30.7% (on a cost of sales basis) and gross profit margin was 27.0% (on Revenue), maintaining a standard level for retail. Top-line stagnation is likely due to flat same-store sales and limited contributions from new store openings.
Profitability: SG&A was ¥2,385.4B (¥+19.9B YoY +0.8%), outpacing Revenue growth, raising the SG&A ratio to 29.3% (approx. +0.1pt YoY). Breakdown includes advertising expenses ¥104.3B, depreciation ¥162.8B, and goodwill amortization ¥13.5B, with ongoing fixed-cost pressure from personnel and utilities. As a result, Operating Income fell to ¥112.2B (-13.4%) and the operating margin declined to 1.4%. Non-operating items contributed net +¥13.1B (dividend income ¥3.9B, equity-method earnings ¥9.7B), resulting in Ordinary Income of ¥125.3B (-12.5%). Extraordinary items comprised Special Gains ¥105.0B (mainly investment securities gains ¥103.7B) and Special Losses ¥148.7B (impairment losses ¥118.8B, loss on disposals of fixed assets ¥8.2B, etc.), leaving Profit Before Tax at ¥81.5B. Corporate taxes, etc. were -¥0.3B (effective tax rate -0.3%), with tax effects materially supporting Net Income attributable to owners of the parent of ¥163.3B (+0.9%). Temporary factors included asset substitution via sale of investment securities and cleanup of loss-making assets via impairment losses, increasing volatility of the bottom line. The divergence between Ordinary Income and Net Income (Net Income / Ordinary Income = 1.30x) indicates significant impact from extraordinary items and tax effects. Overall, the company posted revenue up but profit down at operating and ordinary levels, whereas one-off items and tax effects produced a slight increase in Net Income.
Profitability: Operating margin was 1.4% (approx. -0.2pt YoY), and ROE was 7.2% (Net Income ¥163.3B / average shareholders' equity ¥2,226.3B). DuPont decomposition shows Net Profit Margin 2.0% × Total Asset Turnover 1.96x × Financial Leverage 1.83x; while asset turnover is healthy for retail, the low net profit margin constrains ROE. EBIT equals Operating Income ¥112.2B, giving an EBIT margin of 1.4%; the attenuation from EBIT to Profit Before Tax (Profit Before Tax / EBIT) is 0.73x, reflecting substantial non-operating items and special losses.
Cash Quality: Operating CF / Net Income is 4.62x, and Operating CF / EBITDA (EBITDA = Operating Income ¥112.2B + Depreciation ¥162.8B = ¥275.0B) is 1.37x, indicating strong cash conversion. The accrual ratio is -7.1% ((Net Income ¥163.3B - Operating CF ¥377.4B) / beginning total assets ¥4,118.1B), negative and indicating earnings are backed by cash. Investment Efficiency: CAPEX / Depreciation is 1.13x (CAPEX ¥183.4B / Depreciation ¥162.8B), indicating appropriate maintenance/growth investment. Total Asset Turnover is 1.96x (Revenue ¥8,142.6B / average total assets ¥4,135.1B), well above the industry median 1.17x, reflecting strong asset efficiency. Inventory turnover days are 15.7 days (Inventory ¥349.6B / daily sales ¥22.3B), substantially below industry median 65.7 days, indicating excellent inventory efficiency.
Financial Soundness: Equity Ratio is 54.7%, slightly above industry median 50.2%, indicating a stable financial base. Interest-bearing debt (short-term borrowings ¥39.5B + long-term borrowings ¥201.2B + lease liabilities, etc.) is about ¥241B, with Debt/EBITDA = 0.88x and Interest Coverage = 24.8x (EBIT ¥112.2B / interest expense ¥4.5B), maintaining conservative leverage. Current Ratio is 74.2% (current assets ¥992.2B / current liabilities ¥1,337.8B), below 100%, but negative working capital driven by sizable accounts payable ¥679.4B limits cash flow rigidity. Cash & deposits were ¥389.4B (¥+48.1% YoY), providing short-term debt coverage of 9.9x (cash & deposits / short-term borrowings) and ample liquidity.
Operating CF was ¥377.4B (¥+225.4% YoY), a large increase. Subtotal was ¥401.7B, and changes in working capital resulted in a net approx. -¥24.3B (mainly receivables -¥9.0B, inventories -¥12.9B outflows, offset by payables +¥153.3B inflow), with corporate tax payments -¥28.2B deducted. The increase in accounts payable of ¥153.3B, due to improved supplier terms and year-end inventory buildup, materially boosted OCF. Investing CF was a net inflow of ¥39.0B, with proceeds from sale of investment securities ¥218.8B exceeding PPE investment -¥183.4B, indicating asset substitution. Financing CF was a net outflow of -¥289.9B, driven by long-term borrowings repayments -¥217.98B, dividend payments -¥26.0B, and lease repayments -¥6.3B. Short-term borrowings decreased by -¥39.5B, reducing interest-bearing debt overall. Free Cash Flow was ¥416.4B (Operating CF ¥377.4B + Investing CF ¥39.0B), ample to cover dividends and debt repayments; cash & deposits rose from ¥262.9B at the beginning of the period to ¥389.4B at the end, an increase of ¥126.5B. Operating CF generation substantially exceeded depreciation ¥162.8B, enabling both asset dispositions and cash generation.
Recurring earnings center on Retail Business Operating Income ¥112.2B, supplemented by non-operating income ¥21.1B (equity-method earnings ¥9.7B, dividend income ¥3.9B, etc.). One-off items included Special Gains ¥105.0B (investment securities gains ¥103.7B, etc.) and Special Losses ¥148.7B (impairment losses ¥118.8B, loss on disposals of fixed assets ¥8.2B, etc.), resulting in a net special loss of -¥43.7B. The absolute amount of one-off items totaled ¥253.7B (sum of Special Gains and Special Losses), equivalent to 145.8% of Net Income ¥163.3B, whereas Profit Before Tax was ¥81.5B. The effective tax rate was -0.3%, with corporate taxes, etc. -¥0.3B (current tax ¥26.5B - deferred tax ¥26.8B), which supported the bottom line. Non-operating income as a percentage of Revenue was limited at 0.26%, but volatility in special items creates a large divergence between recurring earnings and reported earnings. With an accrual ratio of -7.1% and OCF/EBITDA = 1.37x, cash quality is high and earnings are cash-backed, but adjustments for one-off items are necessary to assess recurring earning power. Comprehensive income was ¥118.1B (Other Comprehensive Income -¥45.2B versus Net Income ¥163.3B), with valuation gains on securities +¥15.9B and retirement benefit adjustments +¥21.4B contributing; the difference from Net Income is mainly due to temporary valuation gains/losses.
For FY2027 Full Year, guidance projects Revenue ¥8,250.0B (+1.3% YoY), Operating Income ¥170.0B (+51.5%), Ordinary Income ¥172.0B (+37.3%), and Net Income attributable to owners of the parent ¥70.0B (-57.1%). The substantial planned increase in Operating Income (¥+57.8B) is presumed to rely on SG&A growth control, realization of labor-saving and energy-saving effects, and profitability improvements from asset substitution. Net Income is forecast to decline due to the drop-off of one-off gains this period, shifting focus to recovery of recurring earning power. Current progress shows Operating Income ¥112.2B achieving 66.0% of the full-year plan ¥170.0B, a satisfactory level for the first half. Dividend forecast is maintained at ¥15.0 per year, and with forecast EPS ¥80.79, the payout ratio is about 18.6%, a conservative stance. Achievement hinges on SG&A control, inventory efficiency improvements, and progress in disposing of loss-making assets.
Annual dividend is ¥30.0 (interim ¥15.0, year-end ¥15.0), total dividends approx. ¥26.0B. Based on the company’s estimate of Net Income attributable to owners of the parent ¥81.8B (derived from consolidated Net Income ¥163.3B before deduction of non-controlling interests ¥0.0B), the payout ratio is approx. 31.8%, a sustainable level. Note the payout ratio of 68.1% disclosed in the earnings release is calculated on Net Income ¥163.3B, presenting a more conservative view. FCF coverage is approx. 16.0x (FCF ¥416.4B / dividends ¥26.0B), indicating ample capacity to cover dividends. Share buybacks were effectively nil in Financing CF (-¥0.0B), so shareholder returns were conducted solely via dividends. DOE (dividend on equity) is approx. 1.1%, conservative relative to cost of capital. Next fiscal year’s projected annual dividend of ¥15.0 represents half the current level, but with forecast EPS ¥80.79, the payout ratio would be about 18.6%, providing further headroom. Over the long term, strengthened OCF generation and improved asset efficiency suggest scope for dividend increases.
Industry Position (reference — company analysis): Compared with the retail sector 2025 median benchmark, Total Asset Turnover of 1.96x substantially exceeds the industry median 1.17x, placing the company in an upper position on asset efficiency. Inventory turnover days of 15.7 days are well below the industry median 65.7 days, highlighting outstanding inventory management. However, Operating Margin 1.4% vs. industry median 4.6% and Net Profit Margin 2.0% vs. industry median 3.3% indicate relatively weak profitability. ROE 7.2% slightly exceeds the industry median 5.9%, but Financial Leverage 1.83x is comparable to the industry median 1.88x, suggesting room to improve profitability. Equity Ratio 54.7% is slightly above the industry median 50.2%, indicating sound financial health. Current Ratio 74.2% is well below the industry median 1.84x, but Accounts Payable Turnover Days 30.5 days (Accounts Payable ¥679.4B / daily sales ¥22.3B) is shorter than the industry median 39.4 days, and the negative working capital model contributes to cash efficiency. Revenue growth +0.7% trails the industry median +4.3%, indicating weaker growth. The company’s payout ratio 31.8% (company estimate) slightly exceeds the industry median 27%, signaling a relatively proactive shareholder return stance. Cash conversion 1.37x is below the industry median 1.57x, but absolute OCF generation is strong. Overall, the company leads on asset turnover and inventory efficiency, while improving profitability and growth are key to enhancing industry standing.
Three key points from the results: First, the company achieved both asset substitution and cash generation, realizing investment securities gains ¥103.7B alongside impairment losses ¥118.8B while generating robust cash — Operating CF ¥377.4B (¥+225% YoY) and FCF ¥416.4B. It reduced long-term borrowings by 47.8% and increased cash & deposits by 48.1% to ¥389.4B, materially strengthening financial resilience. Second, improving the low-margin structure is the primary challenge: Operating margin 1.4% (industry median 4.6%) and Net Profit Margin 2.0% (industry median 3.3%) lag industry averages. Controlling SG&A ratio 29.3%, improving same-store productivity, and realizing labor- and energy-saving investments are critical to achieving the planned +51.5% increase in Operating Income and sustainable ROE improvement. Third, managing volatility of one-off items is important: net special losses -¥43.7B had a large impact on reported earnings, making assessment of recurring earnings essential. The forecast Net Income ¥70.0B (-57.1%) reflects the absence of this period’s one-off gains; recovery in operating earnings and continuation of cash generation are fundamental to sustaining shareholder returns and enhancing corporate value.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by the Company based on publicly available financial statements and are provided for reference only. Investment decisions are your responsibility; please consult a professional advisor as needed before making investment decisions.