K'S HOLDINGS CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥376.66B
• Operating Income: ¥13.03B
• Net Income: ¥8.88B
• EPS: ¥66.15

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

K’s Holdings (8282) reported FY2026 Q2 consolidated results under JGAAP showing steady topline growth and improved profitability amid a disciplined cost structure. Revenue was ¥376.7bn (+1.4% YoY), with gross profit of ¥102.6bn and a gross margin of 27.2%, indicating a resilient merchandising mix and controlled promotional intensity. Operating income rose 9.9% YoY to ¥13.0bn, lifting the operating margin to roughly 3.5%, reflecting positive operating leverage as SG&A grew slower than sales. Ordinary income reached ¥14.6bn, and net income increased 18.3% YoY to ¥10.5bn, with net margin at 2.79%. DuPont decomposition shows ROE of 4.19% (net margin 2.79% × asset turnover 0.920 × financial leverage 1.64), highlighting modest return on equity constrained primarily by thin retail margins. EBITDA was ¥20.23bn (5.4% margin), and interest coverage was a very comfortable 54.7x, underscoring limited financial risk from interest costs (interest expense ¥238m). Operating cash flow was strong at ¥33.07bn, implying an OCF/Net Income ratio of 3.15, which suggests high earnings quality and favorable working-capital dynamics in the period. The balance sheet appears conservative: total assets ¥409.5bn, total equity ¥250.3bn, implying an equity ratio around 61% by calculation, despite the reported equity ratio line item showing 0.0% (treated as undisclosed). Liquidity looks sound with a current ratio of 151.2% and working capital of ¥76.1bn, though the quick ratio equivalence reflects unreported inventory data and should not be overinterpreted. Debt-to-equity of 0.68x indicates moderate leverage, likely inclusive of lease or other interest-bearing obligations, but interest burden remains modest. Free cash flow is reported as 0 due to unreported investing cash flows; thus, FCF cannot be reliably assessed from the provided data. Dividend-related fields are unreported (DPS and payout ratio listed as 0), so we assess sustainability based on capacity rather than policy. Overall, K’s delivered incremental revenue growth, margin expansion, and strong cash generation in 1H, positioning it well for seasonally stronger 2H, though competitive intensity and product cycle dependence remain key variables. Data gaps (inventories, cash, investing CF, DPS) limit deeper diagnostics on working-capital efficiency, cash liquidity, and shareholder return capacity. On balance, the company demonstrates disciplined operations, robust cash conversion, and a solid balance sheet, albeit with moderate ROE typical of the sector.

Profitability Analysis

ROE of 4.19% reflects: net profit margin 2.79%, asset turnover 0.920x, and financial leverage 1.64x. The main constraint on ROE is margin structure, consistent with Japan CE retail norms; leverage is moderate and asset turns are reasonable. Gross margin at 27.2% suggests healthy vendor terms and mix; the 9.9% YoY increase in operating income against 1.4% sales growth indicates positive operating leverage from SG&A discipline. Operating margin is approximately 3.46% (¥13.03bn/¥376.66bn), up YoY, pointing to better expense control and possibly improved promotional efficiency. EBITDA margin of 5.4% provides additional cushion for fixed costs and rent/leases. Interest expense is low at ¥238m, and interest coverage of 54.7x confirms limited sensitivity to rate increases in the near term. Ordinary income exceeds operating income by ~¥1.55bn, indicating non-operating gains (e.g., financial income or subsidies) that supported profit; sustainability of this gap should be monitored. Effective tax rate appears reasonable when inferred from income tax expense (¥4.24bn) versus pre-tax, despite the effective tax rate metric being shown as 0.0% (treated as undisclosed). Overall margin quality is solid for the segment, with evidence of tight cost control and measured operating leverage.

Growth Assessment

Revenue grew 1.4% YoY to ¥376.7bn, signaling steady but modest demand and likely share stability in a competitive consumer electronics market. Profit growth outpaced sales, with operating income up 9.9% and net income up 18.3% YoY, evidencing mix and cost optimization. The gross margin at 27.2% is consistent with stable vendor rebates and balanced promotional activities; sustainability hinges on holiday season dynamics and product cycle intensity (e.g., TV/AC/smartphone cycles). Ordinary income benefitted from non-operating components, which may not be recurring; core operating growth is the more reliable gauge. Asset turnover at 0.920x is adequate but not high for retail; improvements would come from faster inventory rotation and store productivity, though inventory data is undisclosed. Looking ahead, 2H seasonality should support revenue, while ongoing SG&A discipline could maintain operating margin in the mid-3% range, subject to competitive pricing and foreign exchange impacts on procurement costs. Growth quality appears favorable given strong OCF relative to earnings (3.15x), suggesting profits are cash-backed. The outlook remains cautiously constructive, anchored by cost control and balance sheet strength, albeit tempered by price competition and potential deflationary pressures in key categories.

Financial Health

Total assets are ¥409.5bn and total equity is ¥250.3bn, implying a calculated equity ratio of about 61%, indicative of a conservative capital base (the reported equity ratio of 0.0% is treated as undisclosed). Total liabilities are ¥171.4bn, with current liabilities at ¥148.6bn. Liquidity is sound: current ratio 151.2% and working capital ¥76.1bn. The quick ratio equals the current ratio due to undisclosed inventories; therefore, actual quick liquidity is likely somewhat lower than 151%. Debt-to-equity is 0.68x, suggesting moderate leverage, likely inclusive of lease obligations; interest burden is light with interest expense of ¥238m. Interest coverage is robust at 54.7x, providing significant cushion against earnings volatility. No cash and cash equivalents balance is disclosed; thus, absolute liquidity buffers cannot be quantified from the data provided. Overall solvency appears strong given the high equity base and low financing costs, but the absence of cash and inventory details constrains a full liquidity stress test.

Cash Flow Quality

Operating cash flow was ¥33.07bn versus net income of ¥10.50bn, yielding an OCF/NI ratio of 3.15, a strong indicator of high earnings quality and favorable working-capital release or tight receivables/payables management. Depreciation and amortization totaled ¥7.20bn, providing a non-cash add-back that supports OCF. Investing cash flow is undisclosed (listed as 0), preventing calculation of free cash flow and capex intensity; the reported FCF of 0 should be treated as not available. Financing cash flow was -¥27.75bn, implying cash outflows for shareholder returns, debt reduction, or lease payments, but specific components are not disclosed. Working capital dynamics appear positive as evidenced by OCF strength, but without inventory and cash details, we cannot compute inventory turns, days payables, or cash conversion cycle. Overall, cash generation appears strong relative to earnings, but the inability to assess capex means we cannot judge sustainability of FCF beyond the current period.

Dividend Sustainability

Dividend data (annual DPS and payout ratio) are shown as 0 and should be regarded as undisclosed in this dataset. In the absence of DPS, we evaluate capacity: net income of ¥10.50bn and OCF of ¥33.07bn suggest ample room to fund shareholder returns while maintaining reinvestment, subject to capex needs that are not disclosed. Financing cash outflow of ¥27.75bn may include dividends and/or share repurchases, but the split is unavailable. Without investing CF, we cannot determine FCF coverage of dividends; the reported FCF coverage of 0.00x is not interpretable. Policy outlook cannot be inferred from the provided data; however, the conservative balance sheet and strong cash generation imply flexibility to sustain typical retail-sector payout ratios, contingent on capex and working-capital seasonality.

Risk Assessment

Business Risks:

• Intense price competition in Japan’s consumer electronics retail market, pressuring gross margin
• Product cycle volatility (TV, air conditioners, smartphones) affecting traffic and mix
• Shift to e-commerce and omnichannel dynamics potentially compressing store productivity
• Promotional and rebate dependency with major vendors affecting gross profit stability
• Seasonality (summer AC, year-end sales) leading to earnings concentration in 2H
• Macro sensitivity of big-ticket discretionary items to real income and consumer sentiment
• FX-driven procurement cost volatility influencing pricing and margins
• Store network optimization and new store execution risks

Financial Risks:

• Limited visibility on cash and inventory balances due to undisclosed items reduces liquidity transparency
• Potential lease obligations not fully evident from summary leverage metrics
• Working-capital swings around peak seasons could temporarily strain liquidity
• Non-operating income contribution to ordinary income may be non-recurring
• Interest rate normalization could modestly raise financing costs, though coverage is strong

Key Concerns:

• Sustainability of margin gains amid competitive pricing and promotional cycles
• Dependence on undisclosed inventory dynamics for asset turnover and cash conversion
• Lack of investing CF data obscures capex intensity and FCF sustainability

Investment Implications

Key Takeaways:

• Topline grew modestly (+1.4% YoY) while operating profit expanded faster (+9.9% YoY), indicating positive operating leverage
• Gross margin held at 27.2%, supporting margin quality in a competitive category
• ROE at 4.19% is primarily constrained by thin net margins rather than asset turns or leverage
• OCF of ¥33.07bn (3.15x net income) signals strong cash conversion and high earnings quality
• Balance sheet appears conservative with an implied equity ratio around 61% and high interest coverage (54.7x)
• Data gaps (inventories, cash, investing CF, DPS) limit assessment of liquidity buffers and FCF/dividend capacity
• Ordinary income exceeds operating income, suggesting non-operating gains that may not recur

Metrics to Watch:

• Same-store sales growth and average ticket size
• Gross margin and vendor rebate contribution
• SG&A-to-sales ratio and operating margin progression
• OCF/Net Income ratio and working-capital metrics (inventory turns, payables days) when available
• Capex levels and store pipeline (investing CF) to gauge FCF
• Non-operating income components affecting ordinary income
• Debt and lease obligations, interest expense trend, and liquidity buffers (cash balance)

Relative Positioning: Within Japan’s consumer electronics retail peer set, K’s exhibits disciplined cost control, strong cash conversion, and a conservative balance sheet, but maintains a moderate ROE typical of the sector; competitive intensity and limited disclosure on inventories/cash/FCF are current analytical constraints.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis