Quick View
| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥9506.4B | ¥9110.6B | +4.3% |
| Operating Income | ¥219.5B | ¥224.4B | −2.2% |
| Equity-Method Investment Gain (Loss) | - | - | - |
| Ordinary Income | ¥245.5B | ¥254.2B | −3.4% |
| Net Income | ¥173.2B | ¥182.8B | −5.3% |
| ROE (Annualized) | 7.7% | 8.5% | - |
Executive Summary
The key point of this earnings report is that, although revenue increased, the growth in SG&A expenses exceeded the increase in gross profit, preventing a shift to higher operating income. Revenue was ¥9,506.4B (+4.3% year on year, +395.7B), Operating Income was ¥219.5B (-2.2%, -4.9B), Ordinary Income was ¥245.5B (-3.4%, -8.7B), and Net Income was ¥173.2B (-5.3%, -9.6B). Although the gross margin improved slightly to 7.5%, the SG&A ratio rose to 5.2% due to increases in personnel and delivery expenses, causing the Operating Income margin to decline to 2.3%.
Factors Affecting Financial Results
【Revenue】Revenue was ¥9,506.4B, representing a year-on-year increase of +4.3%. Growth was supported by the acquisition of billing-account customers, expansion of value-added products, demand from international visitors to Japan, and strong sales of seasonal products, while hygiene-related products and certain pharmaceutical products declined. Household goods (+5.9%) and cosmetics (+5.2%) led the increase in revenue.
【Profit and Loss】Gross profit was ¥714.5B (+5.0% year on year), growing faster than revenue, but SG&A expenses expanded to ¥495.0B (+8.6%) due to increases in personnel and delivery expenses, weighing on Operating Income. Non-operating income of ¥26.5B, including dividend income, was a factor supporting earnings, but it was insufficient to offset the decline in Operating Income, resulting in a decrease in Ordinary Income. There is a slight difference between profit before tax and Ordinary Income because the results include ¥4.8B in extraordinary income, including insurance proceeds; however, the amount is small and the impact of temporary factors is limited. In conclusion, the company posted higher revenue but lower earnings.
Segment Analysis
The Household Goods Business accounted for the largest share of revenue and is positioned as the core business. Cumulative revenue was ¥4,281B for household goods (+5.9%), ¥2,267B for cosmetics (+5.2%), ¥1,108B for pharmaceuticals (-2.4%), ¥1,681B for health and hygiene-related products (+3.9%), and ¥166B for other products (+6.4%). While higher revenue from household goods and cosmetics drove overall revenue growth, pharmaceutical revenue declined due to lower demand for cold remedies and other products. Although segment-level operating income and loss are not disclosed, increased SG&A expenses across the business have depressed the profit margin, meaning that the quality of revenue growth has not been sufficiently reflected in Operating Income.
Key Financial Indicators
Profitability: ROE 7.7%, Operating Income margin 2.3% (2.5% in the previous year)
Cash flow quality: Operating CF/Net Income 0.48x, FCF ¥59.1B
Investment efficiency: Capital expenditures/Depreciation and amortization 0.34x
Financial soundness: Equity Ratio 55.1% (56.7% in the previous year), Current Ratio 172.4%
Cash Flow Analysis
Operating CF was ¥83.6B, equivalent to only 0.48x Net Income, indicating weak cash conversion. Increases of ¥235.6B in accounts receivable and ¥124.9B in inventories put pressure on cash flow, while an increase of ¥260.2B in accounts payable provided a partial offset. Investing CF was -¥24.5B, primarily due to ¥16.0B in capital expenditures. Financing CF was -¥97.2B, with dividend payments of ¥68.9B and share repurchases of ¥27.2B serving as sources of cash outflow. FCF was ¥59.1B. Cash generation requires monitoring, as the increase in working capital is constraining Operating CF.
Quality of Earnings
The difference between Ordinary Income of ¥245.5B and Net Income of ¥173.2B was primarily attributable to ¥77.0B in income taxes and other taxes, and the gap is within the range of the tax burden. Non-operating income of ¥26.5B represented a small 0.3% of revenue, and its impact from a compositional perspective was limited. The results also include ¥4.8B in extraordinary income, including insurance proceeds, but the amount is small. Operating CF was only 0.48x Net Income of ¥173.2B, and the increase in accruals resulting from higher accounts receivable and inventories is a point to note regarding earnings quality, as it weakened the cash backing of earnings.
Earnings Forecast and Guidance
Progress against the full-year forecast was 77.3% for revenue, 75.7% for Operating Income, 76.2% for Ordinary Income, and 78.7% for Net Income, all slightly exceeding the standard progress benchmark of 75%. No forecast revision has been made. Achieving full-year Operating Income of ¥290.0B requires Operating Income of ¥70.5B in Q4. If the increase in the SG&A ratio observed in cumulative Q3 results continues, cost control will become an issue relative to the pace of progress.
Shareholder Returns
The interim dividend was ¥57.00 per share, and the full-year forecast dividend is ¥120.00. Based on forecast EPS of ¥356.70 for the full year, the forecast Payout Ratio is approximately 33.6%. In addition to dividend payments of ¥68.9B, the company conducted share repurchases of ¥27.2B during the period, resulting in a Total Return Ratio of approximately 55.5% relative to Net Income of ¥173.2B. The dividend-only payout ratio is low, but including share repurchases, the relative burden of shareholder returns is higher.
Catalysts
【Short Term】The accumulation of Operating Income in Q4 (¥70.5B is required to achieve the full-year plan), the effectiveness of measures to address the increase in delivery unit prices (+9.3%), and control of SG&A expenses. 【Long Term】Improvement in warehouse efficiency through the use of externally leased distribution centers, progress in green logistics initiatives such as joint delivery, and expansion of value-added products, including health foods and products related to going out.
Industry Benchmark (Reference; Compiled by the Company)
Industry Benchmark (trading)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 2.3% | 3.3% (1.8%–5.0%) | −1.0pt |
| Net Income Margin | 1.8% | 3.1% (1.4%–6.3%) | −1.3pt |
| Profitability is below the industry median, and the low-margin structure is more pronounced. |
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (Year on Year) | 4.3% | 5.2% (-4.1%–8.6%) | −0.9pt |
| Revenue growth is slightly below the industry median but remains within the IQR. |
※Source: Compiled by the Company
Risk Factors
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Pressure on profitability from rising SG&A expenses: SG&A expenses increased +8.6% year on year, exceeding revenue growth of 4.3%, while increases in personnel and delivery expenses (delivery unit prices +9.3%) reduced the Operating Income margin to 2.3%.
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Weak cash conversion due to increased working capital: Operating CF/Net Income remained at 0.48x due to increases of ¥235.6B in accounts receivable and ¥124.9B in inventories. Collection and inventory management during a period of revenue growth will be key areas of focus.
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Restraint in capital expenditures: Capital expenditures of ¥16.0B were only 0.34x depreciation and amortization of ¥47.5B, and the pace of renewal of logistics and systems infrastructure could affect future opportunities for efficiency improvements.
Key Points in the Earnings Report
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The trend of revenue growth continues, but the Operating Income margin declined from the previous year because the increase in SG&A expenses (+8.6%) exceeded the improvement in gross profit (+5.0%), making the ability to absorb costs the key earnings focus.
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Operating CF/Net Income of 0.48x was primarily attributable to increases in working capital, namely accounts receivable and inventories, confirming that revenue growth has not been sufficiently converted into cash generation.
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Full-year progress exceeded the standard level for both revenue and earnings, but the Operating Income required in Q4 is slightly above the pace of cumulative Q3 results. Accordingly, SG&A expense trends in the second half will be critical to achieving the plan.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear (Bearish) | ¥4,631 |
| base (Base) | ¥4,667 |
| bull (Bullish) | ¥4,731 |
| Assumption | Value |
|---|---|
| Book Value Per Share (BPS) | ¥4,908 |
| Adjusted Forecast EPS | ¥369.8 |
| Cost of Equity r | 9.27% (10-year Japanese government bond 2.77% + Equity Risk Premium 6.00% + Size Premium 0.50%) |
| Persistence Coefficient of Residual Income ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 33.6% |
| Forecast EPS Confidence Adjustment | ×1.037 (based on the historical guidance achievement rate of peer companies) |
| Implied PBR / PER | 0.95x / 12.6x |
Sensitivity: ¥4,537–¥4,803 at ±1% for the cost of equity, and ¥4,659–¥4,673 at ±0.1 for ω.
Notes:
- Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
- Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).
(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data, and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)
This report is an earnings analysis document automatically generated by AI through an integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.
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