BOOKOFF GROUP HOLDINGS LIMITED FY2026 Q3 Earnings Report

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Executive Summary

The Company achieved higher revenue and income, led primarily by its domestic Bookoff Business, resulting in a robust earnings performance in which profit growth outpaced revenue growth. Revenue was ¥957.8B (¥883.8B in the same period of the previous year, YoY+8.4%), Operating Income was ¥36.4B (¥31.5B, YoY+15.6%), and Ordinary Income was ¥38.7B (¥34.5B, YoY+12.3%). Consolidated Net Income was ¥24.2B (¥20.6B, YoY+18.0%), of which Net Income Attributable to Owners of the Parent was ¥23.4B (¥19.7B, YoY+18.4%). EPS increased significantly to ¥133.17 (¥99.87 in the previous year). The primary reasons why the rate of profit growth exceeded the rate of revenue growth were the revenue growth effect in the core domestic business, combined with the maintenance of a 56.8% gross profit margin, the containment of the SG&A expense ratio at 53.0%, and the improvement in the Operating Income margin to 3.8%.

Factors Affecting Earnings Performance

【Revenue】Revenue was ¥957.8B (YoY+8.4%), with all segments reporting higher revenue. The Domestic Bookoff Business, which accounts for 86.8% of total revenue, led the revenue increase with ¥831.8B (YoY+7.3%). The Premium Services Business generated ¥62.8B (YoY+20.7%), while the Overseas Business generated ¥51.4B (YoY+13.1%); both achieved double-digit revenue growth and drove overall growth.

【Profit and Loss】While maintaining a gross profit margin of 56.8%, the SG&A expense ratio was contained at 53.0%, and the Operating Income margin improved to 3.8% from 3.6% in the previous year. Net non-operating income was ¥2.3B (non-operating income of ¥5.6B and non-operating expenses of ¥3.4B), resulting in Ordinary Income of ¥38.7B (YoY+12.3%). Net extraordinary gains and losses amounted to ▲¥1.5B, as extraordinary losses of ¥2.2B, including impairment losses of ¥0.5B and loss on disposal of fixed assets of ¥0.4B, exceeded extraordinary income of ¥0.7B, including gain on sale of investment securities of ¥0.7B. After deducting income taxes and other taxes of ¥12.9B (effective tax rate of 34.7%) from Profit Before Tax of ¥37.1B, consolidated Net Income was ¥24.2B. Of this amount, Net Income Attributable to Owners of the Parent, excluding ¥0.9B attributable to non-controlling interests, was ¥23.4B. This was a performance of higher revenue and income, with improvements in the gross profit and SG&A expense structure supporting profit growth in addition to revenue growth.

Segment Analysis

The Domestic Bookoff Business generated external revenue of ¥831.2B (¥774.9B in the previous year, YoY+7.3%) and segment profit of ¥5.09B (¥4.42B in the previous year, YoY+15.3%), serving as the main driver of Company-wide profit with a profit margin of 6.1%. The Premium Services Business achieved strong growth, with revenue of ¥62.8B (YoY+20.7%), but segment profit was only ¥0.11B (¥0.02B in the previous year), resulting in a profit margin of 1.8%, as the business remains in an investment-for-growth phase. The Overseas Business posted higher revenue of ¥51.4B (YoY+13.1%), while segment profit declined to ¥0.48B (¥0.58B in the previous year, YoY▲17.2%), with its profit margin also declining to 9.3%. Although the Overseas Business has the highest profit margin among the three segments, it was the only segment to report lower profit in the current fiscal year, making the reacceleration of profitability a key challenge.

Key Financial Indicators

【Profitability】The Operating Income margin was 3.8%, improving from 3.6% in the previous year, while the Net Income margin, based on Net Income Attributable to Owners of the Parent, increased to 2.44% from 2.23% in the previous year. ROE was 11.5%, indicating improvement in both profitability and capital efficiency compared with the previous year.【Cash Flow Quality】Comprehensive income was ¥2.64B, and the difference from Net Income of ¥2.42B was primarily attributable to foreign currency translation adjustments of ¥0.22B. The divergence between recurring earnings and comprehensive income was therefore limited.【Investment Efficiency】The total asset turnover ratio was approximately 1.61x, calculated as Revenue of ¥957.8B ÷ total assets of ¥595.4B, indicating that ROE is being supported by both asset efficiency and improvements in profit margins.【Financial Soundness】The Equity Ratio was 35.4%, improving from 32.9% in the previous year. Inventories were ¥199.6B, accounting for 33.5% of total assets, while cash and deposits increased to ¥77.1B (¥66.3B in the previous year).

Cash Flow Analysis

Cash and deposits increased by +16.4% to ¥77.1B from ¥66.3B in the previous year, indicating that funds are being accumulated through business operations. Total interest-bearing debt was approximately ¥220.5B, broadly flat compared with approximately ¥223.6B in the previous year. By component, short-term borrowings decreased from ¥64.3B to ¥36.0B, while long-term borrowings increased from ¥79.0B to ¥107.7B, indicating progress in shifting the funding structure from short-term to long-term financing. Accounts payable increased by +51.9% to ¥10.0B from ¥6.6B in the previous year, indicating changes in funding efficiency on the trade payables side. Retained earnings increased by +12.6% to ¥170.4B from ¥151.4B in the previous year, and the accumulation of internal reserves during a period of earnings growth contributed to financial stability. Inventories increased only slightly to ¥199.6B from ¥197.3B in the previous year, but remained high at 33.5% of total assets; inventory levels will be a factor influencing future funding efficiency.

Quality of Earnings

Profit growth was largely attributable to higher revenue and income from the core business. Net non-operating income was limited to +¥2.3B (approximately 0.2% of revenue), and no significant distortion was observed in the recurring earnings structure. Net extraordinary gains and losses amounted to ▲¥1.5B. Extraordinary losses, including impairment losses of ¥0.5B and loss on disposal of fixed assets of ¥0.4B, exceeded extraordinary income, including gain on sale of investment securities of ¥0.7B. Accordingly, the adjustment from Ordinary Income of ¥38.7B to Profit Before Tax of ¥37.1B can be regarded as attributable to temporary factors. Net Income of ¥24.2B after deducting income taxes and other taxes of ¥12.9B (effective tax rate of 34.7%) from Profit Before Tax was within a normal range in terms of both the tax burden and extraordinary gains and losses, and the quality of earnings can be assessed as generally sound. However, inventories account for 33.5% of total assets, and the potential risk of future inventory valuation losses warrants attention from an accruals perspective.

Earnings Forecast and Guidance

Progress against the full-year Company forecast was 74.8% for Revenue, calculated as ¥957.8B/¥1,280.0B; 91.0% for Operating Income, calculated as ¥36.4B/¥40.0B; 90.0% for Ordinary Income, calculated as ¥38.7B/¥43.0B; and 97.4% for Net Income Attributable to Owners of the Parent, calculated as ¥23.4B/¥24.0B (forecast). Given that standard progress after nine months is approximately 75%, Revenue is generally tracking in line with the plan, while the profit items are progressing at a pace broadly above plan. The earnings forecast was revised during the quarter, while the dividend forecast was not revised. The strong progress in profit is believed to reflect the revenue growth effect in the domestic business and improved SG&A expense efficiency.

Shareholder Returns

The full-year dividend forecast is ¥30.00 per share. As the interim dividend is ¥0, the Company plans to pay a single year-end dividend. The Payout Ratio against forecast EPS of ¥136.75 is approximately 22% (¥30/¥136.75), and the estimated total dividend based on the number of shares outstanding (approximately 17.55 million shares after deducting treasury shares) is approximately ¥0.53B. The Payout Ratio is also at a similar level relative to forecast Net Income of ¥24.0B. As there was no revision to the dividend forecast during the quarter, and given the strong progress in profit and the cash and deposits balance of ¥77.1B, the sustainability of the dividend policy appears to be secured.

Risk Factors

1. Elevated inventory levels: Inventories were ¥199.6B, accounting for 33.5% of total assets, and increased slightly from ¥197.3B in the same period of the previous year. Given the characteristics of secondhand and reuse retail, prolonged inventory turnover could place pressure on the gross profit margin through future discount sales or the recognition of valuation losses.

2. Declining profitability of the Overseas Business: While the Overseas Business achieved higher revenue of ¥51.4B (YoY+13.1%), segment profit declined to ¥0.48B (YoY▲17.2%), and its profit margin decreased to 9.3%. The highest-margin business among the three segments has shifted to lower profit, and its impact on Company-wide earnings needs to be monitored.

3. Changes in asset retirement obligations and the interest-bearing debt structure: Asset retirement obligations were ¥2.57B, accounting for 6.7% of total liabilities, and represent a cash outflow factor when stores are closed or refurbished. Interest-bearing debt was approximately ¥220.5B and broadly flat, but the shift in composition from short-term to long-term borrowings is progressing, and changes in the interest rate environment could affect funding costs.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (retail)

Profitability and Returns

The Operating Income margin is broadly in line with the industry median, while the Net Income margin is positioned slightly above the median.

Growth and Capital Efficiency

The Revenue growth rate is significantly above the industry median and represents a high-growth level close to the upper bound of the IQR.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. Growth in revenue and income from the Domestic Bookoff Business drove Company-wide profit growth, and the Operating Income margin improved by 0.2pt from the previous year to 3.8%. The structure of maintaining a 56.8% gross profit margin while containing the SG&A expense ratio underpinned the rate of profit growth exceeding the rate of revenue growth.

2. Progress against full-year guidance was 74.8% for Revenue, compared with 91.0% for Operating Income, 90.0% for Ordinary Income, and 97.4% for Net Income, indicating strong progress in the profit items. Extraordinary gains and losses and the tax burden were within normal ranges, suggesting that the strong profit progress was driven by the earnings power of the core business.

3. Although the Overseas Business achieved higher revenue, its profit margin declined to 9.3%, making it the only segment among the three to report lower profit. Inventories remained at a level equivalent to 33.5% of total assets, and trends in inventory efficiency and overseas profitability will be key factors shaping the Company-wide earnings structure going forward.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmark is reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and, where necessary, after consulting with a professional.

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