| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥194.2B | ¥187.7B | +3.5% |
| Operating Income | ¥25.9B | ¥29.5B | -12.5% |
| Ordinary Income | ¥21.2B | ¥25.0B | -15.4% |
| Net Income | ¥53.5B | ¥16.3B | +228.8% |
| ROE | 13.5% | 4.4% | - |
FY2026 Q1 results: Revenue ¥194.2B (YoY +¥6.6B +3.5%), Operating Income ¥25.9B (YoY -¥3.7B -12.5%), Ordinary Income ¥21.2B (YoY -¥3.8B -15.4%), Net Income ¥53.5B (YoY +¥37.2B +228.8%). The company posted higher revenue but lower operating profit; the primary drivers were margin compression from a 190bp decline in gross margin and a 53bp increase in SG&A ratio. Net income surged year-over-year mainly due to a one-time special gain of ¥60.0B from sales of investment securities. Operating margin deteriorated to 13.3%, down 245bp from 15.7% in the prior-year period, indicating a notable slowdown in core earnings power. The large increase in net income depends on a non-recurring gain and is not aligned with a sustainable earnings structure.
[Revenue] Revenue ¥194.2B, up 3.5% YoY. By segment, the core WHG Business reported ¥118.8B (+1.8%), accounting for 61.2% of total revenue. Breakdown: Accommodation ¥110.8B, Other ¥7.9B. The Luxury & Banquet Business grew strongly to ¥46.3B (+8.5%), with Weddings ¥16.4B, Banquets ¥8.9B, Food & Beverage ¥8.8B—recovery in wedding demand contributed. Resort Business increased slightly to ¥25.5B (+0.7%), including Day-trip & Leisure ¥3.9B. Other Businesses ¥9.6B (+4.9%). Overall, Luxury & Banquet’s recovery compensated for a slowdown in the core WHG growth.
[Profit & Loss] Cost of sales ¥158.2B (cost-to-sales 81.5%), yielding a gross margin of 18.5%, down 190bp from 20.4% a year earlier. The main causes are presumed cost increases and adverse mix. SG&A ¥10.1B (SG&A-to-sales 5.2%) doubled from ¥4.7B in the prior year, raising the SG&A ratio by 53bp. As a result, Operating Income ¥25.9B decreased -12.5% YoY, and Operating Margin contracted by 245bp to 13.3%. Non-operating expenses were ¥5.3B, mainly fees paid ¥2.9B and interest paid ¥1.0B. Non-operating income was ¥0.6B, negligible, leading to Ordinary Income ¥21.2B, a -15.4% YoY decline exceeding the operating loss trend. A special gain of ¥60.0B from sales of investment securities was recorded, taking Profit Before Tax to ¥81.2B; after deducting income taxes of ¥27.7B, Net Income was ¥53.5B (YoY +228.8%). The sharp rise in Net Income depends on the one-time sale gain; at the operating level the company experienced higher revenue but lower profit.
The WHG Business remains core, generating Operating Income ¥24.8B (YoY -11.0%) and a margin of 20.9%, accounting for 95.8% of consolidated operating profit; however, profitability weakened despite +1.8% revenue growth. The Luxury & Banquet Business recorded Operating Income ¥1.1B (+14.3%) and a margin of 2.4%, showing improvement though low-margin. Resort Business posted Operating Income -¥0.0B (deteriorated from +¥0.8B prior year), margin -0.1%, indicating stagnation. Other Businesses posted Operating Income -¥0.0B, maintaining losses. There is a large disparity in margins across segments; WHG’s high margin drives consolidated earnings while other segments remain low-margin or near break-even.
[Profitability] Operating Margin 13.3% declined 245bp from 15.7% a year earlier, with gross margin 18.5% (prior 20.4%, -190bp) and SG&A ratio 5.2% (prior 4.7%, +53bp) both compressing margins. ROE 13.5% is at a healthy level, but most of Net Income is driven by one-off sale gains, limiting sustainability. Net Income Margin 27.5% rose sharply from 8.7% a year earlier, but this is dependent on the special gain of ¥60.0B. [Cash Quality] Days Sales Outstanding (DSO) is 119 days, prolonged, indicating room to improve collection efficiency. Interest Coverage 26.1x (Operating Income ¥25.9B ÷ Interest Paid ¥1.0B) is strong, suggesting low interest burden. [Investment Efficiency] Total Asset Turnover 0.199x is low, highlighting a need to improve asset efficiency. [Financial Soundness] Equity Ratio 40.4% improved 3.1ppt from 37.3% a year earlier, strengthened by internal reserves. Interest-bearing debt ¥185.0B, Debt/Equity Ratio 46.8%, Debt/Capital 31.9% indicate a moderate debt level. Current Ratio 88.5% is below 1x, warranting attention to short-term liquidity, but Cash ¥169.0B covers short-term borrowings ¥77.9B by 2.2x.
Most of the reported Net Income ¥53.5B is attributable to the one-time investment securities sale gain ¥60.0B, diverging from recurring earnings power. At the operating level, gross margin deterioration and SG&A increase reduced Operating Income to ¥25.9B (prior ¥29.5B), suggesting weakening core cash generation. DSO of 119 days is trending longer, and working capital constraints may impair the cash conversion cycle. On the balance sheet, Cash & Deposits increased to ¥169.0B (+¥46.5B, +37.9%), while Investment Securities decreased to ¥113.3B (-¥53.9B, -32.2%). This confirms cashing-in of investment securities and parallel liquidity strengthening. Going forward, accelerating receivables collection and optimizing working capital will be important to realign core profitability and cash generation.
Recurring earnings consist of Operating Income ¥25.9B (Operating Margin 13.3%) and declined YoY. Non-operating income ¥0.6B (including dividend income ¥0.1B) is only 0.3% of revenue and dependence on non-core income is limited. A one-off special gain of ¥60.0B from sales of investment securities was recorded, equivalent to 112% of Net Income ¥53.5B. The gap between Ordinary Income ¥21.2B and Net Income is large, so the sustainability of final earnings is limited. Comprehensive Income ¥35.9B is ¥17.6B below Net Income ¥53.5B, mainly due to Other Securities Valuation Differences -¥17.5B, indicating mark-to-market declines in held securities that depressed comprehensive income. Non-operating expenses ¥5.3B were mainly fee payments ¥2.9B, interest paid ¥1.0B, and foreign exchange losses ¥0.2B; financial gains/losses are not the essential driver, though fee burdens have impacted profitability. Overall, the slowdown in recurring earnings and reliance on one-time gains have reduced earnings quality.
Full Year guidance: Revenue ¥830.0B (YoY +1.2%), Operating Income ¥120.0B (YoY -13.0%), Ordinary Income ¥116.0B (YoY -15.4%), Net Income ¥115.0B (EPS ¥191.93). Q1 progress rates: Revenue 23.4%, Operating Income 21.6%, Ordinary Income 18.2%, Net Income 46.5%. Compared with a benchmark progress rate of 25%, Operating Income is behind by -3.4ppt and Ordinary Income by -6.8ppt, while Net Income is ahead by +21.5ppt. The lag in operating and ordinary income suggests impacts from gross margin decline and cost increases, while the strong net income progress stems from the one-time ¥60.0B sale gain. To achieve the full-year forecast, improvements are needed in busy-season occupancy and ADR, cost optimization, and uplift of low-margin segments to restore operating margin. No revisions to earnings or dividend guidance at Q1.
Dividend forecast for the period is ¥0, unchanged from prior year ¥0. Payout Ratio is not calculable (no dividend). Despite Net Income ¥53.5B driven by a one-time gain, the company maintains no dividend, consistent with prioritizing the balance among core earnings level, investment plans, and financial health. Retained earnings increased to ¥232.0B (+¥45.1B, +24.1%), accumulating internal reserves. Resumption of dividends will depend on sustained recovery in operating margin, improvement in working capital efficiency, and normalization of full-year guidance progress. No share buyback disclosure; no shareholder returns are being implemented at this time.
Margin deterioration risk: Gross margin declined 190bp YoY to 18.5%, and SG&A ratio rose 53bp to 5.2%. Consequently, Operating Margin compressed 245bp to 13.3%, showing a clear slowdown in core earnings power. The main drivers are presumed cost increases (labor, energy) and adverse mix; continued cost inflation could further pressure margins.
Liquidity and short-term debt risk: Current Ratio 88.5% is below 1x, with current liabilities ¥284.1B exceeding current assets ¥251.3B, indicating a maturity mismatch. Short-term debt ratio 42.1% is somewhat high, increasing refinancing sensitivity. Cash ¥169.0B covers short-term borrowings ¥77.9B by 2.2x, but DSO 119 days is prolonged; working capital funding constraints could pressure the cash conversion rate.
Dependence on non-recurring gains: A large portion of Net Income ¥53.5B derives from the one-time special gain ¥60.0B on investment securities sales, diverging from recurring earnings power. The gap between Ordinary Income ¥21.2B and Net Income is significant, limiting sustainability of final profits. Investment securities balances have declined to ¥113.3B (-32.2%), and with limited remaining disposal capacity, if recovery in core earnings is delayed, maintaining profit levels will be difficult.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 13.3% | 6.2% (4.2%–17.2%) | +7.1pt |
| Net Income Margin | 27.5% | 2.8% (0.6%–11.9%) | +24.7pt |
Operating Margin exceeds the industry median by 7.1pt, and Net Income Margin exceeds by 24.7pt; however, the latter depends on a one-time sale gain, so the apparent advantage is limited in industry comparison.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 3.5% | 20.9% (12.5%–25.8%) | -17.4pt |
Revenue growth lags the industry median by 17.4pt, indicating relative underperformance in growth.
※Source: Company compilation
Slowing operating profitability and dependence on one-off gains: Operating Margin worsened from 15.7% a year ago to 13.3% (-245bp), with margins compressed by gross margin decline and higher SG&A ratio. Net Income surged 3.3x YoY due to a ¥60.0B investment securities sale, diverging from recurring earnings power. For full-year progress, Operating Income at 21.6% and Ordinary Income at 18.2% lag the 25% benchmark, while Net Income at 46.5% shows large progress—highlighting the contrast between delayed core profits and front-loaded one-off gains. Correcting costs, raising ADR, and optimizing peak-period utilization will be key to stabilizing operating margin.
Segment concentration and need to lift low-margin businesses: WHG accounts for 95.8% of operating profit while Luxury & Banquet posts a 2.4% margin and Resort is near break-even, creating large margin disparities across segments. WHG occupancy and ADR volatility directly impacts consolidated results; improving profitability in low-margin segments is essential to raise consolidated margins. DSO of 119 days is extending; improving working capital efficiency is also critical to strengthen cash generation.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.