| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥869.6B | ¥791.6B | +9.8% |
| Operating Income / Operating Profit | ¥60.0B | ¥58.4B | +2.7% |
| Equity-method Investment Income (Loss) | - | - | - |
| Ordinary Income | ¥59.1B | ¥58.2B | +1.6% |
| Net Income / Net Profit | ¥41.0B | ¥40.0B | +2.6% |
| ROE | 2.2% | 2.1% | - |
FY2026 Q1 (Jan–Mar 2026) results: Revenue ¥869.6B (YoY +¥78.0B +9.8%), Operating Income ¥60.0B (YoY +¥1.6B +2.7%), Ordinary Income ¥59.1B (YoY +¥0.9B +1.6%), Net Income ¥41.0B (YoY +¥1.0B +2.6%). While both revenue and profit increased, profit growth lagged revenue growth (+9.8% vs. +2.7%), with compression in Gross Margin to 20.4% (from 20.9% YoY, -0.5pt) and Operating Margin to 6.9% (from 7.4% YoY, -0.5pt) acting as bottlenecks.
[Revenue] Revenue ¥869.6B (+9.8%) was driven by e-Business Route +18.7%, with Factory Route +6.9%, Home Center Route +8.3%, and Overseas +14.6% all contributing to growth. Segment composition was Factory Route 65.5%, e-Business Route 25.3%, Home Center Route 8.2%, Overseas 1.0%, indicating continued structural growth led by e-Business expansion. By product category, Environmental Safety Products ¥166.9B (+13.6%), Workwear/Work Equipment ¥153.1B (+10.2%), and Hand Tools ¥144.8B (+5.3%) were core, each posting near-double-digit increases and showing broad-based demand.
[Profitability] Cost of goods sold increased to ¥692.0B (from ¥625.5B YoY, +10.6%), outpacing revenue growth and compressing Gross Margin to 20.4% (from 20.9%, -0.5pt). Gross Profit was ¥177.6B (+7.0%) while SG&A was ¥117.6B (from ¥107.7B YoY, +9.2%), rising relatively strongly due to increased logistics and personnel costs associated with higher sales; however, SG&A ratio improved slightly to 13.5% (from 13.6% YoY, -0.1pt). As a result, Operating Income was ¥60.0B (+2.7%), Operating Margin 6.9% (from 7.4% YoY, -0.5pt). Non-operating items: Interest and dividend income ¥0.3B vs. Interest expense ¥1.8B (from ¥0.8B YoY, +¥1.0B), with increased borrowings and higher rates doubling interest burden; Ordinary Income ¥59.1B (+1.6%), Ordinary Margin 6.8% (from 7.3% YoY, -0.5pt) were compressed. Extraordinary items were negligible; Pre-tax Income ¥59.1B less Income Taxes ¥18.0B (effective tax rate 30.5%) yields Net Income ¥41.0B (+2.6%), Net Margin 4.7% (from 5.1% YoY, -0.4pt). Conclusion: revenue- and e-Business-led profit growth, but Gross Margin compression and higher interest burden limited profit expansion.
Factory Route: Revenue ¥569.6B (+6.9%), Segment Profit ¥39.6B (+1.0%), Segment Margin 7.0% (from 7.4% YoY, -0.4pt); as the largest segment, margin compression is notable. e-Business Route: Revenue ¥220.1B (+18.7%), Segment Profit ¥20.2B (+11.6%), Margin 9.2% (from 9.7% YoY, -0.5pt), maintaining high growth with relatively strong efficiency. Home Center Route: Revenue ¥71.3B (+8.3%) but Segment Profit -¥0.2B (from +¥0.6B YoY, turning to loss), showing rapid deterioration in profitability and structural issues emerging. Overseas: Revenue ¥8.6B (+14.6%), Segment Profit ¥0.7B (-7.8%), Margin 8.3% (from 10.3% YoY, -2.0pt), reflecting revenue growth but profit decline.
[Profitability] Operating Margin 6.9% (from 7.4% YoY, -0.5pt), Net Margin 4.7% (from 5.1% YoY, -0.4pt) declined due to Gross Margin compression. ROE 2.2% indicates low capital efficiency, determined by the three-factor DuPont product: Net Margin decline × Total Asset Turnover 0.26x × Financial Leverage 1.78x, with Net Margin decline the primary driver. [Cash Quality] DSO 186 days, DIO 374 days, CCC 400 days (DPO 161 days) highlight weak working capital efficiency. Interest Coverage 33.2x (Operating Income ÷ Interest Expense) shows financial capacity, but Interest Expense doubled from ¥0.8B to ¥1.8B, and higher interest is pressuring profits. [Investment Efficiency] ROIC 2.0% (NOPAT ÷ Invested Capital) is low; Construction in Progress ¥281.4B (8.4% of Total Assets) indicates high ongoing investment in facilities/logistics with payback in a mid-to-long-term phase. [Financial Soundness] Equity Ratio 56.2%, D/E 0.48x, Interest-bearing Debt ¥900.0B (Short-term Borrowings ¥200B, Long-term Borrowings ¥700B), with YoY short-term +¥100B, long-term +¥150B indicating expanded financing. Cash and Deposits ¥661.0B, Current Ratio 251%, Quick Ratio 155% indicate strong liquidity, and Interest-bearing Debt to Cash ratio 1.36x suggests adequate short-term repayment capacity.
Cash and Deposits increased substantially to ¥661.0B (from ¥475.9B YoY, +¥185.1B +38.9%), funded by increased interest-bearing debt (Short-term +¥100B, Long-term +¥150B). Accounts Receivable ¥442.3B (from ¥400.9B YoY, +¥41.4B) and Inventory ¥709.1B (from ¥681.8B YoY, +¥27.3B) show working capital expansion weighing on cash generation. Construction in Progress ¥281.4B (from ¥252.2B YoY, +¥29.2B) indicates continued investment, with funds allocated to logistics and site development. Accounts Payable ¥302.4B (from ¥262.3B YoY, +¥40.1B) increased, partially absorbing working capital via payment terms. Prolonged DSO 186 days and DIO 374 days and high CCC 400 days lead to delayed and more volatile Operating Cash Flow creation; inventory reduction and normalization of collections are top priorities for medium-term cash quality improvement.
Of Ordinary Income ¥59.1B, Operating Income ¥60.0B is core; Non-operating Income ¥1.2B (Dividends Received ¥0.2B, Interest Received ¥0.1B, etc.) is minimal at 0.1% of sales, indicating high reliance on core operations. Non-operating Expenses ¥2.1B (Interest Expense ¥1.8B, etc.) doubled from ¥1.1B YoY, with increased borrowings and higher rates raising financial costs and compressing earnings. Extraordinary items are essentially zero, so earnings are recurring, but Gross Margin compression and increased interest burden exert structural downward pressure. The drop from Operating Income to Net Income is 31.8% (Non-operating loss -¥0.9B, Taxes ¥18.0B), and the persistence of higher interest expense (YoY +¥1.0B) could be an ongoing margin headwind.
Full Year / FY forecast: Revenue ¥3,410.0B (YoY +6.5%), Operating Income ¥217.2B (YoY -4.8%), Ordinary Income ¥212.2B (YoY -5.9%), Net Income ¥145.4B (prior-year comparison not provided). Q1 progress rates against FY guidance: Revenue 25.5%, Operating Income 27.6%, Ordinary Income 27.8%, Net Income 28.2%. Versus standard seasonality (Q1 = 25%), Operating Income +2.6pt, Ordinary Income +2.8pt, Net Income +3.2pt indicate a front-loaded pace. While e-Business high growth and SG&A containment contributed, full-year forecasts call for lower Operating and Ordinary Income, so recovery of Gross Margin in H2, control of interest burden, and inventory reduction progress will determine FY outcome quality. No revisions to earnings or dividend forecasts were made this quarter.
Full-year dividend forecast ¥30.00 per share (assumed interim & year-end ¥15.00 each), implying Payout Ratio 13.6% vs. forecast EPS ¥220.50, a conservative level. Q1 EPS ¥62.27; on an annualized basis the realized payout ratio is approximately 12.1%, a healthy payout level. Cash balance ¥661.0B and strong liquidity, and Net Income ¥41.0B (annualized ~¥164B) imply dividend burden of roughly ¥20B, which is modest and sustainable. No disclosure of share buybacks was confirmed in this document; Total Return Ratio cannot be calculated. Given high Construction in Progress (¥281.4B) and expanding working capital, dividend policy appears to prioritize stable dividends, with surplus cash allocated to capital investment, working capital, and debt repayment.
Gross Margin Compression Risk: Gross Margin 20.4% (from 20.9% YoY, -0.5pt) suggests structural issues from rising procurement costs, price competition, or product mix changes (or a combination), with Gross Profit growth +7.0% lagging Revenue growth +9.8%. Continued delay in passing on cost increases could lead to persistent margin compression.
Working Capital Efficiency Risk: DSO 186 days, DIO 374 days, CCC 400 days are long relative to industry norms; Inventory ¥709.1B (21.1% of Total Assets) is high and could lead to inventory write-downs, delayed cash generation, and reduced capital efficiency. Continued inventory build ahead of sales would increase downside risk in a demand downturn.
Rising Interest Burden Risk: Interest Expense ¥1.8B (from ¥0.8B YoY, +¥1.0B) doubled due to increased short-term borrowings ¥200B (+¥100B) and long-term borrowings ¥700B (+¥150B) combined with higher rates. Continued tightening of the rate environment would create persistent increases in non-operating expenses, pressuring Ordinary and Net Income.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.9% | – | – |
| Net Margin | 4.7% | 7.4% (6.8%–7.9%) | -2.6pt |
Net Margin is 2.6pt below the industry median 7.4%, with Gross Margin compression and higher interest burden lowering profitability relative to peers.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 9.8% | 3.8% (0.9%–6.4%) | +6.0pt |
Revenue Growth 9.8% outpaces the industry median 3.8% by 6.0pt, driven by expansion of the e-Business Route and delivering high growth within the sector.
※ Source: Company compilation
High growth in e-Business Route (+18.7%) and its relatively high margin (9.2%) are driving overall growth; continued increase in this route’s share could structurally improve margins. Conversely, the Home Center Route’s shift to loss (-¥0.2B) indicates structural issues and progress on profitability improvement measures will be watched.
Declines in Gross Margin 20.4% (-0.5pt) and Operating Margin 6.9% (-0.5pt) are manifesting as slower profit growth vs. revenue growth; effectiveness of price pass-through and product mix improvements, and control of rising interest expense (Interest Expense +¥1.0B) will determine full-year quality. Progress rates are front-loaded (Operating Income 27.6% vs. standard 25% +2.6pt), but alignment with full-year earnings decline forecasts depends on a H2 recovery in Gross Margin.
Weakness in working capital efficiency (CCC 400 days, Inventory ¥709.1B) causes delayed cash generation and higher volatility; with Construction in Progress ¥281.4B in an investment recovery phase, inventory reduction and normalization of collections are keys to medium-term capital efficiency improvement. Despite strong cash balance ¥661.0B and liquidity, continued working capital expansion could reduce capital efficiency and increase refinancing risk.
This report was automatically generated by AI analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the firm based on public filings. Investment decisions are your responsibility; consult a professional advisor as needed.