| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥16918.1B | ¥16290.7B | +3.9% |
| Operating Income / Operating Profit | ¥161.7B | ¥428.2B | -62.2% |
| Ordinary Income | ¥200.0B | ¥480.4B | -58.4% |
| Net Income / Net Profit | ¥155.8B | ¥274.4B | -43.2% |
| ROE | 2.4% | 4.3% | - |
For the fiscal year ended March 2026, revenue was ¥1兆6,918.1B (YoY +627.4B +3.9%), achieving top-line growth, while Operating Income was ¥161.7B (YoY -266.5B -62.2%), Ordinary Income was ¥200.0B (YoY -280.4B -58.4%), and Net Income attributable to owners of the parent was ¥155.8B (YoY -118.6B -43.2%), representing a material decline in profitability. The principal cause of the profit decline was a sharp drop in operating profit in the core Denki segment (accounting for 77.2% of revenue), which fell by -91.7% YoY, worsening the operating margin by 1.6pt from 2.6% to 1.0%. The Housing & Construction and Environment segments supported results with double-digit revenue and profit growth, but gross margin deteriorated to 26.1% (down ~2.0pt from 28.1% a year earlier), and improvement in SG&A ratio to 25.1% (YoY -0.4pt) could not fully offset the gross margin decline. Extraordinary items included ¥116.7B of special gains (including ¥113.8B gain on sale of fixed assets) and ¥74.0B of special losses (including ¥52.4B impairment losses), making this fiscal year heavily influenced by one-off factors.
Revenue: Revenue was ¥1兆6,918.1B (YoY +3.9%), marking the first year of revenue growth in four years. By segment, Denki recorded ¥1兆3,294.3B (+1.3%) with only modest growth, Housing & Construction recorded ¥3,338.7B (+12.3%) and Environment ¥428.4B (+18.6%) with double-digit growth. Financial Services was ¥47.1B (+4.9%) and Other was ¥101.2B (-11.7%). The revenue increase was driven by expanded detached-house sales in Housing & Construction and growth in reuse/recycling in Environment, while core Denki remained largely flat due to weak appliance demand and intensified competition. Cost of sales amounted to ¥1兆2,501.6B, with a cost-of-sales ratio of 73.9% (worsened +2.0pt from 71.9% prior year), lowering gross margin to 26.1%.
Profitability: Gross profit was ¥4,416.5B (gross margin 26.1%), down -1.4% YoY. SG&A was ¥4,254.8B (SG&A ratio 25.1%), up +2.6% YoY but improved 0.4pt as a percentage of revenue from 25.5% the prior year. However, the drop in gross margin was larger, resulting in Operating Income of ¥161.7B (Operating Margin 1.0%), down -62.2% YoY. By segment, Operating Income in Denki plunged to ¥24.9B (margin 0.2%, YoY -91.7%), the main driver of consolidated profit decline. Housing & Construction achieved ¥102.5B (margin 3.1%, +9.4%), Environment ¥18.7B (margin 4.4%, +14.5%) and performed solidly. Financial Services recorded ¥12.6B (margin 26.7%, -3.7%), and Other ¥1.8B (margin 1.7%, +9.3%). Non-operating expenses included interest expense of ¥32.2B (prior year ¥22.9B), increasing finance cost and contributing to Ordinary Income of ¥200.0B (ordinary income margin 1.2%), down -58.4% YoY. Special gains totaled ¥116.7B (mainly ¥113.8B gain on sale of fixed assets) and special losses totaled ¥74.0B (including ¥52.4B impairment). Profit before income taxes was ¥242.7B; after deducting income taxes of ¥86.9B (effective tax rate 35.8%), Net Income attributable to owners of the parent was ¥155.8B (Net Margin 0.9%), resulting in a revenue-increase/profit-decrease outcome.
The Denki Segment reported revenue of ¥1兆3,294.3B (+1.3%) and Operating Income of ¥24.9B (margin 0.2%, YoY -91.7%), with sales slightly up but profits sharply down. The decline was mainly due to weak appliance demand, intensified price competition pressure, and inventory clearance impacts that substantially worsened gross margin. The Housing & Construction Segment posted revenue of ¥3,338.7B (+12.3%) and Operating Income of ¥102.5B (margin 3.1%, +9.4%), achieving revenue and profit growth supported by strong detached-home sales and expanded sales of housing equipment. The Environment Segment recorded revenue of ¥428.4B (+18.6%) and Operating Income of ¥18.7B (margin 4.4%, +14.5%), with growth driven by increased reuse/recycling demand for appliances and PCs. The Financial Services Segment maintained high margins with revenue ¥47.1B (+4.9%) and Operating Income ¥12.6B (margin 26.7%, -3.7%), slightly down. Other reported revenue ¥101.2B (-11.7%) and Operating Income ¥1.8B (margin 1.7%, +9.3%). On a consolidated basis, Denki accounts for 77.2% of revenue and 15.4% of profits, underscoring that deterioration in that segment’s profitability directly affects consolidated results.
Profitability: Operating Margin was 1.0% (down -1.6pt from 2.6% prior year), Ordinary Income Margin was 1.2% (down -1.8pt from 3.0%), and Net Margin was 0.9% (down -0.8pt from 1.7%). Gross Margin decreased to 26.1% (down -2.0pt from 28.1%) while SG&A Ratio improved to 25.1% (down -0.4pt from 25.5%) but could not offset the gross margin deterioration. ROE was 2.4% (prior year 4.3%), and ROA (on an ordinary income basis) was 1.5% (prior year 3.7%), indicating a marked decline in capital efficiency. Cash Quality: Operating Cash Flow (OCF) was ¥497.9B, 3.2x Net Income ¥155.8B, and OCF/Revenue ratio was 2.9%, which is healthy. OCF before working capital changes subtotaled ¥722.9B, with inventory reductions of ¥157.1B and receivables collection of ¥79.0B contributing to cash generation. Free Cash Flow (OCF + Investing CF) was ¥169.2B, funding dividend payments of ¥90.1B and share buybacks of ¥154.3B in total returns covered by FCF. Investment Efficiency: Total Asset Turnover improved to 1.30x (prior year 1.23x). Capital expenditures were ¥436.6B, 1.49x depreciation ¥293.2B, indicating continued investment in renewal and growth. Financial Soundness: Equity Ratio was 49.3% (prior year 48.7%, +0.6pt), remaining stable. Current Ratio was 131.7% and Quick Ratio 63.8%, indicating short-term payment capacity is secured, but the short-term liability ratio is high at 61.0% with cash of ¥382.2B versus short-term borrowings of ¥1,485.6B, giving a cash coverage of 0.26x which is thin. Interest-bearing debt (short-term borrowings + long-term borrowings + corporate bonds) was ¥1,098.7B, with Debt/EBITDA (approx.) about 2.41x within an acceptable range, though Interest Coverage (Operating Income / Interest Expense) of 5.02x shows reduced cushion.
OCF was ¥497.9B (YoY -3.4%), 3.2x Net Income ¥155.8B, indicating strong cash-generating ability. OCF subtotal (before working capital changes) was ¥722.9B, exceeding the sum of depreciation ¥293.2B and operating income ¥161.7B. Working capital changes contributed via inventory decrease of ¥157.1B (inventory reduction) and receivables decrease of ¥79.0B (improved collections), while payables decreased by -¥8.6B, a minor cash outflow. Major cash outflows included income taxes paid -¥201.9B and interest paid -¥32.2B. Investing CF was -¥328.7B, primarily due to capital expenditures of -¥436.6B, partially offset by proceeds from sale of fixed assets of ¥165.9B. Consequently, Free Cash Flow was ¥169.2B, which funded dividend payments of -¥90.1B and share buybacks of -¥154.3B (total returns ¥244.4B), leaving limited safety margin. Financing CF was -¥482.1B, mainly due to long-term debt repayments of -¥647.6B and net decrease in short-term borrowings of -¥51.2B, partially offset by ¥523.6B of long-term borrowings. Cash and cash equivalents at period-end were ¥372.9B (from ¥683.1B at period-beginning, a decrease of -¥310.2B), reflecting reduced liquidity and highlighting the thin cash coverage against short-term borrowings of ¥1,485.6B.
Of Ordinary Income ¥200.0B, Operating Income was ¥161.7B, and Non-operating income totaled ¥98.1B (including interest income ¥6.5B) against Non-operating expenses of ¥59.7B (including interest expense ¥32.2B), yielding net non-operating income of +¥38.3B. The non-operating uplift accounted for approximately 19.2% of Ordinary Income, indicating the ordinary-stage profit benefited from non-operating factors. In special items, special gains were ¥116.7B (including gain on sale of fixed assets ¥113.8B, negative goodwill ¥2.6B, etc.) and special losses were ¥74.0B (including impairment losses ¥52.4B, etc.), indicating Net Income depends significantly on one-off items. The net special items (Special gains - Special losses) were +¥42.7B (¥242.7B pretax profit less ¥200.0B ordinary income), representing about 27.4% of Net Income ¥155.8B, suggesting that assessing sustainable earning power should focus on the ordinary-income level. OCF was 3.2x Net Income, with working capital release (notably inventory reduction ¥157.1B) contributing significantly, and accruals were negative (cash generation exceeded accounting profit). However, inventory reduction may be transient, and there is risk of reversal if demand recovers or seasonality leads to restocking. Comprehensive income was ¥180.8B, ¥25.0B higher than Net Income ¥155.8B, attributable to foreign currency translation adjustments ¥2.2B, valuation differences on available-for-sale securities ¥8.4B, and adjustments related to retirement benefits ¥14.3B. The divergence between comprehensive income and net income is limited, and there is no major concern over net income quality.
For FY2027 ending March 2027, the guidance projects Revenue of ¥1兆7,800.0B (YoY +5.2%), Operating Income of ¥515.0B (YoY +218.6%), Ordinary Income of ¥526.0B (YoY +163.0%), and Net Income attributable to owners of the parent of ¥278.0B (forecast EPS ¥41.83). The Operating Margin is planned to improve to approximately 2.9% from 1.0% this period (+1.9pt), assuming normalization of gross margin in the Denki segment, productivity improvements in SG&A, and revenue expansion in Housing & Construction and Environment. The cumulative results to Q2 (H1) were Revenue ¥1兆6,918.1B, representing 95.0% of the full-year forecast, and Operating Income ¥161.7B, representing 31.4% of the full-year forecast, indicating low progress and plans for substantial profit buildup in the second half. The dividend forecast is stated as ¥0, which likely indicates mid-term dividend omission, with the year-end dividend to be decided separately. Achieving next year’s plan depends on curbing discounts and inventory rationalization in Denki, smooth project formation and handovers in Housing & Construction, and continued growth in Environment; monitoring external factors such as interest-rate environment and consumer trends is also important.
This period’s dividend was a year-end lump-sum of ¥17 per share. Total dividends amounted to approximately ¥90.1B (implied payout ratio approximately 57.8%), representing about 53.3% of Free Cash Flow ¥169.2B, so dividend coverage by FCF was maintained. However, Total Return Ratio including share buybacks was approximately 156.8% (total returns ¥90.1B + ¥154.3B share buybacks = ¥244.4B divided by Net Income ¥155.8B), exceeding Free Cash Flow, and together with a reduction in cash deposits (-¥201.6B), the sustainability of capital allocation requires cautious evaluation. The dividend forecast for next year is disclosed as ¥0, which may indicate mid-term dividend omission, with year-end dividend to be determined based on business progress. The sustainability of the dividend policy depends on achieving the planned Operating Income ¥515B, stable Free Cash Flow generation, and recovery of cash balances. Share buybacks raised total returns this period, but given the thin cash coverage against short-term borrowings, it would be preferable to prioritize dividends going forward and only execute buybacks after confirming financial flexibility.
Risk of prolonged earnings weakness in core Denki Segment: Denki accounts for 77.2% of revenue but Operating Margin has fallen to 0.2%. Weak appliance demand, intensified price competition leading to discount pressure, and inventory clearance have worsened gross margin. Inventory turnover days are high at 92–95 days (Inventory ¥3,161.5B ÷ Cost of Sales ¥1兆2,501.6B × 365 days), indicating risk of inventory obsolescence and ongoing price pressure. Achieving next year’s plan requires gross margin normalization, but recovery may be delayed depending on consumer conditions and competitive dynamics.
Concentration of short-term liabilities and liquidity risk: Short-term liability ratio is high at 61.0%, with short-term borrowings of ¥1,485.6B versus cash ¥382.2B (cash coverage 0.26x), leaving a thin liquidity cushion. Although OCF is healthy, it depends on inventory reductions; if inventories are rebuilt, cash generation may reverse. Rising interest rates could increase refinancing costs, and changes in credit conditions may impact short-term funding. Current Ratio 131.7% appears sound, but 51.5% of current assets are inventory, which limits quick cash conversion.
Dependence on one-off items and instability of earnings quality: Of pretax profit ¥242.7B, special gains ¥116.7B (including ¥113.8B gain on sale of fixed assets) accounted for about 48.1%, and ordinary-stage profit ¥200.0B benefited from non-operating income of +¥38.3B. Sustainable operating profit remains ¥161.7B (Operating Margin 1.0%), and the occurrence of impairment losses ¥52.4B highlights fragility in the earnings base. If next year’s Operating Income target of ¥515B is missed, there is risk of renewed dependence on one-off items, raising concerns about profit stability and predictability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 1.0% | 4.6% (1.7%–8.2%) | -3.6pt |
| Net Margin | 0.9% | 3.3% (0.9%–5.8%) | -2.4pt |
| Both Operating Margin and Net Margin are well below industry medians, placing the company in the lower ranks for profitability within the retail sector. |
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 3.9% | 4.3% (2.2%–13.0%) | -0.4pt |
| Revenue growth is roughly in line with the industry median, indicating a sector-average growth pace. |
※ Source: Company compilation
Recovery of profitability in core Denki is the top priority: Operating Margin of 1.0% is far below the industry median 4.6%, driven by deterioration in Denki’s gross margin and inventory burden (Denki: 77.2% of revenue, Operating Margin 0.2%). Achieving next year’s Operating Margin target of 2.9% requires curbing discounting, inventory optimization, and improving promotional spending productivity. Trends in existing-store gross margin and inventory turnover days will be leading indicators of recovery. Housing & Construction and Environment are maintaining solid revenue and profit growth, providing diversification support, but without Denki’s improvement, a material improvement in consolidated margins is unlikely.
Tightening short-term liability composition and stricter liquidity management needed: A short-term liability ratio of 61.0% and cash/short-term borrowings ratio of 0.26x indicate a capital structure with a thin liquidity cushion, so even with healthy OCF, there is insufficient buffer against a cash-flow reversal once inventory reductions are exhausted. Monitor short-term borrowing rollovers, seasonality of OCF, and inventory trends, and consider shifting to longer-term borrowings or increasing cash holdings as necessary. Given that total returns (dividends + buybacks) exceeded FCF this period, shifting to a capital-allocation balance that prioritizes financial flexibility in future periods is advisable.
Achievement of forecasts and stabilization of earnings quality: Next year’s plan is ambitious—raising Operating Income about 3.2x—and is skewed to the second half. The focus is whether sustainable operating-level profit can be generated without relying on one-off items such as gains on sale of fixed assets. Low capital efficiency (ROE 2.4%, estimated ROIC 1.2%) will not improve without structural enhancement of profitability; simultaneous improvement in gross margin, inventory efficiency, and SG&A ratio KPIs is necessary to deliver returns exceeding the cost of capital.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It is not a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your own responsibility; please consult a professional as necessary before making investment decisions.