YAMADA HOLDINGS (9831) FY2026 Q3 Earnings Report

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Executive Summary

The company reported higher revenue but lower earnings, with declining profitability relative to revenue growth being the most notable feature. Revenue was ¥1,208.04B (+1.2% YoY), Operating Income was ¥350.5B (△10.9%), Ordinary Income was ¥383.5B (△10.9%), and Net Income attributable to owners of the parent was ¥222.0B (△12.6%). The Operating Income margin declined to 2.9% from 3.3% in the previous year, mainly because increases in the cost of sales and SG&A expenses exceeded profit growth. Progress against the full-year company forecast was 71.2% for Revenue and 71.7% for Operating Income, slightly below the standard 75%, making a recovery in profitability in Q4 the key focus.

Factors Affecting Performance

【Revenue】Revenue was ¥1,208.04B, representing a 1.2% YoY increase. By segment, Electrical was the core business, accounting for 81.3% of the revenue mix and driving an increase of ¥812.9B in revenue (+approximately 1.7% YoY). Housing remained relatively small at ¥206.49B (17.1% of the mix), Environmental at ¥30.69B (2.5% of the mix), and Financial at ¥3.50B (0.3% of the mix). Overall, the revenue growth trend has been maintained, but the pace is below the full-year plan of +4.2% YoY growth.

【Profit and Loss】Operating Income was ¥350.5B, down 10.9% YoY. The gross margin was nearly flat at 28.7% (28.9% in the previous year), while the SG&A ratio rose to 25.8% (25.6% in the previous year), pushing the Operating Income margin down to 2.9% (3.3% in the previous year). By segment, the Electrical margin was 3.1% and the Housing margin was 1.1%, both low levels, and declining profitability in the core businesses reduced overall profit. Non-operating income and expenses resulted in a net gain of ¥33.0B, securing Ordinary Income of ¥383.5B; however, extraordinary losses of ¥23.2B, including impairment losses of ¥13.6B, weighed on income before taxes, resulting in Net Income of ¥222.0B (△12.6% YoY). With revenue increasing but earnings declining, improving profitability is the immediate challenge.

Segment Analysis

Electrical was the core segment, accounting for the majority of company-wide profit, with revenue of ¥981.44B (81.3% of the mix), Operating Income of ¥30.09B, and a margin of 3.1%. Housing generated revenue of ¥206.49B (17.1% of the mix), with a low margin of 1.1%. Environmental was relatively highly profitable, with revenue of ¥30.69B and a margin of 4.4%, although its scale was small. Financial generated revenue of ¥3.50B but had an exceptionally high margin of 27.9%; its contribution to company-wide profit, however, was limited to ¥0.98B. Against the company-wide profit margin of 2.9%, the margins of both core segments, Electrical and Housing, were below the overall level, making improvements to their cost structures the key to company-wide profitability.

Key Financial Indicators

【Profitability】The Operating Income margin was 2.9%, down from 3.3% in the previous year, while the Net Income margin remained at 1.8%. With a gross margin of 28.7% and an SG&A ratio of 25.8%, most gross profit is absorbed by SG&A expenses. 【Cash Flow Quality】Extraordinary losses included impairment losses of ¥13.6B, indicating that non-cash expenses are weighing on profit. Inventories were ¥400.33B, accounting for 28.2% of total assets and creating pressure from a capital-efficiency perspective. 【Investment Efficiency】ROE was 3.5%, while ROIC remained in the low 3% range, indicating weak profit generation relative to invested capital. Basic EPS was ¥32.79, down from ¥36.72 in the previous year. 【Financial Soundness】The Equity Ratio declined somewhat to 45.5% (48.1% in the previous year), but remains at a certain level. Cash and deposits were ¥50.85B, a limited level relative to short-term borrowings of ¥199.12B and current portion of long-term borrowings of ¥49.95B.

Cash Flow Analysis

As disclosed data from the statement of cash flows is not included, funding trends are analyzed based on changes in the balance sheet. Inventories increased to ¥400.33B from ¥336.66B in the previous year, suggesting that the accumulation of working capital may be affecting capital efficiency. Cash and deposits declined to ¥50.85B from ¥58.38B in the previous year, while short-term borrowings increased to ¥199.12B from ¥150.09B, suggesting that the expansion of working capital is being financed through short-term funding. Accounts payable and notes payable also increased substantially to ¥152.85B from ¥84.53B in the previous year, indicating that the use of payment terms is also supporting liquidity management. Property, plant and equipment, corresponding to capital investment, increased to ¥467.17B, indicating that investment activities appear to be continuing.

Quality of Earnings

The gap between Ordinary Income of ¥383.5B and Net Income of ¥222.0B was mainly attributable to the recognition of extraordinary losses of ¥23.2B, including impairment losses of ¥13.6B, which can be distinguished as a temporary factor. Most of the ¥75.6B in non-operating income consisted of other non-operating income of ¥62.0B, and it is difficult to determine from the disclosures whether this income is recurring in nature. Extraordinary gains of ¥6.0B included a gain on the sale of fixed assets of ¥5.6B, which was also a non-recurring item. Comprehensive Income was ¥228.2B, close to Net Income of ¥222.0B, indicating that the impact of other comprehensive income items, such as foreign currency translation adjustments and valuation differences on securities, was limited. Overall, the current period’s earnings include the non-recurring downward impact of impairment losses, and the company’s underlying earnings power is more appropriately assessed based on Ordinary Income.

Earnings Forecast and Guidance

Progress against the full-year company forecast was 71.2% for Revenue, 71.7% for Operating Income, 74.5% for Ordinary Income, and 81.3% for Net Income. Progress for Revenue and Operating Income was slightly below the standard 75% for the cumulative first three quarters. To achieve the full-year plan of Revenue of ¥1,697.50B (+4.2% YoY) and Operating Income of ¥48.90B (+14.2% YoY), the company will need not only revenue growth but also a recovery in profit margins in Q4. Net Income progress was relatively high at 81.3% and is proceeding comparatively smoothly against the full-year forecast of ¥27.30B. The company plan incorporates substantial Operating Income growth in the second half, and the extent to which this is achieved will be the focus going forward.

Shareholder Returns

The full-year dividend forecast is ¥17.00 per share, and the Payout Ratio based on forecast EPS of ¥40.56 is approximately 41.9%. The Q2 dividend was ¥0, indicating a structure that places emphasis on the year-end dividend. Cumulative Q3 EPS was ¥32.79, providing support for the annual dividend level from an earnings perspective. Treasury shares totaled 305,630 thousand shares, representing 31.6% of issued shares, a scale that affects the calculation of per-share indicators and total dividends.

Risk Factors

1. Declining profitability: The Operating Income margin declined to 2.9% from 3.3% in the previous year. While Revenue increased by +1.2%, Operating Income decreased by △10.9%; if the adverse trend in operating leverage caused by the rising SG&A ratio continues, it could lead to further profit compression.

2. Risk in the funding structure: Against cash and deposits of ¥50.85B, the company recorded short-term borrowings of ¥199.12B and the current portion of long-term borrowings of ¥49.95B, indicating a high degree of dependence on short-term funding. Changes in the refinancing environment could affect funding costs.

3. Impairment losses and asset efficiency: Impairment losses of ¥13.6B were recorded in extraordinary losses, suggesting a decline in the profitability of assets such as stores and real estate. In addition, inventories account for 28.2% of total assets, and inventory management affects both capital efficiency and profitability.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (retail)

Profitability and Returns

The Operating Income margin is slightly below the industry median, while the Net Income margin is above the median.

Growth and Capital Efficiency

The Revenue growth rate is close to the industry median and the lower bound of the IQR, indicating a relatively moderate growth pace.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Despite higher revenue, Operating Income declined △10.9% YoY, and the Operating Income margin fell to 2.9%. While the gross margin was flat at 28.7%, the SG&A ratio rose to 25.8%, indicating that the cost structure is constraining profitability.

2. Progress of Operating Income against the full-year plan was 71.7%, slightly below the standard 75%. The company plan assumes full-year Operating Income growth of +14.2% YoY, making improvement in the Q4 profit margin the key to achieving the plan.

3. Impairment losses of ¥13.6B were recorded in extraordinary losses, indicating challenges in some areas of asset profitability. Although Net Income progress was relatively high at 81.3%, the underlying profitability of the core business is more appropriately assessed based on Ordinary Income.

Theoretical Share Price (Reference Value)

Sensitivity: ¥810–¥857 at ±1% in the cost of equity, and ¥829–¥836 at ±0.1 in 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 end of the quarter are used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. 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 discretion and responsibility, after consulting with a professional as necessary.

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AI Financial Analysis

Executive Summary

FY2026 Q3 results were modestly revenue-positive but earnings-negative, with margin pressure outweighing the 1.2% YoY sales increase. Revenue reached ¥1,208.0bn, up ¥14.4bn YoY. Gross profit increased only 0.5% YoY to ¥346.5bn, materially lagging sales growth. Gross margin declined 21bp YoY to 28.7%, indicating a less favorable merchandise mix, pricing, procurement cost, or promotional balance. SG&A rose 1.9% YoY to ¥311.4bn, faster than revenue growth. Consequently, the SG&A ratio increased 18bp YoY to 25.8%. Operating income fell 10.9% YoY to ¥35.1bn. The operating margin compressed 39bp YoY to 2.9%, which is low for a retailer with a large fixed-cost store, logistics, and property base. Ordinary income also declined 10.9% YoY to ¥38.4bn. Profit attributable to owners fell 12.6% YoY to ¥22.2bn, equivalent to EPS of ¥32.79. Net margin declined 29bp YoY to 1.8%. Below-the-line performance included a net extraordinary loss of ¥1.7bn, including ¥1.4bn of impairment losses, which constrained pre-tax profit. The effective tax rate was 37.9%, producing a tax burden of 0.606x and further limiting conversion of pre-tax earnings into net income. The FY2026 full-year plan implies Q4 operating income of ¥13.8bn and Q4 profit attributable to owners of ¥5.1bn. Full-year guidance calls for 4.2% sales growth and 14.2% operating-income growth, so delivery requires a meaningful Q4 margin recovery despite the Q3 cumulative margin deterioration. Balance-sheet growth has been financed principally through current liabilities, particularly trade payables and short-term borrowings, making inventory execution and refinancing discipline central to the outlook.

Profitability Analysis

Annualized DuPont ROE is 4.6%, decomposed into a 1.8% net profit margin, 1.135x asset turnover, and 2.20x financial leverage. The weak net margin is the primary constraint on shareholder returns: even with moderate asset utilization and meaningful leverage, it limits annualized ROE to well below typical cost-of-equity expectations. Operating margin fell to 2.9% from 3.3% in the prior-year Q3 cumulative period, a 39bp contraction. Gross margin fell 21bp to 28.7%, while SG&A increased 1.9% YoY, faster than the 1.2% increase in sales, demonstrating negative operating leverage. This cost-growth mismatch reduced operating income by ¥4.3bn. Asset turnover is adequate for a large-format retailer, but capital efficiency remains weak, as indicated by the 3.3% ROIC quality alert. Financial leverage of 2.20x supports ROE mechanically but does not offset the low operating return; debt-funded balance-sheet expansion raises the importance of restoring operating profitability. Interest coverage remains sound at 15.29x, so the current earnings issue is principally operational rather than an inability to service interest. Ordinary income exceeded operating income by ¥3.3bn, supported by a net ¥3.3bn non-operating income contribution, but this did not prevent the decline in ordinary earnings. Net income conversion was also affected by a ¥1.7bn net extraordinary loss, including ¥1.4bn of impairments. Under JGAAP, the reported earnings therefore reflect both a weaker core operating margin and non-recurring charges.

Growth Assessment

Q3 cumulative revenue growth of 1.2% was positive but insufficient to absorb higher operating costs. Gross profit growth of 0.5% lagged revenue, showing that incremental sales carried lower profitability. The ¥63.7bn YoY increase in inventories to ¥400.3bn is considerably larger than the ¥14.4bn sales increase, raising the execution hurdle for future sell-through. Inventory represented 28.2% of total assets, making merchandise productivity a major determinant of capital efficiency. The calculated annualized inventory days of approximately 127 days, alongside the 130-day quality alert, are elevated even allowing for durable-goods retailing. Full-year sales guidance of ¥1,697.5bn indicates a 71.2% Q3 cumulative progress rate versus a standard 75% seasonal benchmark. Operating-income progress is 71.7% and ordinary-income progress is 74.5%, both modestly below the standard Q3 pace. Profit attributable to owners has already reached 81.3% of the ¥27.3bn full-year plan, although this is partly influenced by the timing of non-operating, extraordinary, and tax items. The guidance therefore assumes stronger Q4 revenue momentum and, more importantly, a substantial recovery in operating profitability. Achieving the operating-income forecast requires Q4 operating income of ¥13.8bn, compared with ¥35.1bn earned cumulatively through Q3. The central growth question is whether inventory can be monetized without markdowns that further pressure gross margin.

Financial Health

Liquidity is positive on a current-ratio basis, with current assets of ¥735.2bn exceeding current liabilities of ¥580.6bn and producing a 126.6% current ratio. However, the 57.7% quick ratio shows that this liquidity position depends substantially on inventories rather than immediately liquid assets. Cash and deposits of ¥50.9bn cover only 0.26x of short-term loans of ¥199.1bn, triggering the liquidity-stress quality alert. Short-term debt accounts for 68.3% of interest-bearing debt, above the 40% warning level and explicitly indicating refinancing risk. Short-term loans increased ¥49.0bn, or 32.7% YoY, to ¥199.1bn. Current liabilities increased ¥111.2bn YoY, while cash and deposits declined ¥7.5bn, reinforcing the need to manage maturities actively. Trade payables increased ¥68.3bn, or 80.8% YoY, to ¥152.8bn; this supports working capital but creates a higher near-term settlement requirement. Interest-bearing debt totals ¥291.5bn, with debt-to-equity at 1.20x and debt-to-capital at 31.1%, levels that remain below aggressive-leverage warning thresholds. Interest coverage of 15.29x provides substantial capacity to meet current interest costs. Owners' equity was broadly stable at ¥637.2bn, while total assets expanded ¥94.2bn YoY to ¥1,419.2bn. Asset retirement obligations total ¥46.3bn, equal to 6.0% of liabilities, above the 5% quality-alert threshold; this represents a meaningful long-dated obligation associated with store, facility, and property restoration commitments. The financial profile is therefore solvent, but its near-term resilience depends on inventory liquidity, payable settlement, and continued access to short-term financing.

Notable B/S Changes

Inventories: +¥63.7bn (+18.9%) to ¥400.3bn — absolute increase is substantial and coincides with elevated annualized inventory days of approximately 127-130; monitor sell-through, markdowns, and impairment risk. Accounts payable: +¥68.3bn (+80.8%) to ¥152.8bn — supplier financing increased sharply, supporting working capital but increasing near-term settlement dependence on inventory conversion. Short-term loans: +¥49.0bn (+32.7%) to ¥199.1bn — refinancing dependence increased, consistent with the 68.3% short-term debt ratio and 0.26x cash-to-short-term-debt coverage. Current liabilities: +¥111.2bn (+23.7%) to ¥580.6bn — liability growth exceeded the increase in current assets, reducing the quality of liquidity despite a current ratio above 1.0x. Long-term loans: -¥17.9bn (-16.3%) to ¥92.4bn — debt maturity has shifted toward shorter-term funding rather than reflecting a comparable reduction in overall funding reliance. Cash and deposits: -¥7.5bn (-12.9%) to ¥50.9bn — lower cash alongside higher short-term borrowings weakens immediate liquidity coverage. Treasury stock: -¥14.4bn to -¥143.5bn — the larger treasury-share carrying balance reduces reported equity available to common shareholders and remains relevant to capital-allocation flexibility.

Cash Flow Quality

Dividend Sustainability

The full-year dividend forecast is ¥17.00 per share. Based on forecast EPS of ¥40.56, the implied dividend payout ratio is 41.9%, which is within the stated sustainable benchmark of below 60%. The Q2 dividend was ¥0, consistent with a year-end-oriented payment structure. Forecast net income attributable to owners of ¥27.3bn provides an earnings base for the indicated dividend, although the margin recovery embedded in full-year guidance remains important for maintaining this coverage. The large treasury-share balance of 305.6 million shares and treasury stock carrying value of ¥143.5bn are relevant to capital allocation, but no period buyback amount is specified, so a total return ratio is not calculated. Dividend capacity should be assessed alongside the elevated inventory balance and high reliance on short-term debt.

Risk Assessment

Business risks include High priority — Retail inventory and markdown risk: annualized inventory days of approximately 127-130 days exceed both the 60-day durable-goods retail warning benchmark and the quality-alert thresholds. Slow sell-through could require discounting, reduce the 28.7% gross margin, and lead to further inventory impairments., High priority — Consumer-demand and competitive-pricing risk: a 1.2% sales increase did not cover the increase in SG&A, and operating margin fell to 2.9%. Weak discretionary demand or intensified price competition would make the planned Q4 margin rebound harder to achieve., Medium priority — Fixed-cost operating leverage: SG&A growth of 1.9% exceeded revenue growth, while the company carries substantial property, plant, equipment, and store-related obligations. Revenue underperformance can therefore translate disproportionately into operating-profit pressure., Medium priority — Impairment risk: Q3 included ¥1.4bn of impairment losses. With ¥467.2bn of property, plant and equipment, sustained underperformance at stores or facilities could create additional impairment exposure..

Financial risks include High priority — Refinancing risk: 68.3% of interest-bearing debt is short term, and short-term loans increased 32.7% YoY to ¥199.1bn. This elevates dependence on bank and capital-market funding conditions., High priority — Liquidity risk: cash-to-short-term-debt is only 0.26x, below the 0.5x warning benchmark. The current ratio is above 1.0, but the quick ratio of 57.7% indicates that liquidity is inventory-dependent., Medium priority — Working-capital settlement risk: accounts payable rose 80.8% YoY to ¥152.8bn. This improves short-term funding but requires continued inventory sales and cash conversion to support supplier payments., Medium priority — Asset retirement obligation exposure: asset retirement obligations of ¥46.3bn equal 6.0% of liabilities, above the 5% alert threshold, and represent material future restoration and closure-related cash commitments..

Key concerns include The 2.9% EBIT margin and 3.3% ROIC quality alerts indicate that the core issue is insufficient return generation rather than absolute debt overextension., Annualized ROE of 4.6% is constrained by the 1.8% net margin despite 2.20x financial leverage., FY2026 guidance requires operating-profit growth of 14.2% for the full year after a 10.9% decline through Q3, placing considerable weight on Q4 gross-margin and cost performance., The deterioration in gross margin, rising inventory, and greater short-term borrowing together create a risk that growth is being supported by working-capital investment without commensurate operating returns..

Investment Implications

Key takeaways include Revenue growth remains positive, but Q3 cumulative operating income declined 10.9% because gross-margin compression and SG&A growth eroded profitability., The core financial objective is margin restoration: operating margin is 2.9%, net margin is 1.8%, annualized ROE is 4.6%, and ROIC is 3.3%., Inventory rose ¥63.7bn YoY and annualized inventory days are approximately 127-130 days, making sell-through and markdown discipline key determinants of earnings recovery., Leverage is manageable on debt-to-capital and interest-coverage measures, but the funding mix is short-term-heavy and cash coverage of short-term debt is limited., The ¥17.00 forecast dividend implies a 41.9% forecast payout ratio and is earnings-covered if the full-year profit plan is achieved..

Metrics to watch include Gross margin and operating margin, particularly the ability to reverse the Q3 cumulative 21bp and 39bp YoY contractions, Inventory balance, inventory days, sell-through rates, and impairment or markdown charges, SG&A growth relative to revenue growth, Q4 operating income relative to the ¥13.8bn implied requirement for full-year guidance, Short-term loans, cash-to-short-term-debt coverage, and accounts-payable movements, ROIC and annualized ROE improvement from 3.3% and 4.6%, respectively.

Regarding relative positioning, Yamada Holdings' 28.7% gross margin is within the broad general-retail benchmark range, but its 2.9% operating margin is below the 5% concern threshold and its approximately 127-130 inventory days are high relative to durable-goods retail benchmarks. Its debt-to-capital ratio of 31.1% and interest coverage of 15.29x are comparatively supportive, whereas the short-term debt concentration and low cash coverage weaken the liquidity profile.