YAMADA HOLDINGS (9831) FY2027 Q1 Earnings Report

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Executive Summary

This was a positive earnings report, with both revenue and profit increasing, as the core Electrical retail business drove growth and the reduction in the SG&A ratio secured profit growth exceeding the rate of revenue growth. Revenue was ¥4,202.2B (+11.3% YoY), Operating Income was ¥156.4B (+16.8%), Ordinary Income was ¥167.7B (+14.5%), and Net Income attributable to owners of the parent was ¥99.8B (+12.8%), with all metrics showing increases in both revenue and profit. The Operating Income margin improved to 3.7% from 3.5% in the same period of the previous year; however, this resulted from offsetting the decline in the gross profit margin through a reduction in the SG&A ratio. From the perspective of the quality of profitability improvement, attention should be paid to the high degree of dependence on SG&A efficiency gains. Progress against the full-year company forecast was ahead on the profit side, at 23.6% for Revenue versus 30.4% for Operating Income, 31.9% for Ordinary Income, and 35.9% for Net Income.

Factors Affecting Earnings

【Revenue】All segments posted revenue growth, with the core Electrical segment, accounting for approximately 81% of the revenue mix, increasing 10.5% and driving the majority of company-wide revenue growth. Housing posted the highest growth among all segments at 13.1%, followed by Environmental at 10.9% and Financial at 3.9%. However, as discussed below, Housing’s revenue growth was accompanied by deteriorating profitability, indicating differences in the quality of revenue growth.

【Profit and Loss】The gross profit margin declined 1.2pt to 29.0% from 30.2% in the same period of the previous year, while the SG&A ratio improved 1.4pt to 25.3% from 26.6%, resulting in an Operating Income margin of 3.7% (+0.2pt). Net extraordinary income and expenses were a minor negative ¥2.5B (extraordinary income of ¥1.2B and extraordinary losses of ¥3.7B), indicating a limited impact from one-time factors. Net non-operating income and expenses amounted to +¥11.3B (non-operating income of ¥26.9B and non-operating expenses of ¥15.6B), resulting in Ordinary Income of ¥167.7B. After deducting income taxes and other taxes of ¥64.1B (effective tax rate: 38.8%) from Profit Before Tax of ¥165.3B and excluding net income attributable to non-controlling interests of ¥1.3B, Net Income attributable to owners of the parent was ¥99.8B. In conclusion, both revenue and profit increased.

Segment Analysis

By segment, Electrical posted Revenue of ¥3,394.7B (+10.5%) and Operating Income of ¥147.4B (+20.3%), with its margin improving to 4.3% from 4.0% in the previous year, making it the primary driver of company-wide profit growth. Housing achieved revenue growth of 13.1% to ¥728.3B, but Operating Income fell sharply by 88.0% to ¥0.5B, with the margin declining to 0.1% from 0.6% in the previous year, impairing the quality of its revenue growth. Environmental posted Revenue of ¥110.0B (+10.9%) and Operating Income of ¥5.1B (+31.1%), with the margin steadily improving to 4.6% from 3.9%. Financial posted Revenue of ¥11.9B (+3.9%) and Operating Income of ¥2.9B (-1.0%); while its margin was high at 24.2%, its contribution to the company as a whole was limited. Overall, the improvement in the margins of Electrical and Environmental offset the deterioration in Housing’s profitability, resulting in widening margin disparities among the segments.

Key Financial Indicators

【Profitability】The Operating Income margin improved modestly to 3.7% from 3.5% in the same period of the previous year, while the Net Income margin, based on income attributable to owners of the parent, improved to 2.4% from 2.3%. The decline in the gross profit margin to 29.0% from 30.2% was absorbed by a reduction in the SG&A ratio to 25.3% from 26.6%, making SG&A efficiency the primary driver of the margin improvement. 【Cash Quality】The current ratio was 124.8% (current assets of ¥6,726.9B / current liabilities of ¥5,389.0B), while the quick ratio, calculated by excluding inventories from current assets, was 58.7%, indicating that immediate liquidity excluding inventory was somewhat limited. 【Investment Efficiency】ROE, based on quarterly results and before annualization, was 1.6%. A DuPont breakdown comprising a Net Income margin of 2.4%, total asset turnover of 0.31x, and financial leverage of 2.1x indicates that the low total asset turnover was a constraint on ROE. 【Financial Soundness】The Equity Ratio was 47.0%, down 1.6pt from 48.6% in the same period of the previous year. Interest coverage (EBIT / interest expense) was 18.8x, indicating strong debt-servicing capacity, although the company has a high degree of dependence on short-term funding, centered on short-term borrowings of ¥1,503.3B.

Cash Flow Analysis

Although the cash flow statement was not disclosed, trends in the balance sheet indicate a working-capital-driven movement of funds. Cash and deposits declined to ¥354.4B from ¥382.2B in the same period of the previous year, while inventories increased to ¥3,562.2B (¥3,161.5B in the previous year, +12.7%) and accounts payable rose significantly to ¥1,482.5B (¥873.5B in the previous year, +69.7%). Inventory buildup associated with expanded procurement increased funding needs, while the sharp increase in accounts payable supplemented funding through payment-term arrangements and mitigated the decline in cash and deposits to a certain extent. This accounts-payable-dependent funding structure could weaken cash generation if seasonality or procurement terms reverse. Trends in inventory turnover and the normalization of accounts payable will determine the quality of funding going forward.

Quality of Earnings

Current-period profit consisted primarily of Operating Income of ¥156.4B, with net non-operating income and expenses of +¥11.3B (non-operating income of ¥26.9B and non-operating expenses of ¥15.6B) added to produce Ordinary Income of ¥167.7B. Non-operating income accounted for approximately 0.6% of Revenue, indicating that the earnings structure was centered on the core business. Net extraordinary income and expenses were a minor negative ¥2.5B (extraordinary income of ¥1.2B and extraordinary losses of ¥3.7B), and the volatility of special items declined compared with the impairment loss of ¥19.4B recorded in the same period of the previous year. The difference between Ordinary Income and Net Income was primarily attributable to income taxes and other taxes of ¥64.1B (effective tax rate: 38.8%). Excluding the somewhat heavy tax burden, the factors causing the divergence between Ordinary Income and Net Income were limited. Comprehensive income attributable to owners of the parent was ¥97.2B, a difference of -¥2.7B from Net Income attributable to owners of the parent of ¥99.8B. The negative impact of valuation differences on securities and adjustments related to retirement benefits reflected changes in OCI related to other securities and retirement benefits, with the divergence between comprehensive income and Net Income remaining modest.

Earnings Forecasts and Guidance

The progress rates for the current Q1 against the full-year company forecasts (Revenue of ¥1,780.0B, Operating Income of ¥51.50B, Ordinary Income of ¥52.60B, and Net Income attributable to owners of the parent of ¥27.80B) were 23.6% for Revenue, 30.4% for Operating Income, 31.9% for Ordinary Income, and 35.9% for Net Income. Revenue progress was slightly below the simple quarterly run-rate of 25%, while all profit metrics exceeded the even-progress benchmark, with margin improvement in Electrical and SG&A efficiency contributing to the early progress in earnings. As of the current quarter, no revisions have been made to the earnings forecast or dividend forecast. It should be noted that the year-on-year increases in the full-year forecasts for Operating Income and Ordinary Income (+218.6% and +163.0%, respectively) may include the reversal of special factors recorded in the previous full year.

Shareholder Returns

The company forecasts an annual dividend of ¥17. The Payout Ratio against the company’s forecast EPS of ¥41.81 is approximately 40.7% (¥17 / ¥41.81). Considering the financial foundation of equity of ¥6,405.9B and an Equity Ratio of 47.0%, this can be considered a sustainable level based on the disclosed information. As of the current Q1, no revision has been made to the dividend forecast.

Risk Factors

1. Deterioration in Housing segment profitability: Revenue increased 13.1% to ¥728.3B, but Operating Income fell sharply by 88.0% to ¥0.5B, and the margin declined to 0.1% from 0.6% in the previous year. The gap with Electrical’s 4.3% margin has widened, making Housing a factor depressing the company-wide margin.

2. Quality of working capital: Inventories increased 12.7% YoY to ¥3,562.2B, while the quick ratio remained at 58.7%. Accounts payable surged 69.7% YoY to ¥1,482.5B, requiring monitoring of the impact on liquidity if procurement terms or payment periods reverse.

3. Dependence on short-term funding: Cash and deposits of ¥354.4B were approximately 0.24x short-term borrowings of ¥1,503.3B, indicating a high proportion of short-term funding. Interest coverage of 18.8x demonstrates strong earnings-based debt-servicing capacity, but the funding structure is weighted toward short-term financing.

Industry Benchmark (Reference, Compiled by the Company)

Profitability and Returns

The company’s Operating Income margin and Net Income margin are both slightly above the median for the retail industry.

Growth and Capital Efficiency

The Revenue growth rate is well above the industry median but remains below the upper bound of the industry IQR (14.5%).

※Source: Compiled by the Company

Key Points from the Earnings Report

1. The improvement in the margin resulting from SG&A efficiency generated an effect of -1.4pt, exceeding the -1.2pt decline in the gross profit margin, thereby increasing the Operating Income margin. Whether this improvement can continue to absorb fluctuations in the gross profit margin, which is affected by procurement prices and the competitive environment, will be a key focus in assessing future profitability trends.

2. While the improvement in the margin of the core Electrical segment from 4.0% to 4.3% was the primary driver of company-wide profit growth, Housing’s margin declined to 0.1%, widening the margin disparity among segments. The polarization of the earnings structure within the portfolio is a structural change indicated by the earnings data and warrants attention.

3. Progress against the full-year company forecast was ahead on profit, with all profit metrics exceeding 30% versus 23.6% for Revenue, while both the earnings forecast and dividend forecast remained unchanged. At the same time, changes in working capital—inventory buildup (+12.7%) and a sharp increase in accounts payable (+69.7%)—are progressing in parallel. Confirming both the progress of earnings and the quality of liquidity will be a key focus of future earnings analysis.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation for any specific investment action.

Sensitivity: ¥812–¥859 at ±1% for the cost of equity, and ¥832–¥838 at ±0.1 for ω.

Notes:

• Since Net Income progress against the full-year forecast (36%) exceeds the standard benchmark (25%), forecast EPS has been adjusted upward within an upper limit of +10% (because companies with early progress tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net Income is substantially compressed relative to Operating Income due to the tax burden, acquisition-related expenses, and non-controlling interests, among other factors (Net Income / Operating Income: 54%). This figure reflects that compression at face value; if these factors are temporary, the normalized value may be higher.
• Since 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 gap relative to the full-year forecast).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on 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 responsibility, consulting with professionals as necessary.

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AI Financial Analysis

Executive Summary

FY2027 Q1 delivered a constructive top-line and operating-profit performance, although returns and liquidity remain constrained by the low-margin retail model and short-term funding reliance. Revenue increased 11.3% YoY to ¥420.2bn. Operating income rose faster, up 16.8% to ¥15.6bn. Ordinary income increased 14.5% to ¥16.8bn, while profit attributable to owners rose 12.8% to ¥10.0bn. Gross profit expanded 7.9% to ¥121.9bn, but its margin fell 116bp YoY to 29.0% as cost of sales increased 13.1%, faster than sales. SG&A increased 5.7% to ¥106.3bn, materially below revenue growth. Consequently, the SG&A ratio improved by 133bp to 25.3% and the operating margin rose 17bp to 3.7%. The Denki segment was the principal earnings driver, accounting for ¥14.7bn of segment profit, or nearly all consolidated operating income. Housing sales increased strongly, but segment profit declined 87.8% YoY to ¥0.5bn, indicating a significant deterioration in segmental profitability. Financial and environmental operations remained profitable but are much smaller contributors than Denki. Net margin improved only modestly by 4bp to 2.4%, as the effective tax rate was elevated at 38.8%. Net income was also reduced by a ¥2.5bn net extraordinary loss, including ¥3.1bn of fixed-asset disposal losses. Annualized ROE was 6.2%, supported by annualized asset turnover of 1.233x and 2.13x financial leverage, but remains below an 8% return threshold. Inventory stood at ¥356.2bn and inventory days were flagged at approximately 109-112 days, increasing exposure to markdown, product-obsolescence, and working-capital risk in consumer electronics. Accounts payable increased 69.7% YoY to ¥148.3bn, providing supplier-financing support to inventory and sales growth but requiring close monitoring. The full-year plan implies Q1 progress of 23.6% for revenue, 30.4% for operating income, and 35.9% for owner-attributable profit, suggesting that the company is ahead of a standard 25% first-quarter profit run rate while revenue is broadly on track.

Profitability Analysis

Annualized DuPont ROE of 6.2% is derived from a 2.4% net profit margin, annualized asset turnover of 1.233x, and financial leverage of 2.13x. The largest positive change in the earnings structure was operating leverage: sales increased 11.3% while SG&A increased only 5.7%, lifting operating margin to 3.7% from 3.5% (+17bp). This improvement was partly offset by gross-margin pressure, with gross margin declining to 29.0% from 30.2% (-116bp), because cost of sales grew 13.1%, faster than revenue. The resulting 3.7% EBIT margin remains below the 5% efficiency threshold and is a material quality alert; the retail model requires sustained gross-margin discipline and SG&A productivity to lift returns. The ROIC alert of 4.6% also indicates that operating returns remain below a 5% minimum benchmark despite the Q1 profit expansion. Interest coverage of 18.78x is strong, and the interest burden of 1.057 reflects net non-operating income exceeding interest expense, limiting the current income-statement burden from debt. The tax burden was 0.604, with a 38.8% effective tax rate, which constrained conversion from pre-tax profit to owner-attributable profit. The core Denki segment generated ¥337.4bn of external sales (+10.5% YoY) and ¥14.7bn of segment profit (+20.3%), implying an approximately 4.4% segment-profit margin. Juken generated ¥72.2bn of sales (+14.1%) but only ¥0.5bn of profit (-87.8%), or an approximately 0.1% margin, making its earnings recovery a key condition for broader profitability improvement. Financial services produced ¥10.0bn of sales (+2.7%) and ¥2.9bn of profit (-1.4%), while environmental operations generated ¥7.1bn of sales (+26.6%) and ¥5.1bn of profit (+31.1%).

Growth Assessment

Revenue growth was broad-based, led by Juken external sales growth of 14.1%, Denki growth of 10.5%, and environmental growth of 26.6%. Denki remains the core business by operating-income contribution and drove consolidated profit growth through a 20.3% rise in segment profit. The growth mix has a favorable cost-efficiency element because consolidated SG&A grew more slowly than revenue. However, gross-margin compression shows that the additional sales were achieved with lower merchandise margin, limiting the quality of top-line growth. Inventory increased 12.7% YoY to ¥356.2bn, slightly faster than sales, and the approximately 109-112 inventory-day alerts indicate that sales growth must continue to prevent elevated stock from translating into markdown pressure. The housing segment's sharp profit decline despite strong sales growth suggests that revenue expansion there is presently not translating into economic value at an adequate rate. Full-year guidance calls for ¥1,780.0bn of revenue, ¥51.5bn of operating income, ¥52.6bn of ordinary income, and ¥27.8bn of owner-attributable profit. Q1 revenue progress of 23.6% is only 1.4 percentage points below the standard 25% pace, while operating-profit and net-profit progress are 5.4 and 10.9 percentage points above that pace, respectively. The 35.9% net-profit progress is more than 10 percentage points ahead of the standard first-quarter run rate, so sustaining the full-year profit trajectory will depend on maintaining Denki cost discipline and avoiding margin deterioration later in the year.

Financial Health

The current ratio is 124.8%, above 1.0x, and working capital totals ¥133.8bn; therefore, reported current assets exceed current liabilities. Nevertheless, the quick ratio is only 58.7%, indicating that liquidity is substantially dependent on inventory conversion rather than cash and receivables. Cash and deposits of ¥35.4bn cover only 0.24x of short-term debt, triggering the liquidity-stress alert because the ratio is below 0.5x. Short-term debt represents 64.2% of interest-bearing debt, triggering the refinancing-risk alert and creating a material maturity mismatch risk given limited cash relative to near-term funding needs. Interest-bearing debt was ¥233.99bn, comprising ¥150.33bn of short-term loans and ¥83.66bn of long-term loans. Debt-to-equity of 1.13x is manageable and remains below the 2.0x aggressive-leverage threshold, while debt/capital of 26.8% is within a conservative covenant range. Interest coverage of 18.78x provides substantial near-term debt-service capacity, but refinancing capacity remains important because of the short-tenor debt mix. Total liabilities increased faster than equity, and the capital adequacy ratio declined to 46.4% from 48.6% YoY. Accounts payable rose ¥60.9bn YoY to ¥148.3bn, a 69.7% increase that supported working capital but increased reliance on supplier credit. Asset retirement obligations were ¥46.5bn, equal to 6.4% of total liabilities, triggering the high-ARO-ratio alert; this reflects a meaningful fixed obligation associated with store and property operations.

Notable B/S Changes

Accounts payable: +¥60.9bn (+69.7%) YoY to ¥148.3bn - supplier financing increased materially, supporting working capital but increasing sensitivity to payment terms and purchasing trends. Current liabilities: +¥72.7bn YoY to ¥538.9bn - near-term obligations rose materially, reinforcing the importance of inventory conversion and refinancing access. Total assets: +¥59.5bn YoY to ¥1,363.5bn - asset growth was concentrated in current operating assets, particularly inventory, rather than a broad increase in fixed assets.

Cash Flow Quality

Working-capital indicators require scrutiny despite the earnings increase. Inventory of ¥356.2bn represented 26.1% of total assets and approximately 53.0% of current assets, making inventory turnover and valuation central to cash conversion. The approximately 109-112 inventory-day alerts exceed both the 60-day retail warning threshold and the 90-day broader warning threshold. Accounts payable increased by ¥60.9bn YoY, substantially faster than inventory growth, which can support near-term liquidity but may reverse if purchasing slows or supplier payment terms normalize. Trade receivables declined 6.9% YoY to ¥89.3bn, which is a favorable counterweight to the inventory build. The Q1 income statement includes only a small ¥0.03bn impairment loss, compared with ¥1.94bn in the prior-year quarter, reducing current-period exceptional charges. Fixed-asset disposal losses of ¥3.1bn, partly offset by ¥1.2bn of gains on asset sales, resulted in a ¥2.5bn net extraordinary loss and modestly reduced reported earnings conversion.

Dividend Sustainability

The full-year dividend plan is ¥17.00 per share, unchanged under the disclosed dividend revision status. Against forecast EPS of ¥41.81, the implied dividend payout ratio is approximately 40.7%. This is below the 60% sustainability benchmark and leaves a meaningful earnings retention buffer. Q1 basic EPS was ¥15.02, equivalent to 35.9% of the full-year EPS forecast, consistent with the above-standard first-quarter net-profit progress rate. Dividend capacity should nevertheless be assessed alongside inventory monetization, the short-term debt profile, and maintenance requirements associated with the large property base.

Risk Assessment

Business risks include Merchandise-margin risk: gross margin declined 116bp YoY to 29.0%, and continued price competition or unfavorable product mix could offset SG&A leverage., Inventory risk: inventory days of approximately 109-112 exceed warning thresholds, exposing the company to markdowns, obsolescence, and weaker cash conversion in electronics and housing-related merchandise., Housing profitability risk: Juken segment profit fell 87.8% YoY to ¥0.5bn despite 14.1% external-sales growth, indicating significant margin or cost pressure., Consumer demand and competitive risk: the Denki segment's scale makes group earnings highly sensitive to consumer durable demand, promotional intensity, e-commerce competition, and product-cycle volatility., Property-operation risk: ¥46.5bn of asset retirement obligations create fixed obligations related to the store and property footprint..

Financial risks include Refinancing risk: 64.2% of interest-bearing debt is short term, materially above the 40% alert level., Liquidity risk: cash/short-term debt is only 0.24x and the quick ratio is 58.7%, leaving liquidity dependent on inventory sales and continued supplier financing., Supplier-financing risk: accounts payable increased 69.7% YoY to ¥148.3bn; a reversal in purchasing volumes or payment terms could pressure working capital., Capital-efficiency risk: annualized ROE is 6.2% and ROIC is 4.6%, both below preferred return benchmarks..

Key concerns include Highest priority: elevated inventory days combined with low cash coverage of short-term debt., High priority: the sustainability of Denki's SG&A-led operating-margin improvement despite gross-margin compression., High priority: recovery in Juken profitability, where sales growth has not translated into earnings., Moderate priority: the decline in capital adequacy to 46.4% as liabilities grew faster than equity..

Investment Implications

Key takeaways include Q1 operating income growth of 16.8% exceeded revenue growth of 11.3%, demonstrating positive SG&A leverage., Gross-margin contraction limits the quality of the operating improvement and leaves the 3.7% operating margin below the 5% efficiency threshold., Denki is the core earnings engine, while Juken is the principal segmental drag., The balance sheet remains adequately capitalized, but low cash coverage and a 64.2% short-term debt ratio elevate financing sensitivity., The implied FY dividend payout ratio of approximately 40.7% is moderate on an earnings basis..

Metrics to watch include Denki gross margin and segment-profit margin, Juken segment-profit recovery, Inventory days, inventory growth relative to sales, and markdown-related charges, Accounts payable trend and cash/short-term debt coverage, Short-term debt share of interest-bearing debt, Progress versus FY2027 operating-income guidance.

Regarding relative positioning, The company combines a retail-typical gross margin of 29.0% with a relatively low 3.7% operating margin and 6.2% annualized ROE. Its 26.8% debt/capital ratio and 18.78x interest coverage are strengths, but liquidity quality is weaker than a conservatively funded retailer because the quick ratio is below 1.0x, cash covers only 0.24x of short-term debt, and inventory days are elevated.