Quick View
| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥68.81B | ¥64.22B | +7.2% |
| Operating Income | ¥2.33B | ¥2.69B | −13.1% |
| Equity Method Investment Gain/Loss | - | - | - |
| Ordinary Income | ¥2.68B | ¥3.05B | −12.2% |
| Net Income | ¥1.53B | ¥2.04B | −24.9% |
| ROE | 1.1% | 1.5% | - |
Executive Summary
This was a case of higher revenue but lower earnings, with revenue increasing 7.2% while higher SG&A expenses and corporate-wide costs, together with an increase in the effective tax rate, led to a substantial decline in profit. Revenue was ¥68.81B (¥64.22B in the same period of the previous year, +7.2%), Operating Income was ¥2.33B (¥2.69B, -13.1%), and Ordinary Income was ¥2.68B (¥3.05B, -12.2%). Net Income attributable to owners of the parent was ¥1.48B (¥2.00B, -26.0%). In addition to the deterioration in operating profit margins, the effective tax rate increased to 42.8% (33.1% in the previous year), significantly reducing bottom-line profit.
Factors Affecting Performance
【Revenue】Revenue of ¥68.81B increased 7.2% year on year. By segment, the AUTOBACS Business remained the largest contributor at ¥48.99B (+5.3%), while the Consumer Business at ¥14.56B (+19.4%) and Expansion Business at ¥3.20B (+18.4%) drove overall growth with strong increases. The Wholesaling Business remained firm at ¥8.38B (+4.2%).
【Profit and Loss】Although the increase in cost of sales was below the increase in revenue, the gross margin improved to 36.8% (35.8% in the previous year, +1.0pt). However, the SG&A ratio rose to 33.4% (31.6%, +1.8pt), more than offsetting the benefit of gross-margin improvement. Corporate-wide costs (intersegment adjustments) increased 36.7% to ¥3.19B from ¥2.34B in the previous year, becoming the primary factor pressuring Operating Income. As a result, Operating Income was ¥2.33B (-13.1%), while Ordinary Income, supported by ¥0.72B in non-operating income, including ¥0.13B in dividends received, remained at ¥2.68B (-12.2%). The decline from Ordinary Income to Net Income was primarily attributable to the increase in the effective tax rate to 42.8% (33.1% in the previous year), resulting in Net Income attributable to owners of the parent of ¥1.48B (-26.0%). Revenue increased while earnings declined.
Segment Analysis
The core AUTOBACS Business generated revenue of ¥48.99B (+5.3%), Operating Income of ¥4.60B (-0.5%), and a profit margin of 9.4%. Both its scale and profitability remained stable, although earnings did not increase. The Consumer Business generated revenue of ¥14.56B (+19.4%) and Operating Income of ¥0.42B, a significant improvement in profitability and a turnaround to profitability from a loss of ¥0.04B in the previous year. However, its profit margin of 2.9% remained low within the Group. The Wholesaling Business generated revenue of ¥8.38B (+4.2%), Operating Income of ¥0.15B (+6.5%), and a profit margin of 1.8%, remaining stable at a low margin. The Expansion Business generated revenue of ¥3.20B (+18.4%), Operating Income of ¥0.35B (+19.2%), and a profit margin of 11.0%, securing the highest profitability among the four businesses and achieving both revenue and earnings growth. There are substantial margin disparities among the segments. The Consumer Business’s return to profitability and the Expansion Business’s high growth and profitability were key features of the current period, while the increase in corporate-wide costs (from ¥2.34B in the previous year to ¥3.19B, +36.7%) reduced the aggregate segment profit.
Key Financial Indicators
【Profitability】Operating margin declined to 3.4% (4.2% in the previous year), Ordinary Income margin to 3.9% (4.7%), and Net Income margin attributable to owners of the parent to 2.2% (3.1%). The primary causes of the deterioration in profitability were the increase in the SG&A ratio (+1.8pt), which exceeded the improvement in gross margin (+1.0pt), and the increase in the effective tax rate to 42.8% (33.1% in the previous year). 【Cash Quality】Inventories were ¥32.44B (¥29.99B in the previous year, +8.2%), increasing faster than revenue (+7.2%). The impact of slower inventory turnover on cash generation should therefore be monitored. 【Investment Efficiency】ROE was 1.1%, down from the previous year’s ROE of approximately 1.5%, calculated using shareholders’ equity at the end of the same period of the previous year, primarily due to the deterioration in the Net Income margin. 【Financial Soundness】The Equity Ratio remained broadly flat at 57.6% (56.8% in the previous year). Current assets of ¥115.59B versus current liabilities of ¥58.24B resulted in a substantial current ratio of approximately 198.5%. Interest-bearing debt totaled approximately ¥39.69B, including short-term debt, long-term debt, and bonds. The Company held a certain level of net interest-bearing debt relative to cash and deposits of ¥16.79B, but financial leverage remained conservative.
Cash Flow Analysis
Although a standalone cash flow statement has not been disclosed, funding trends can be identified from changes in the balance sheet. Cash and deposits declined by ¥3.49B (-17.2%) to ¥16.79B from ¥20.29B in the same period of the previous year. The main sources of cash outflow appear to have been the increase in inventories (+¥2.45B, +8.2%) and corporate tax payments, reflected in a ¥3.63B decrease in accrued income taxes payable from ¥4.95B to ¥1.32B (-73.4%). Meanwhile, other accounts receivable declined by ¥6.95B (-24.7%) to ¥21.19B from ¥28.14B, indicating that the collection and reduction of external receivables progressed and contributed to cash conversion to a certain extent. Property, plant and equipment increased moderately to ¥68.97B (¥67.33B in the previous year, +2.4%), suggesting that investments, primarily store-related, have continued. Overall, the increase in inventories accompanying revenue growth and tax payments reduced the cash balance, while the reduction in accounts receivable partially offset these effects.
Quality of Earnings
Non-operating income was ¥0.72B, equivalent to approximately 1.0% of revenue, and was primarily recurring in nature, centered on ¥0.13B in dividends received (¥0.065B in the previous year, +100%), indicating limited reliance on such income. A loss on disposal of property, plant and equipment of ¥0.009B was recorded as an extraordinary loss, but the amount was immaterial. The significant gap between Ordinary Income and Net Income was attributable not to a one-off factor but to the increase in the effective tax rate to 42.8% (33.1% in the previous year). Comprehensive income was ¥1.77B (¥1.71B attributable to owners of the parent), exceeding Net Income attributable to owners of the parent of ¥1.48B. Valuation gains related to other securities and foreign exchange, including ¥0.08B in valuation difference on securities and ¥0.08B representing the share of OCI of equity-method affiliates, contributed positively. At the same time, the fact that inventories grew faster than revenue warrants some caution from an accrual perspective and suggests that changes in earnings may not have translated directly into corresponding changes in cash-generating capacity.
Earnings Forecast and Guidance
The Q1 progress rates against the full-year forecasts—Revenue of ¥300.00B, Operating Income of ¥15.00B, Ordinary Income of ¥15.00B, and Net Income attributable to owners of the parent of ¥9.00B—were 22.9% for Revenue, 15.6% for Operating Income, 17.8% for Ordinary Income, and 16.4% for Net Income. All were below the simple progress benchmark of 25% (Revenue -2.1pt, Operating Income -9.4pt, Ordinary Income -7.2pt, Net Income -8.6pt). The divergence was attributable to the higher SG&A ratio, increased corporate-wide costs, and the elevated effective tax rate. Achievement of the full-year plan assumes cost-efficiency improvements and normalization of the tax burden toward the second half of the fiscal year. Neither the earnings forecast nor the dividend forecast had been revised as of the current quarter.
Shareholder Returns
The full-year dividend forecast is ¥60.00 per share and had not been revised as of the current quarter. The Payout Ratio based on forecast EPS of ¥114.62 is approximately 52.4%. In light of the conservative financial foundation, including an Equity Ratio of 57.6% and a current ratio of approximately 198.5%, this is considered a reasonable level of shareholder returns.
Risk Factors
-
Declining profitability: The Operating margin declined to 3.4% (4.2% in the previous year), primarily due to the increase in the SG&A ratio (+1.8pt), which exceeded the improvement in gross margin (+1.0pt), and the increase in corporate-wide costs (+36.7%). If expenses continue to grow faster than revenue, the decline in operating leverage could become structural.
-
Persistently high tax burden: The effective tax rate rose substantially to 42.8% from 33.1% in the previous year, widening the decline from Ordinary Income to Net Income. The tax burden coefficient (Net Income/Income Before Tax) is approximately 0.55, below the normal level, and whether the tax rate normalizes will influence future Net Income.
-
Expansion of working capital: Inventories increased 8.2% year on year to ¥32.44B, exceeding the increase in revenue (+7.2%). If the pace of inventory accumulation continues, it may affect cash-generating capacity through increased funds tied up in working capital.
Industry Benchmarks (For Reference; Compiled by the Company)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.4% | 4.3% (1.7%–6.9%) | −0.9pt |
| Net Income Margin | 2.2% | 3.8% (1.5%–5.1%) | −1.6pt |
The Company’s profitability indicators, both Operating margin and Net Income margin, are below the industry median, placing it at a relative disadvantage in terms of its cost structure.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (Year on Year) | 7.2% | 3.1% (-0.6%–11.7%) | +4.1pt |
The Revenue growth rate is substantially above the industry median, indicating that the Company’s top-line expansion is at a competitive level within the industry.
※Source: Compiled by the Company
Key Points from the Earnings Results
-
Although Revenue increased by +7.2% and gross margin improved by +1.0pt, the increase in the SG&A ratio (+1.8pt) and the +36.7% increase in corporate-wide costs absorbed these benefits, indicating that the revenue growth effect at the operating level has not translated into profit.
-
The primary reason for the decline from Ordinary Income to Net Income was the increase in the effective tax rate from 33.1% in the previous year to 42.8%. The extent to which the tax burden normalizes will determine the degree of recovery in bottom-line profit.
-
Progress against the earnings forecast was 22.9% for Revenue, versus 15.6% for Operating Income and 16.4% for Net Income. The greater shortfall in profit items means that cost-efficiency improvements in the second half of the fiscal year are a prerequisite for achieving the full-year plan.
Theoretical Stock Price (Reference Value)
This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade period). It is not a forecast of the market price or a recommendation to take any specific investment action.
| Scenario | Theoretical Stock Price |
|---|---|
| bear (bearish) | ¥1,585 |
| base (base case) | ¥1,596 |
| bull (bullish) | ¥1,616 |
| Calculation Assumption | Value |
|---|---|
| Book Value Per Share (BPS) | ¥1,727 |
| Adjusted Forecast EPS | ¥118.8 |
| Cost of Equity r | 9.65% (10-year government bond 2.65% + equity risk premium 6.00% + size premium 1.00%) |
| Residual Income Persistence Factor ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 52.3% |
| Forecast EPS Confidence Adjustment | ×1.037 (based on the industry’s historical guidance achievement rate) |
| Implied PBR / PER | 0.92x / 13.4x |
Sensitivity: ¥1,553–¥1,641 at ±1% for the cost of equity, and ¥1,592–¥1,599 at ±0.1 for 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 / Interest Rate Reference Month: 2026-06 / This value does not predict or guarantee the future stock price.)
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 discretion and responsibility, after consulting a professional advisor as necessary.
---End of Report---
AI Financial Analysis
Executive Summary
FY2027 Q1 was a mixed start: revenue growth was solid, but profit conversion weakened materially and first-quarter progress toward full-year earnings targets was below a standard seasonal run-rate. Revenue increased 7.2% YoY to ¥68.82bn. Gross profit rose 10.1% YoY to ¥25.29bn, outpacing sales growth. Accordingly, gross margin improved by approximately 103bp YoY to 36.8%. However, SG&A increased 13.2% YoY to ¥22.96bn, faster than both sales and gross profit. The SG&A-to-sales ratio rose by approximately 177bp to 33.4%. Operating income consequently declined 13.1% YoY to ¥2.33bn. Operating margin compressed by approximately 79bp YoY to 3.4%. Ordinary income declined 12.2% to ¥2.68bn despite non-operating income of ¥0.72bn. Profit attributable to owners fell 26.0% to ¥1.48bn, with net margin declining by approximately 96bp to 2.1%. The effective tax rate was elevated at 42.8%, reducing the conversion of pre-tax earnings into net income. The core Autobacs business generated ¥46.04bn of segment profit before corporate-cost allocation, but this was marginally lower YoY despite 3.6% revenue growth. Consumer, wholesale, and expansion businesses all delivered profit growth, with the consumer business returning to profitability. Unallocated corporate expenses increased 36.7% YoY to ¥3.19bn and were the principal source of consolidated operating-profit pressure. Liquidity and debt-servicing capacity remain sound, with a 198.5% current ratio and 18.23x interest coverage. First-quarter sales reached 22.9% of the full-year forecast, broadly close to the 25% reference level, whereas operating profit and owner-attributable profit reached only 15.6% and 16.4%, respectively. Management has not revised full-year earnings or dividend guidance, leaving the investment case dependent on a substantial acceleration in operating-profit conversion through the remainder of the year.
Profitability Analysis
Annualized DuPont ROE is 4.3%, comprising a 2.1% net profit margin, 1.165x asset turnover, and 1.74x financial leverage. The primary constraint on shareholder returns is weak profit margin rather than insufficient leverage: the 2.1% net margin is below the 3% concern threshold, while leverage remains moderate. The annualized asset-turnover level is reasonable for a retail, distribution, and service network, but cannot offset the low earnings captured from each yen of sales. Gross margin expanded to 36.8% from approximately 35.8% in the prior-year quarter, indicating improved merchandise margin or sales-mix quality. This gross-profit improvement was more than absorbed by SG&A growth of 13.2% YoY, versus revenue growth of 7.2% YoY. The resulting operating margin fell to 3.4% from approximately 4.2%, a compression of approximately 79bp. Corporate costs were particularly unfavorable: unallocated expenses rose to ¥3.19bn from ¥2.34bn, increasing their share of revenue to 4.6% from 3.6%. The Autobacs business is the core business by segment-profit contribution, producing ¥4.60bn of segment profit, but its profit declined 0.5% YoY on revenue growth of 3.6%, suggesting limited operating leverage. Consumer business segment profit improved to ¥0.42bn from a ¥0.04bn loss, while wholesale profit increased 6.5% to ¥0.15bn and expansion-business profit increased 19.2% to ¥0.35bn. These smaller businesses improved the underlying segment mix, but their gains were insufficient to offset higher corporate costs. The supplied annualized ROIC of 3.4% is also below the 5% warning level, reflecting the low EBIT margin relative to the sizeable capital base. This is a material capital-efficiency concern because the company has ¥236.26bn of assets, including ¥68.97bn of property, plant and equipment. The elevated tax burden is an additional drag: the tax burden factor was 0.553, versus a normal benchmark above 0.70. Interest burden was favorable at 1.147 because non-operating income exceeded interest expense, while interest coverage remained strong at 18.23x.
Growth Assessment
Top-line momentum was constructive, with consolidated revenue up 7.2% YoY to ¥68.82bn. Segment revenue growth was broad-based: Autobacs business revenue increased 3.6% YoY to ¥46.83bn, consumer business revenue increased 19.5% to ¥14.49bn, wholesale business revenue increased 6.2% to ¥5.97bn, and expansion business revenue increased 19.7% to ¥1.53bn. Consumer and expansion were the highest-growth reported segments, although the Autobacs business remains the largest contributor to both revenue and segment profit. Gross profit growth of 10.1% exceeded sales growth, supporting the view that underlying gross-margin trends were favorable. Profit quality at the operating level was nevertheless weak because SG&A expansion outpaced the gross-profit increase. The full-year forecast calls for revenue of ¥300.00bn, operating income of ¥15.00bn, ordinary income of ¥15.00bn, and profit attributable to owners of ¥9.00bn. Q1 revenue progress was 22.9%, only 2.1 percentage points below the standard 25% first-quarter pace. In contrast, Q1 operating-income progress was 15.6%, 9.4 percentage points below the standard pace, and owner-attributable profit progress was 16.4%, 8.6 percentage points below it. Achieving the full-year operating-income forecast therefore requires operating margins to improve materially after Q1. The company forecasts 8.7% YoY growth in full-year operating income despite the 13.1% Q1 decline, making corporate-cost discipline and the preservation of gross-margin gains central to the outlook. No forecast revision has been announced.
Financial Health
Financial health is sound on reported liquidity and solvency measures. The current ratio is 198.5% and the quick ratio is 142.8%, both comfortably above healthy benchmarks. Working capital was ¥57.35bn, providing a substantial buffer against current liabilities. Current assets of ¥115.59bn exceed current liabilities of ¥58.24bn by a wide margin. Cash and deposits of ¥16.80bn covered short-term loans of ¥8.62bn by 1.95x. Interest-bearing debt totaled ¥39.43bn, comprising ¥8.62bn of short-term loans, ¥30.81bn of long-term loans, and ¥0.26bn of bonds. The short-term debt ratio was 21.9%, meaning debt maturities are predominantly long-term and there is no evident short-term maturity mismatch. Debt-to-equity was conservative at 0.74x, well below the 2.0x risk threshold. Debt-to-capital was also moderate at 22.5%, below the 40% investment-grade reference point. Interest coverage of 18.23x indicates ample ability to service current interest costs. Total equity was ¥136.02bn, equivalent to 57.6% of total assets, supporting balance-sheet resilience. Goodwill was ¥8.68bn, or 6.4% of equity and 3.7% of assets, which is modest and does not create a material goodwill-concentration risk. Intangible assets represented 7.2% of assets, also below the level associated with material asset-quality concentration.
Notable B/S Changes
Inventories: +¥2.45bn (+8.2% YoY) to ¥32.44bn - growth exceeded revenue growth and corresponds with inventory days of 68; monitor sell-through and markdown risk. Cash and deposits: -¥3.49bn (-17.2% YoY) to ¥16.80bn - liquidity remains strong, but cash declined while interest-bearing debt increased modestly. Goodwill: +¥0.46bn (+5.6% YoY) to ¥8.68bn - still only 6.4% of equity, indicating limited balance-sheet dependence on acquired value. Property, plant and equipment: +¥1.64bn (+2.4% YoY) to ¥68.97bn - maintains a sizeable fixed-asset base, increasing the importance of improving ROIC. Accounts payable and other payables: -¥2.95bn (-8.9% YoY) to ¥31.79bn - lower supplier financing contributed to the reduction in current liabilities. Income taxes payable: -¥3.63bn (-73.3% YoY) to ¥1.32bn - a major contributor to the ¥3.80bn decline in current liabilities. Interest-bearing debt: +¥0.86bn (+2.2% YoY) to ¥39.43bn - leverage remains moderate at 0.74x debt-to-equity, but the upward debt trend should be assessed alongside lower cash.
Cash Flow Quality
Dividend Sustainability
The full-year dividend forecast is ¥60 per share and has not been revised. Based on forecast EPS of ¥114.62, the forecast dividend payout ratio is approximately 52.3%. This is below the 60% sustainability reference level and leaves a moderate earnings retention buffer. Q1 EPS was ¥18.85, representing 16.4% of forecast full-year EPS, consistent with the below-standard first-quarter profit progress. Dividend sustainability will therefore depend on the anticipated recovery in operating profit during the remaining quarters. The balance sheet provides support for the stated dividend policy, given ¥16.80bn of cash and deposits, a 198.5% current ratio, and moderate 0.74x debt-to-equity. Treasury shares totaled 3.53m shares, or approximately 4.3% of issued shares, but no current-period share-repurchase amount is provided; therefore, only the dividend payout ratio is assessed.
Risk Assessment
Business risks include Automotive aftermarket demand is exposed to consumer discretionary spending, vehicle usage, weather-driven seasonal demand, and competitive pricing. This is particularly relevant because the core Autobacs business recorded only 3.6% revenue growth while segment profit declined 0.5% YoY., Operating leverage risk is elevated: SG&A rose 13.2% YoY against 7.2% sales growth, causing operating margin to fall to 3.4%. Sustained cost growth above revenue growth would limit the benefit of gross-margin expansion., Inventory execution is a key sector-specific risk. Inventories increased 8.2% YoY to ¥32.44bn and the supplied inventory-days metric is 68 days, above the 60-day alert threshold. Seasonal merchandise, tires, accessories, and model-specific products can face markdown or obsolescence risk if sell-through weakens., Corporate-cost escalation is a material execution risk. Unallocated corporate expenses increased 36.7% YoY to ¥3.19bn, offsetting improvement in the consumer, wholesale, and expansion segments..
Financial risks include The effective tax rate of 42.8% and tax burden factor of 0.553 are high, reducing net-income conversion and contributing to the 26.0% decline in owner-attributable profit., Annualized ROIC of 3.4% is below the 5% warning level. The low return on the capital base raises the risk that growth investment does not create sufficient economic value unless operating margins recover., Interest-bearing debt increased modestly to ¥39.43bn, while cash and deposits declined 17.2% YoY to ¥16.80bn. Current liquidity remains strong, but this direction merits monitoring..
Key concerns include LOW_OPERATING_EFFICIENCY: EBIT margin of 3.4% is below the 5% concern benchmark. The root cause is that SG&A growth exceeded sales growth despite a 103bp gross-margin improvement. In the automotive retail and service industry, margins are structurally narrower than in asset-light businesses, but the YoY decline in margin is unfavorable. The impact is lower annualized ROIC and a larger required profit recovery to achieve guidance., HIGH_TAX_BURDEN: The 42.8% effective tax rate and 0.553 tax burden factor are above normal corporate earnings-conversion levels. The high tax charge amplified the difference between the 12.2% decline in pre-tax profit and the 26.0% decline in owner-attributable profit. The impact is weaker EPS growth and reduced capacity for internally funded shareholder distributions or investment., CAPITAL_EFFICIENCY: Annualized ROIC of 3.4% is below the 5% warning threshold. Low operating profitability against a substantial asset base, including ¥68.97bn of PPE, is the principal driver. The impact is that future capital deployment and store, service, or adjacent-business investments need to generate a demonstrably higher margin or turnover contribution., HIGH_INVENTORY_DAYS: Inventory days of 68 exceed the 60-day alert threshold. Inventory grew faster than revenue, increasing 8.2% YoY versus 7.2% sales growth. The impact is greater working-capital intensity and potential markdown pressure if demand or product mix changes..
Investment Implications
Key takeaways include Revenue growth and a 103bp improvement in gross margin demonstrate positive demand and merchandise-margin momentum., The principal earnings issue is cost absorption: SG&A grew 13.2% YoY and corporate expenses grew 36.7%, resulting in a 13.1% operating-profit decline., The core Autobacs business remains profitable and dominant, but its segment profit was flat-to-down despite sales growth., Consumer, wholesale, and expansion businesses improved profit contribution, offering diversification benefits but not yet enough scale to offset corporate-cost pressure., Liquidity, leverage, interest coverage, and goodwill exposure are all supportive of financial resilience., Full-year guidance requires a meaningful acceleration from Q1, especially in operating-profit conversion and net-income growth..
Metrics to watch include Consolidated operating margin and SG&A-to-sales ratio, Unallocated corporate expenses relative to revenue, Core Autobacs business segment-profit trend, Inventory days, inventory growth, and merchandise markdown pressure, Progress toward the ¥15.00bn full-year operating-income forecast, Effective tax rate and tax-burden factor, Annualized ROIC relative to the 5% warning level.
Regarding relative positioning, The company combines a resilient balance sheet, modest M&A-related asset exposure, and broad-based sales growth with currently weak earnings conversion. Its 3.4% operating margin, 4.3% annualized ROE, and 3.4% annualized ROIC indicate lower capital efficiency than desirable, while its 198.5% current ratio, 0.74x debt-to-equity, and 18.23x interest coverage provide a comparatively conservative financial-risk profile.