| Metric | Current Period | Prior-Year Period | YoY |
|---|---|---|---|
| Revenue | ¥330.7B | ¥258.1B | +28.1% |
| Operating Income | ¥20.6B | ¥15.7B | +31.2% |
| Equity-method Investment Income (Loss) | - | - | - |
| Ordinary Income | ¥21.6B | ¥17.1B | +26.4% |
| Net Income | ¥16.5B | ¥23.5B | -29.9% |
| ROE | 4.1% | 5.9% | - |
For the cumulative Q2 of the fiscal year ending May 2026, Revenue was ¥330.7B (YoY +¥72.6B, +28.1%), Operating Income ¥20.6B (YoY +¥4.9B, +31.2%), Ordinary Income ¥21.6B (YoY +¥4.5B, +26.4%), and Net Income attributable to owners of parent ¥16.5B (YoY -¥7.0B, -29.9%). The company achieved revenue and operating profit growth in operating activities, with an operating margin improving 0.1pt to 6.2% from 6.1% in the prior-year period. Gross margin also improved 0.1pt to 30.6% from 30.5%, aided by price pass-through and mix improvement. Net income declined due to the absence of a prior-year bargain purchase gain of ¥11.1B, but the trend at the ordinary-income level remains solid. By region, Japan led with Revenue of ¥255.0B (+34.2%), while Europe and America maintained a high operating margin of 9.5%. Operating Cash Flow was ¥35.0B (YoY +162.3%), a substantial improvement, and Free Cash Flow was ¥38.8B, indicating ample liquidity. Cash balance was ¥106.3B and Equity Ratio was 70.9%, reflecting a strong financial base.
Revenue: Revenue increased significantly to ¥330.7B (YoY +28.1%). By segment, Japan ¥255.0B (+34.2%) drove results, accounting for 77.1% of consolidated revenue. Japan’s large revenue increase was attributable to full-year contributions from subsidiaries Ms.ID Co., Ltd. and Mitsuboshi Corporation (acquired in the prior year) and expansion of existing businesses. Asia ¥66.9B (+13.0%) maintained double-digit growth, while Europe and America ¥38.3B (+7.3%) recorded modest growth. By product, apparel-related products accounted for ¥198.9B (60.1% of total), product-related ¥96.7B (29.2%), and transport-related ¥33.0B (10.0%). Gross margin improved 0.1pt to 30.6% from 30.5% in the prior year, while SG&A ratio was flat at 24.4%.
Profitability: Operating Income was ¥20.6B (YoY +31.2%), with an operating margin of 6.2% (prior-year 6.1%, +0.1pt). Segment operating income: Japan ¥15.0B (+24.0%, margin 5.9%), Asia ¥4.6B (+9.0%, margin 6.9%), Europe and America ¥3.6B (+155.7%, margin 9.5%). Europe and America’s margin of 9.5% is notable, a substantial improvement from 1.4% in the prior-year period. Non-operating income included dividend income ¥0.5B, foreign exchange gains ¥0.5B, interest income ¥0.1B, and equity-method investment income ¥0.2B, totaling non-operating income ¥1.7B against non-operating expenses ¥0.7B, resulting in Ordinary Income of ¥21.6B (+26.4%). Extraordinary items: extraordinary gains ¥3.7B (gain on sale of investment securities ¥3.6B, insurance proceeds ¥0.7B, etc.) and extraordinary losses ¥0.1B, netting ¥3.6B of contribution. The prior year included an extraordinary gain of ¥13.1B, including a bargain purchase gain of ¥11.1B, so extraordinary gains shrank due to this one-off effect. Profit before tax was ¥25.3B (prior-year ¥30.0B), income taxes ¥8.8B, and Net Income ¥16.5B (prior-year ¥23.5B, -29.9%). Net margin declined 4.1pt to 5.0% from 9.1% in the prior year, mainly due to the prior-year one-off gain; underlying ordinary-profit level strength remains. In conclusion, the company achieved revenue and operating income growth accompanied by improved core profitability.
Japan: Revenue ¥255.0B (YoY +34.2%), Operating Income ¥15.0B (YoY +24.0%), Operating Margin 5.9%. As the core segment accounting for 72.9% of consolidated operating income, M&A contributions and growth in existing businesses drove revenue increases. Asia: Revenue ¥66.9B (+13.0%), Operating Income ¥4.6B (+9.0%), Operating Margin 6.9%, maintaining double-digit revenue growth and a margin 1.0pt higher than Japan. Europe and America: Revenue ¥38.3B (+7.3%), Operating Income ¥3.6B (+155.7%), Operating Margin 9.5%; margin improved 8.1pt from 1.4% in the prior year, delivering the highest profitability among the three segments and contributing 17.6% of consolidated operating income, with the regional mix improvement lifting consolidated margins.
Profitability: Operating margin 6.2% (prior-year 6.1%, +0.1pt), ROE 4.1% (prior-year 5.9%, -1.8pt). Net margin 5.0% decreased 4.1pt from 9.1% in the prior year due to one-off gains in the prior period; Ordinary margin 6.5% (prior-year 6.6%, -0.1pt) remained stable. Gross margin 30.6% (prior-year 30.5%, +0.1pt) improved slightly, SG&A ratio 24.4% (prior-year 24.4%, flat). EBITDA margin 7.8% (EBITDA ¥26.1B / Revenue ¥330.7B).
Cash quality: Operating CF / Net Income 2.13x, OCF / EBITDA 1.34x, indicating good cash conversion of earnings. Accrual ratio -3.2% ((Net Income - Operating CF) / Total Assets) suggests healthy earnings quality.
Investment efficiency: ROIC 4.1% (NOPAT ¥17.7B / Invested Capital ¥432.7B), Total Asset Turnover 0.58x. CAPEX / Depreciation 0.60x, indicating maintenance-level investment and restrained growth investment.
Financial soundness: Equity Ratio 70.9% (prior-year 71.8%, -0.9pt), Current Ratio 281%, Quick Ratio 210%—liquidity is very high. Interest-bearing debt ¥25.6B (Short-term borrowings ¥17.3B, Long-term borrowings ¥8.3B, Bonds ¥6.0B), Debt/EBITDA 0.98x, Net Cash ¥80.7B (Cash ¥106.3B - Interest-bearing debt ¥25.6B), effectively net-debt-free. Interest coverage 130.6x (EBITDA ¥26.1B / Interest ¥0.2B). Working capital: DSO 94 days, DIO 124 days, DPO 69 days, CCC 150 days—collection and inventory turnover are somewhat extended.
Operating CF was ¥35.0B (YoY +162.3%). Operating CF subtotal was ¥41.7B (Profit before tax ¥25.3B + Depreciation ¥5.5B + Goodwill amortization ¥1.7B and other non-cash expenses), adjusted for working capital changes (Accounts receivable +¥18.2B, Inventories -¥1.6B, Accounts payable -¥2.8B) and less corporate tax payments of ¥7.1B. Improved collection of receivables was the primary driver of higher operating CF. Investing CF recorded an inflow of ¥3.8B, as proceeds from sale of investment securities ¥4.3B exceeded CAPEX ¥3.3B and acquisition of subsidiary shares ¥45.7B (consolidation of Hisanaga Seisakusho Co., Ltd.), resulting in net inflow. Free Cash Flow was ¥38.8B, ample to cover dividend payments ¥9.7B, share buybacks ¥11.5B, and debt repayments ¥2.2B, with surplus remaining. Financing CF was -¥29.7B; while short-term borrowings increased by ¥11.3B to bolster funding, shareholder returns via dividends and buybacks were executed. Cash balance increased to ¥106.3B (prior-year ¥94.0B, +¥12.3B), leaving strong near-term liquidity.
Of Ordinary Income ¥21.6B, Operating Income ¥20.6B was core operating earnings, and non-operating income ¥1.7B (dividend income ¥0.5B, FX gains ¥0.5B, etc.) is small at 0.5% of revenue. Extraordinary gains ¥3.7B (gain on sale of investment securities ¥3.6B, etc.) are one-off, and smaller than the prior-year bargain purchase gain of ¥11.1B. Operating CF ¥35.0B substantially exceeds Net Income ¥16.5B, with Operating CF / Net Income 2.13x and OCF / EBITDA 1.34x, indicating solid cash backing. Comprehensive income ¥28.8B exceeded Net Income by ¥12.3B, mainly due to foreign currency translation adjustments ¥8.9B and valuation differences on securities ¥3.8B. The foreign currency translation gain reflects yen depreciation on overseas subsidiaries and includes temporary elements, while the securities valuation gain strengthens the balance sheet. Accrual ratio -3.2% is favorable; although receivables and inventory retention exist (DSO 94 days, DIO 124 days), overall earnings quality is healthy.
Full Year guidance: Revenue ¥630.0B (YoY +10.8%), Operating Income ¥35.0B (YoY +5.0%), Ordinary Income ¥37.0B (YoY +2.1%), Net Income ¥30.0B. First-half progress rates versus full-year guidance: Revenue 52.5%, Operating Income 58.8%, Ordinary Income 58.4%, Net Income 54.8%—above standard half-year progression (50%) and on track. Forecasted operating margin for the full year is 5.6%, while first-half actual was 6.2% (+0.6pt), reflecting conservative assumptions that incorporate some margin decline in the second half. EPS forecast ¥117.21 vs. first-half actual ¥65.13 (progress 55.5%). Dividend forecast ¥36.00 (Payout Ratio 30.7%)—the full interim dividend has already been paid in the first half. The probability of achieving the full-year plan is high, and given the strong first-half performance, core operations are expected to remain robust in the second half.
An interim dividend of ¥36.00 has been paid; the dividend payout for the first half was ¥9.7B against first-half Net Income ¥16.5B, implying a payout ratio of 58.7%. The full-year dividend forecast of ¥36.00 is the same as the interim dividend, so no increase is planned; expected full-year payout ratio based on Net Income forecast ¥30.0B is 30.7%. Share buybacks of ¥11.5B (weighted average shares outstanding during the period 25,262 thousand shares, treasury shares 1,828 thousand shares) were executed, resulting in total shareholder returns (dividends + buybacks) of ¥21.2B and a Total Return Ratio of 128.5% relative to first-half Net Income ¥16.5B. The company returned more than first-half Net Income during the first half alone, supported by abundant Free Cash Flow of ¥38.8B. Free Cash Flow / Dividend Coverage is 4.03x, indicating dividend sustainability. With cash and deposits ¥106.3B and Net Cash ¥80.7B, liquidity is ample and balancing financial soundness and shareholder returns is feasible. However, a Total Return Ratio of 128.5% is high on a recurring basis, so appropriate capital allocation over the full year warrants attention.
Regional concentration risk: Japan accounts for 77.1% of revenue and 72.9% of operating income, creating high dependency and sensitivity to domestic demand, regulatory changes, and price competition. Although Asia grew 13.0%, its revenue share is only 20.2%, so geographic diversification remains limited. High reliance on Japan implies that a domestic demand slowdown could materially depress consolidated performance.
Working capital efficiency risk: With DSO 94 days, DIO 124 days, and CCC 150 days, receivables and inventory turnover are prolonged, expanding working capital needs. Accounts receivable ¥85.5B (25.9% of revenue) and inventories ¥78.1B (23.6%) comprise a large portion of current assets, and in demand fluctuations there is risk of inventory write-downs or increased allowance for doubtful accounts. While operating CF is solid, further expansion of working capital could strain liquidity and depress ROIC.
Low capital efficiency risk: ROE 4.1% and ROIC 4.1% are below typical capital costs (generally 5–8%), indicating returns insufficient for invested capital. CAPEX / Depreciation 0.60x suggests continued restraint in investment; insufficient growth investment could undermine mid- to long-term competitiveness. Failure to improve capital efficiency could lead to depressed valuation and higher cost of capital.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.2% | – | – |
| Net Margin | 5.0% | 7.0% (6.4%–7.5%) | -2.0pt |
Net margin is 2.0pt below the industry median, mainly due to the prior-year one-off gain; Ordinary margin of 6.5% indicates structural earning power.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 28.1% | 4.5% (2.2%–5.8%) | +23.7pt |
Revenue growth materially outperformed the industry median by 23.7pt, driven by M&A contributions and expansion of existing businesses; the company ranks high in growth among peers.
※ Source: Company compilation
Core profitability is on an improving trend with an operating margin of 6.2%, and Europe and America’s high profitability (Operating Margin 9.5%) contributed to lifting consolidated margins. Net Income declined due to the prior-year bargain purchase gain of ¥11.1B, but Ordinary Income grew +26.4% and the underlying trend is solid. Progress against the full-year plan is steady (Revenue 52.5%, Operating Income 58.8%), and core operations are expected to remain stable in the second half.
Cash generation is ample (Operating CF ¥35.0B, Free CF ¥38.8B), supporting total shareholder returns of ¥21.2B (Total Return Ratio 128.5%). With Net Cash ¥80.7B and Equity Ratio 70.9%, the financial base is strong, but capital efficiency (ROE 4.1%, ROIC 4.1%) is low. Improving working capital efficiency (DSO 94 days, DIO 124 days, CCC 150 days) and selectively increasing growth investment are key to medium-term value creation.
This report is an earnings analysis document automatically generated by AI from XBRL earnings release data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by our firm from public financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.