| Metric | Current FY | Prior FY | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3411.4B | ¥3157.3B | +8.0% |
| Operating Income / Operating Profit | ¥142.0B | ¥162.3B | -12.5% |
| Ordinary Income | ¥138.4B | ¥191.7B | -27.8% |
| Net Income / Net Profit | ¥62.8B | ¥77.3B | -18.8% |
| ROE | 4.9% | 6.4% | - |
For the full year ended February 2026, Revenue was ¥3411.4B (YoY +¥254.1B +8.0%), Operating Income was ¥142.0B (YoY -¥20.3B -12.5%), Ordinary Income was ¥138.4B (YoY -¥53.3B -27.8%), and Net Income attributable to owners of the parent was ¥62.8B (YoY -¥14.5B -18.8%), resulting in a revenue-increase, profit-decline outcome. Revenue expansion was driven by the Retail Business (+8.4%) and the Foodservice Business (+8.3%), and gross margin improved to 38.1% (+0.6pt YoY). However, SG&A ratio rose by 1.4pt to 38.6%, causing operating margin to fall to 4.2% (down 0.9pt from 5.1% a year earlier). The primary cause of the profit decline was a substantial fall in Retail Business operating profit (-19.1%); Foodservice operating profit also declined (-10.5%), and the high-margin Real Estate Business (operating margin 24.7%) was too small in scale to offset the company-wide profit decline.
[Revenue] Revenue was ¥3411.4B (YoY +8.0%), showing solid growth. By segment, the Retail Business accounted for ¥2767.2B (+8.4%), representing 81.1% of the total; the Foodservice Business was ¥607.9B (+8.3%); and the Real Estate Business was ¥146.3B (+3.7%), with all three major segments achieving revenue increases. By contrast, the Wholesale Business declined to ¥38.9B (-12.1%). In the Retail Business, expansion of home center stores and Loppiya franchise stores drove growth; in the Foodservice Business, core brands “Katsuya” and “Karayama” achieved revenue growth through higher average spend per customer and store expansion. By geography, domestic sales account for over 90% of operating revenue, indicating a high concentration in the domestic market. The revenue mix is diversified around the three pillars of Retail, Foodservice, and Real Estate, but dependence on the Retail Business is high, making company-wide performance sensitive to that segment’s profitability.
[Profitability] Gross profit was ¥1299.8B (gross margin 38.1%), a 0.6pt improvement YoY, reflecting procurement efficiency and improved product mix. However, SG&A was ¥1318.1B (SG&A ratio 38.6%), up 1.4pt YoY, and increases in personnel costs, logistics expenses, and store rents offset the gross margin improvement. Goodwill amortization was ¥17.9B (YoY +¥2.5B), increasing fixed cost burden. As a result, Operating Income was ¥142.0B (operating margin 4.2%), a YoY decline of 12.5%. In non-operating items, interest expense of ¥11.0B persisted, and net non-operating items were a -¥3.4B loss (non-operating income ¥10.3B less non-operating expense ¥13.8B). Ordinary Income was ¥138.4B (ordinary margin 4.1%), roughly flat from Operating Income, indicating limited impact from non-operating items. Extraordinary items included gain on sales of fixed assets ¥6.7B, while losses on disposal of fixed assets ¥2.5B and impairment losses ¥0.8B were recorded, resulting in a net minor loss of -¥1.1B. After income taxes of ¥56.0B, Net Income attributable to owners of the parent was ¥62.8B (net margin 1.8%), a YoY decrease of 18.8%. The effective tax rate was high at 40.8%, pressuring net margin. In conclusion, the company reported revenue growth but profit decline, primarily because SG&A growth outpaced gross margin improvement, causing negative operating leverage.
The Retail Business reported Revenue of ¥2767.2B (YoY +8.4%), Operating Income of ¥45.0B (YoY -19.1%), and an operating margin of 1.6% — showing revenue growth but significant profit decline. Growth was driven by store expansion and increased traffic at existing stores, but margin declined by 0.6pt from 2.2% the prior year due to rising personnel and logistics costs and higher inventory-related expenses. The Foodservice Business had Revenue of ¥607.9B (YoY +8.3%), Operating Income ¥53.4B (YoY -10.5%), and an operating margin of 8.8%; core brands “Katsuya” and “Karayama” achieved revenue growth via higher average customer spend, but margins fell 1.8pt from 10.6% due to increased raw material and labor costs. The Real Estate Business delivered Revenue ¥146.3B (YoY +3.7%), Operating Income ¥36.1B (YoY -2.3%), and a high operating margin of 24.7%, but its small scale limits its contribution to the company. The Wholesale Business recorded Revenue ¥38.9B (YoY -12.1%), Operating Income ¥4.7B (YoY -19.5%), and an operating margin of 12.2%, suffering from a deteriorating market environment. Other businesses (fitness, etc.) had Revenue ¥11.3B (YoY +10.7%) and Operating Income ¥1.1B (YoY +184.2%), showing significant profit growth though on a small base. By segment, the largest contributor to Operating Income was the Foodservice Business (¥53.4B), followed by Retail (¥45.0B) and Real Estate (¥36.1B). Although Retail is largest by revenue, its low operating margin of 1.6% means margin recovery in that segment is essential for company-wide profitability improvement.
[Profitability] Operating margin was 4.2% (prior year 5.1%), down 0.9pt, showing a declining trend over three periods. Gross margin improved 0.6pt to 38.1%, but SG&A ratio rose to 38.6% (+1.4pt), causing negative operating leverage. Net margin was 1.8% (prior year 2.4%), down 0.6pt, with the high effective tax rate of 40.8% depressing net income. ROE fell to 4.9% (prior year 6.4%), and ROA declined to 1.8% (prior year 2.3%), indicating deterioration in capital and asset efficiency. [Cash Quality] Operating Cash Flow (OCF) was ¥232.3B, 3.7x Net Income of ¥62.8B, indicating strong cash backing of profits. The OCF/EBITDA ratio was high at 87.4%, and cash conversion was solid. However, inventory increase (+¥28.8B) and receivables increase (+¥18.0B) pressured working capital, and OCF decreased -25.1% YoY. Free Cash Flow (FCF) was ¥160.1B, a substantial positive, providing ample capacity to cover capex and dividends. [Investment Efficiency] Total Asset Turnover was 0.99x (prior year 0.94x), a slight improvement but still below 1x, indicating low asset efficiency. Inventory turnover days lengthened to 96.7 days, highlighting the need to improve inventory efficiency in the Retail Business. [Financial Soundness] Equity Ratio was 37.1% (prior year 36.2%), a slight improvement, and the financial base is within a stable range. Interest-bearing debt (short-term borrowings ¥366.6B + long-term borrowings ¥460.5B + bonds ¥1.0B) totaled ¥828.1B, with Debt/EBITDA at 3.1x — a moderate leverage level. Interest coverage was 12.9x (Operating Income / Interest Expense), indicating sufficient ability to service interest, but current ratio was 80.4% and quick ratio 33.7%, indicating weak short-term liquidity and a high proportion of short-term borrowings that warrants attention.
Operating Cash Flow was ¥232.3B (YoY -25.1%), a decline, but remained at 3.7x Net Income ¥62.8B, supporting solid cash backing of profits. Operating cash flow before working capital changes (subtotal) was ¥308.2B, with non-cash expenses including depreciation ¥123.6B and goodwill amortization ¥17.9B boosting cash flow. Working capital changes included inventory increase -¥28.8B and trade receivables increase -¥18.0B as cash outflows, partially offset by accounts payable increase +¥29.2B. Increase in contract liabilities +¥2.2B also contributed positively. After income taxes paid of -¥66.1B, final OCF was ¥232.3B. Investing Cash Flow was -¥72.2B, with capital expenditures of -¥202.5B as the main outflow, representing growth investments significantly exceeding depreciation of ¥123.6B. Proceeds from sales of fixed assets of ¥205.8B was a large positive contributor, resulting in a net investing cash outflow limited to -¥72.2B. Acquisition of subsidiary shares -¥63.2B indicates ongoing M&A activity of a certain scale. FCF was ¥160.1B (OCF ¥232.3B - Investing CF ¥72.2B), a substantial positive providing ample capacity for capex and dividends. Financing Cash Flow was -¥136.7B, driven by long-term borrowings repayment -¥330.4B, long-term borrowing proceeds +¥154.7B, and net increase in short-term borrowings +¥70.6B, indicating debt refinancing and short-term funding procurement. Dividend payments were -¥24.9B and share buybacks were -¥0.0B, continuing shareholder returns. Lease liability repayments amounted to -¥16.7B. As a result, cash and cash equivalents at the end of the period were ¥203.8B, an increase of +¥23.4B from ¥180.4B at the end of the prior period.
Overall, the quality of earnings is sound. Of Revenue ¥3411.4B, the majority derives from recurring operating activities, and income from one-off factors is limited. Non-operating income of ¥10.3B comprised dividend income ¥0.3B, foreign exchange gains ¥0.9B, and other income ¥6.5B, all of which are recurring items incidental to operating activities. Non-operating expenses of ¥13.8B were mainly interest expense ¥11.0B, a recurring cost associated with interest-bearing debt; foreign exchange losses ¥0.1B and other expenses ¥2.8B were likewise normal operating-related costs. Extraordinary items included gain on sales of fixed assets ¥6.7B, loss on disposal of fixed assets ¥2.5B, and impairment losses ¥0.8B, with a net minor loss of -¥1.1B, indicating limited impact from one-off items. Comprehensive income was ¥84.3B, ¥21.5B above Net Income ¥62.8B; components of other comprehensive income were foreign currency translation adjustment ¥0.0B, valuation difference on available-for-sale securities ¥2.5B, and deferred hedge gains/losses ¥0.5B, reflecting realized and unrealized valuation gains. OCF of ¥232.3B was 3.7x Net Income, indicating sufficient cash backing. However, increases in working capital (Inventory +¥28.8B, Accounts Receivable +¥18.0B) somewhat depressed cash conversion, making inventory efficiency improvement a future priority. Accrual ratios are low, and earnings quality is generally healthy.
The company plans full-year Revenue of ¥3600.0B (YoY +5.5%), Operating Income ¥170.0B (YoY +19.7%), and Ordinary Income ¥165.0B (YoY +19.2%). The plan assumes an improvement in Operating Margin to 4.7% (+0.5pt), premised on controlling SG&A and margin recovery in the Retail Business. Revenue growth of +5.5% is a slowdown from this year’s +8.0%, but Operating Income is expected to increase substantially, signaling a focus on improving profitability. Ordinary Income is expected to grow roughly in line with Operating Income, with non-operating items assumed to be flat. Forecast EPS is ¥159.97, and the dividend forecast is annual ¥20.00 (payout ratio approximately 12.5%), representing a dividend cut from this year’s ¥40.00, which appears to assume only a year-end dividend of ¥20. Estimated progress will be evaluated after the full-year results, but achieving the plan hinges on shortening Retail inventory turnover, improving SG&A efficiency, and maintaining same-store sales in Foodservice. Because SG&A ratio rose 1.4pt last fiscal year and caused negative operating leverage, next fiscal year will require limiting personnel and logistics cost growth while combining gross margin improvements to raise operating margin by 0.5pt.
Dividends were maintained at annual ¥40.00 per share (interim ¥20.00, year-end ¥20.00), unchanged from the prior year. Payout ratio was 24.6% (based on basic EPS ¥129.39), a conservative level, and total dividends amounted to ¥24.9B. Share buybacks were negligible at -¥0.0B on a financing cash flow basis, so dividends are the main channel of shareholder returns. Total Return Ratio is approximately 25%, broadly in line with the payout ratio. FCF of ¥160.1B greatly exceeds total dividends of ¥24.9B, with FCF-to-dividend coverage of 6.4x, indicating ample capacity. Despite the profit decline, dividend continuation was maintained; next fiscal year’s forecast dividend is annual ¥20.00 (payout ratio approx. 12.5%) representing a dividend cut, likely reflecting only a year-end dividend being assumed. Cash and deposits stand at ¥204.0B and OCF is ¥232.3B, indicating secured liquidity and a high capacity to continue dividends. However, given short-term borrowings of ¥366.6B and a current ratio of 80.4%, the short-term liquidity vulnerability suggests that prioritizing inventory reduction and short-term debt reduction over dividend increases would be a rational capital allocation.
Low profitability and inventory efficiency risk in the Retail Business: The Retail Business has a low operating margin of 1.6% and inventory turnover days of 96.7 days are lengthening. Inventory increases (+¥42.6B) are pressuring working capital and increasing the risk of markdowns and valuation losses. If profitability improvement in the Retail Business (which accounts for 81.1% of revenue) is delayed, company-wide operating margin could decline further and ROE could deteriorate from 4.9%.
Rising SG&A ratio and negative operating leverage: SG&A ratio rose to 38.6% (+1.4pt YoY), with personnel, logistics, and rent increases offsetting gross margin gains. The next fiscal year plans a recovery to operating margin 4.7%, but if structural personnel cost increases and high energy costs persist, curbing SG&A will be difficult and achieving the targeted +19.7% Operating Income growth is uncertain.
Short-term liquidity vulnerability and refinancing risk: With a current ratio of 80.4% and quick ratio of 33.7%, short-term liquidity is fragile, and dependence on short-term borrowings of ¥366.6B (16.8% of total liabilities) is high. Under moderate leverage (Debt/EBITDA = 3.1x), rising interest rates or changes in banks’ lending stance could increase refinancing costs and interest burden. Although interest coverage is 12.9x, if Operating Income does not recover as planned, financial flexibility could weaken.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.2% | 4.6% (1.7%–8.2%) | -0.4pt |
| Net Margin | 1.8% | 3.3% (0.9%–5.8%) | -1.5pt |
The company’s operating margin is slightly below the median, and net margin is substantially below the median. Profitability is below average within the retail industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.0% | 4.3% (2.2%–13.0%) | +3.7pt |
Revenue growth rate exceeds the median and places the company in a higher-growth group within the industry.
※ Source: Company compilation
The main reason for revenue growth but profit decline is the rise in SG&A ratio (+1.4pt), causing Operating Margin to fall to 4.2% (-0.9pt). Although Gross Margin improved by 0.6pt, increases in personnel, logistics, and rent reversed operating leverage. The Retail Business is low-margin at 1.6%, and inventory turnover days of 96.7 are lengthening, pressuring working capital. The next fiscal year projects Operating Income +19.7%, but achieving this requires controlling SG&A and margin recovery in Retail (inventory compression and same-store improvements). Versus industry benchmarks, operating and net margins are below median, indicating substantial room for profitability improvement.
Operating Cash Flow was ¥232.3B, 3.7x Net Income, and FCF was ¥160.1B, a substantial positive, demonstrating strong cash generation even in a profit-decline scenario and supporting dividend sustainability. However, short-term liquidity is fragile (current ratio 80.4%, quick ratio 33.7%) with high dependence on short-term borrowings of ¥366.6B. Under Debt/EBITDA = 3.1x and moderate leverage, resilience to interest rate increases is limited, making inventory compression and reduction of short-term debt priority tasks. ROE at 4.9% is low; improving capital efficiency requires recovery of Retail profitability and higher asset turnover.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company from published financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.