Nitori Holdings Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

Although revenue declined in Q1, the Company largely maintained its profit margins, resulting in a smaller decline in profit than in revenue. Revenue was ¥226.26B (¥231.69B in the previous year, YoY -2.3%), Operating Income was ¥36.54B (¥36.94B, YoY -1.1%), and Net Income was ¥25.76B (¥26.16B, YoY -1.5%). An improvement in the gross margin partially offset the increase in the SG&A ratio, and the Operating Income margin improved slightly from the previous year to 16.2%.

Factors Affecting Performance

【Revenue】Revenue was ¥226.26B, representing a YoY decline of -2.3%. By segment, the core NITORI Business generated ¥199.59B (88.2% of total revenue, YoY -1.2%), while the SHIMACHU Business generated ¥26.67B (11.8% of total revenue, YoY -10.3%). Both businesses posted revenue declines, although the decline at SHIMACHU was relatively larger.

【Profit and Loss】Cost of sales decreased 2.7% YoY to ¥104.92B, and the cost ratio improved slightly to 46.4% (46.6% in the previous year), while the gross margin improved to 53.6% (53.4% in the previous year). SG&A expenses decreased 1.8% YoY to ¥85.91B, but the decline was relatively small compared with the decrease in revenue, causing the SG&A ratio to rise to 38.0% (37.8% in the previous year). Consequently, the Operating Income margin was virtually unchanged at 16.2%, and Operating Income was ¥36.54B (YoY -1.1%). By segment, NITORI posted segment profit of ¥33.41B (YoY -1.6%, margin 16.7%), while SHIMACHU posted segment profit of ¥3.15B (YoY +5.4%, margin 11.8%). SHIMACHU achieved profit growth despite lower revenue, confirming an improvement in profitability. Financial income of ¥1.73B exceeded financial expenses of ¥1.09B, resulting in Profit Before Tax of ¥37.18B (YoY +0.1%), essentially flat. Net Income was ¥25.76B (YoY -1.5%) due to an increase in income taxes. Overall, the Company reported lower revenue and profit, but the rate of profit decline was below the rate of revenue decline, highlighting the reduction in the earnings decline achieved through cost management.

Segment Analysis

The segments comprise the NITORI Business and the SHIMACHU Business. The NITORI Business generated revenue of ¥199.59B (88.2% of total revenue, YoY -1.2%) and segment profit of ¥33.41B (YoY -1.6%, margin 16.7%), making it the core business that generates approximately 91% of total Company profit. The SHIMACHU Business generated revenue of ¥26.67B (11.8% of total revenue, YoY -10.3%) and segment profit of ¥3.15B (YoY +5.4%, margin 11.8%), achieving profit growth despite a revenue decline. There is an approximately 5pt difference between the profit margins of the two businesses. While the high degree of dependence on NITORI is a characteristic of the business mix, improved profitability at SHIMACHU is contributing to support total Company profit.

Key Financial Metrics

【Profitability】The Operating Income margin was 16.2% (16.0% in the previous year), and the Net Income margin was 11.4% (11.3% in the previous year), both showing slight improvement. The gross margin of 53.6% improved from 53.4% in the previous year, with cost control supporting profit margins.【Cash Flow Quality】Cash and cash equivalents increased 5.9% from the end of the same quarter of the previous year to ¥153.52B. Inventories decreased to ¥112.88B (-7.6% from the end of the previous fiscal year), while accounts receivable decreased to ¥62.49B (-22.5%), indicating progress in working capital reduction.【Investment Efficiency】ROE was 2.6% (quarterly result, before annualization), while the total asset turnover ratio remained low, indicating room for improvement in capital efficiency.【Financial Soundness】The Equity Ratio rose to 64.8% (62.9% in the previous year). With ¥153.52B in cash against interest-bearing debt of ¥15.00B, the Company has a strong liquidity position and capital base.

Cash Flow Analysis

Although individual disclosures for Operating Cash Flow (OCF), investing cash flow, and financing cash flow for the quarter could not be confirmed, improvements in cash generation can be observed from balance sheet trends. Inventories decreased by ¥9.29B from the end of the previous fiscal year, and accounts receivable decreased by ¥18.18B. This working capital reduction likely contributed to cash generation, although accounts payable also declined by ¥15.40B, partially offsetting the effect through changes in the purchasing and payment cycle. Short-term borrowings were reduced by ¥10.00B. As debt reduction progressed on the financing side, cash and cash equivalents accumulated to ¥153.52B, an increase of ¥8.51B from the end of the previous fiscal year. Retained earnings increased by ¥17.06B, with the retention of current-period profit contributing to strengthening the capital base.

Quality of Earnings

Current-period earnings were primarily derived from recurring income based on operating activities, and no temporary factors equivalent to extraordinary gains or losses were identified. Financial income of ¥1.73B exceeded financial expenses of ¥1.09B, while equity-method investment income also increased to ¥1.26B from ¥0.98B in the previous year, reinforcing earnings quality. Non-operating income was limited relative to revenue, and the gap between Profit Before Tax of ¥37.18B and Operating Income of ¥36.54B was small at ¥0.64B, indicating a limited impact from non-operating factors. Comprehensive income was ¥28.54B, exceeding Net Income of ¥25.76B. The difference was primarily attributable to foreign currency translation adjustments for foreign operations (+¥2.20B), with valuation gains from foreign exchange movements contributing to the result. This divergence between comprehensive income and Net Income does not indicate a change in the underlying earning power of the business itself, and its direct impact on cash flow is considered limited.

Earnings Forecast and Guidance

The full-year plan calls for Revenue of ¥957.00B, Operating Income of ¥130.30B (YoY +3.8%), and Net Income of ¥91.00B (YoY +1.9%). Q1 progress rates were 23.6% for Revenue, 28.0% for Operating Income, and 28.3% for Net Income. On a simple one-quarter-of-the-year benchmark of 25%, revenue was slightly behind schedule, while profit was ahead of schedule. Improvements in the gross margin and control of SG&A expenses drove profit progress. No revision was made to the quarterly earnings or dividend forecasts.

Shareholder Returns

The full-year dividend forecast is ¥32.00 per share (Company plan). Based on the full-year Net Income forecast of ¥91.00B and the EPS forecast of ¥161.05, the Payout Ratio is approximately 19.9%, a conservative level. Given the ¥153.52B in cash and cash equivalents and the Equity Ratio of 64.8%, the sustainability of the current dividend level is considered high. No revision was made to the dividend forecast for the quarter. Because of the stock split in October 2025, caution is required when comparing dividends per share across periods.

Risk Factors

1. High concentration in the NITORI Business: The NITORI Business accounts for 88.2% of revenue and approximately 91% of Operating Income, indicating a high degree of dependence on a single business format. Deterioration in same-store performance is structurally likely to have a direct impact on total Company results.

2. Margin pressure from the relative increase in SG&A expenses: While Revenue decreased YoY by -2.3%, SG&A expenses declined only -1.8% YoY, causing the SG&A ratio to rise to 38.0% (37.8% in the previous year). If revenue recovery remains slow, rising costs could erode margins.

3. Dependence on short-term borrowings: Borrowings included in current liabilities decreased by -6.7% from the end of the previous fiscal year to ¥14.00B. However, short-term borrowings remain high relative to long-term borrowings of ¥1.00B, creating a structure that requires monitoring of refinancing conditions.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (retail)

Profitability and Returns

Profitability is substantially above the industry median for both the Operating Income margin and Net Income margin, placing the Company at a high level within the industry.

Growth and Capital Efficiency

The Revenue growth rate is below the industry median, indicating relative underperformance within the industry in terms of top-line growth.

※Source: Company analysis

Key Takeaways from the Earnings Results

1. Despite lower revenue, the improvement in the gross margin to 53.6% from 53.4% in the previous year resulted in a slight improvement in the Operating Income margin to 16.2%, confirming resilience in the cost structure.

2. Inventories (-7.6% from the end of the previous fiscal year) and accounts receivable (-22.5%) continued to contract, indicating a trend toward working capital reduction. Inventory turnover trends will remain an area for monitoring.

3. Progress rates against the full-year plan were 28.0% for Operating Income and 28.3% for Net Income, exceeding the simple progress benchmark of 25%. Profit progress is ahead of revenue progress of 23.6%.

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 of any specific investment action.

Sensitivity: ¥1,687–¥1,788 at ±1% for the cost of equity, and ¥1,734–¥1,737 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 quarter-end are used (there is a timing mismatch with the full-year forecast).

(Calculation model: residual income model / interest rate reference month: 2026-07 / This value does not predict 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 release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting professionals as necessary.

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