GOURMET KINEYA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥21.47B
• Operating Income: ¥210M
• Net Income: ¥348M
• EPS: ¥1.55

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Gourmet Kineya (9850) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥21.473bn, up 6.7% YoY, but profitability deteriorated sharply. Gross profit was ¥7.483bn, implying a gross margin of 34.9%, while operating income fell 60.7% YoY to ¥0.21bn, driving an operating margin of roughly 1.0%. Ordinary income was ¥0.257bn, and net income declined to ¥0.035bn, a net margin of just 0.16%, highlighting significant earnings compression despite top-line growth. EBITDA was ¥0.732bn (3.4% margin), underscoring thin cash earnings in the current cost environment. DuPont analysis indicates ROE of 0.38%, driven by very low net margin (0.16%), moderate asset turnover (0.661x), and relatively high financial leverage (3.49x). The company’s interest coverage is 2.4x (operating income basis), leaving limited cushion against further earnings volatility. Liquidity metrics are adequate but not strong, with a current ratio of 118% and a quick ratio of 113%, and working capital of ¥1.446bn. Cash flow quality is weak this half: operating cash flow was negative ¥0.749bn, translating to an OCF/Net Income ratio of -21.4x, which points to poor earnings-to-cash conversion and/or sizeable working capital outflows. Financing cash flow was a net outflow of ¥1.131bn, suggesting debt repayments or lease repayments amid negative OCF, which tightens liquidity. The balance sheet shows total assets of ¥32.462bn and total equity of ¥9.3bn (implying a leverage multiple of 3.49x); the reported equity ratio is undisclosed in XBRL. Dividend payments are suspended (DPS ¥0; payout 0%), which appears consistent with the current earnings and cash flow profile. Cost inflation (food and labor) and limited price pass-through likely drove negative operating leverage: revenue grew but operating income contracted significantly. The effective tax line appears volatile or influenced by special items, as the provided ‘effective tax rate’ metric is 0.0% while taxes are booked at ¥0.190bn; this warrants caution in interpreting after-tax trends. Inventory at ¥0.376bn is modest relative to current assets, implying receivables and cash management are more material to working capital dynamics; however, cash and investing cash flow are not disclosed, limiting full assessment of liquidity buffers and capex. Overall, the set of results indicates growth in sales but material pressure on profitability and cash generation, elevating near-term financial risk while the company focuses on stabilization.

Profitability Analysis

ROE is 0.38%, decomposed into a net margin of 0.16%, asset turnover of 0.661x, and financial leverage of 3.49x. The overwhelmingly low net margin is the primary drag on ROE, with leverage masking otherwise weak returns. Operating margin is about 1.0% (¥210m/¥21,473m), down sharply YoY (operating income -60.7% despite +6.7% revenue), signaling negative operating leverage. Gross margin stands at 34.9%, but the compression from gross profit to operating profit is severe given SG&A intensity and cost inflation. EBITDA margin of 3.4% indicates limited buffer to absorb wage and raw material inflation, and limited capacity to fund capex internally without working capital support. Interest coverage at 2.4x (operating income/interest expense) is thin for a consumer dining business exposed to cyclical and cost shocks. Ordinary income margin is approximately 1.2%, only marginally above operating margin, suggesting non-operating items provide limited relief. The net margin at 0.16% implies high sensitivity of bottom line to small swings in traffic, pricing, or costs. Overall margin quality is weak, and profitability is vulnerable until cost ratios (food, labor, utilities) improve or price/mix actions gain traction.

Growth Assessment

Revenue growth of 6.7% YoY to ¥21.473bn suggests some recovery in customer traffic and/or pricing, consistent with broader sector normalization. However, the severe decline in operating income (-60.7% YoY) indicates growth is not translating to profits, pointing to cost pressures and negative operating leverage. Gross margin at 34.9% is reasonable for the category, but SG&A and labor intensity eroded operating margin to ~1.0%. EBITDA of ¥0.732bn (3.4% margin) limits reinvestment capacity absent improved cash conversion. Ordinary income of ¥0.257bn and net income of ¥0.035bn highlight fragile earnings quality, with after-tax results highly sensitive to non-recurring and tax effects. Sustainability of revenue growth hinges on same-store sales momentum, pricing elasticity, and format optimization; profit sustainability requires clear cost control and productivity gains. Without evidence of wage cost normalization or successful menu repricing, growth remains volume-heavy and margin-light. Outlook near term is cautious: top line may continue to grow modestly, but earnings will likely lag until cost ratios normalize or structural efficiencies are realized.

Financial Health

Total assets are ¥32.462bn against total equity of ¥9.3bn, implying a leverage multiple (assets/equity) of 3.49x and a debt-to-equity ratio of 2.37x, indicating a leveraged capital structure. Liquidity is adequate but not robust, with a current ratio of 118.1% and quick ratio of 113.4%, supported by ¥1.446bn of working capital. Interest expense is ¥87.2m; coverage at 2.4x (operating income basis) leaves modest headroom if operating income weakens further. Ordinary income exceeds operating income only slightly, suggesting limited non-operating buffers. The reported equity ratio is not disclosed in XBRL; mechanically, assets and equity imply around ~28–29%, but we rely on the provided non-zero items. Negative operating cash flow (¥0.749bn) combined with financing outflows (¥1.131bn) suggests balance sheet cash (not disclosed) or credit lines were drawn down previously and are now being repaid or leases reduced, tightening flexibility. Overall solvency is acceptable but trending tighter given negative OCF and thin profitability.

Cash Flow Quality

Operating cash flow of -¥748.9m versus net income of ¥35m yields an OCF/Net Income ratio of -21.4x, indicating very weak earnings-to-cash conversion this half. EBITDA of ¥731.5m and depreciation of ¥521.5m imply only modest cash generation before working capital; large working capital outflows likely drove negative OCF. Inventories are ¥375.7m (small versus current assets), so receivables, payables, and other current items likely explain most of the swing. Investing cash flow is undisclosed (reported as 0), limiting analysis of maintenance vs. growth capex and the true free cash flow. Free cash flow is shown as 0 in the calculated metrics; given negative OCF and undisclosed investing outlays, underlying FCF is likely negative in substance for the period. Financing CF was -¥1,131.3m, indicating repayments (debt/leases) or other financing uses while OCF was negative, which can pressure liquidity absent cash reserves. Overall, cash flow quality is weak, with high reliance on working capital normalization or near-term profit recovery to stabilize cash generation.

Dividend Sustainability

The company paid no dividend (DPS ¥0) with a payout ratio of 0%, which aligns with thin earnings (¥35m) and negative operating cash flow. FCF coverage is shown as 0.00x; given negative OCF and undisclosed investing CF, sustaining dividends would not be supported by internal cash generation. With interest coverage at 2.4x and leverage of 2.37x D/E, preserving cash to protect liquidity and fund operations appears prudent. Unless profitability and operating cash conversion improve, reinstating dividends would be challenging. Policy stance near term is likely capital preservation over distribution.

Risk Assessment

Business Risks:

• Cost inflation (food, energy, and labor) squeezing margins with limited pricing power
• Traffic volatility and macro sensitivity in Japan’s restaurant sector
• Operational leverage risk: fixed cost base magnifies downside when sales soften
• Competition and promotional intensity across casual dining and food service
• Execution risk in menu pricing, mix optimization, and productivity initiatives
• Potential store portfolio rationalization risks affecting sales base

Financial Risks:

• Negative operating cash flow and weak cash conversion increasing liquidity risk
• Leverage (D/E 2.37x) and modest interest coverage (2.4x) heighten solvency sensitivity
• Refinancing and covenant risks if earnings weaken further
• Lease obligations (typical for restaurants) reduce financial flexibility
• Tax and below-the-line volatility affecting net profit visibility

Key Concerns:

• Operating income down 60.7% YoY despite +6.7% revenue growth
• Net margin at 0.16% and ROE at 0.38% indicate very low returns
• OCF of -¥748.9m versus net income of ¥35m (OCF/NI -21.4x)
• Financing outflow of -¥1.131bn amid negative OCF tightens liquidity
• Interest coverage of 2.4x leaves limited buffer
• Limited disclosure on investing CF and cash balances constrains full assessment

Investment Implications

Key Takeaways:

• Sales growth resumed (+6.7% YoY), but earnings quality deteriorated sharply
• Margins are thin: operating margin ~1.0% and EBITDA margin 3.4%
• ROE is suppressed at 0.38% due to near-zero net margin despite leverage
• Cash generation is weak with significant negative OCF this half
• Leverage and modest interest cover elevate sensitivity to earnings shocks
• Dividend suspension is consistent with current cash and earnings profile

Metrics to Watch:

• Same-store sales growth and average ticket vs. traffic trends
• Food and labor cost ratios (COGS and personnel as % of sales)
• SG&A as % of sales and productivity metrics per store
• Operating margin and EBITDA margin trajectory
• Operating cash flow, working capital turns, and net debt/EBITDA
• Interest coverage and maturity/refinancing schedule
• Store openings/closures and capex (maintenance vs. growth)

Relative Positioning: Relative to domestic casual dining peers, Gourmet Kineya’s growth is in line to modest, but profitability and cash conversion are weaker with thinner operating margins and lower ROE; leverage is on the higher side, and liquidity is adequate but less comfortable given negative OCF.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis