AIGAN (9854) FY2026 Q3 Earnings Report

Quick View

Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, the key highlight was the turnaround from an operating loss in the same period of the previous year to operating profitability, driven by a modest increase in revenue and ongoing improvement in the SG&A expense ratio. Revenue was ¥116.5B (¥113.0B in the same period of the previous year, +3.0% YoY), while operating income was ¥1.9B (an operating loss of ¥0.9B in the same period of the previous year, representing an improvement of ¥3.1B). Ordinary income was ¥2.4B (an ordinary loss of ¥0.4B in the same period of the previous year), and net income was ¥1.7B (a net loss of ¥0.6B in the same period of the previous year), with both turning profitable. The primary factor behind the turnaround to profit growth was that the increase in SG&A expenses was contained at a pace below revenue growth.

Factors Affecting Performance

【Revenue】Revenue was ¥116.5B, up +3.0% YoY. Eyewear retail, which accounts for 97.6% of consolidated revenue, led growth at ¥113.7B (+3.5% YoY), while eyewear wholesale revenue continued to decline, at ¥2.7B (-11.6% YoY). The overseas eyewear sales segment, which existed in the previous year, was discontinued during the current period following the completion of its liquidation.

【Profit and Loss】The gross margin improved to 68.8%, up 0.8pt from 68.0% in the same period of the previous year, while the SG&A expense ratio declined 1.6pt to 67.2% from 68.8%. Although revenue increased +3.0%, the increase in SG&A expenses was limited to +0.7%, resulting in operating leverage. Consequently, the operating margin improved to 1.6%, up 2.4pt from negative 0.8% in the same period of the previous year. Profit before tax included a gain on the sale of investment securities of ¥0.2B, which contributed to ordinary income of ¥2.4B. Segment income in eyewear retail recovered to ¥1.9B (a margin of 1.6%), while eyewear wholesale continued to report a loss of ¥0.02B. Both revenue and profit exceeded the levels recorded in the same period of the previous year, indicating an increase in both revenue and profit.

Segment Analysis

The core eyewear retail business recorded revenue of ¥113.7B (+3.5% YoY) and segment income of ¥1.9B, a significant recovery from the ¥0.7B loss in the same period of the previous year. Eyewear wholesale recorded revenue of ¥2.7B (-11.6% YoY) and a segment loss of ¥0.02B, remaining in the red. Overseas eyewear sales was discontinued as a segment from the current period following the completion of the liquidation of Beijing Aigan Optical Co., Ltd., eliminating loss factors attributable to the overseas business. Dependence on the domestic retail business has increased further for both revenue and profit.

Key Financial Metrics

【Profitability】The operating margin of 1.6% and net profit margin of 1.4% both improved significantly from negative levels in the same period of the previous year, but remain low in absolute terms.【Cash Quality】Inventories were ¥24.3B, up from ¥20.7B in the same period of the previous year, and inventory trends could affect the sustainability of the gross margin. Accounts payable increased to ¥5.2B, up +45.2% YoY, with supplier credit financing part of the working capital burden associated with the expansion of purchases.【Investment Efficiency】ROE (annualized) was 1.8%. Although the Company turned profitable from the loss-making period of the previous year, capital efficiency remains low.【Financial Soundness】The equity ratio was extremely high at 85.5%. With current assets of ¥77.3B and current liabilities of ¥15.3B, there are no concerns regarding short-term payment capacity. Cash and deposits of ¥42.6B substantially exceeded current liabilities.

Cash Flow Analysis

Although no cash flow statement has been disclosed, an analysis of funding trends based on changes in the balance sheet indicates that cash and deposits were ¥42.6B, remaining almost flat compared with ¥43.0B in the same period of the previous year. Meanwhile, inventories increased to ¥24.3B, and investment securities also increased to ¥8.7B, suggesting that part of the funds generated from operating activities may have been allocated to inventory accumulation and securities investments. The increase in accounts payable to ¥5.2B has partially mitigated the working capital burden associated with increased purchases. Net assets increased to ¥123.6B, while retained earnings accumulated to ¥30.6B, indicating that the return to profitability during the current period contributed to an increase in retained earnings.

Quality of Earnings

Ordinary income of ¥2.4B comprised operating income of ¥1.9B plus ¥0.1B in dividend income, ¥0.1B in insurance dividends, and other non-operating income of ¥0.7B, indicating that the contribution from sources outside the core business was limited. Meanwhile, profit before tax of ¥2.5B included a gain on the sale of investment securities of ¥0.2B as an extraordinary gain, meaning that a certain portion of net income of ¥1.7B was attributable to non-recurring factors. Extraordinary losses also included an impairment loss of ¥0.1B and a loss on disposal of fixed assets of ¥0.1B, suggesting that the replacement of store-related assets is ongoing. The upward trend in inventories partly reflects inventory accumulation in response to increased sales, but should be monitored from an accrual perspective as a potential risk of future valuation losses. Comprehensive income was ¥3.5B, exceeding net income of ¥1.7B, with valuation differences on investment securities held, amounting to ¥1.8B, serving as the primary driver.

Earnings Forecast and Guidance

The cumulative Q3 progress rates against the full-year Company forecasts were 73.8% for revenue (forecast: ¥157.9B), 83.8% for operating income (forecast: ¥2.2B), and 86.7% for ordinary income (forecast: ¥2.7B). Net income had reached ¥1.7B against the full-year forecast of ¥1.5B, representing a progress rate of 111.4% and already exceeding the plan. While revenue progress was slightly below the standard 75%, profit performance was tracking ahead of plan. If this relationship is maintained at face value, the calculation implies a small loss in Q4. The excess progress in net income was supported by a gain on the sale of investment securities of ¥0.2B, which needs to be assessed separately from growth in core operating earnings.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the disclosed dividend forecast also remains at ¥0 for the full year, indicating the continuation of a no-dividend policy. The payout ratio is 0% because there are no dividend payments subject to calculation. The financial foundation, including an equity ratio of 85.5% and cash and deposits of ¥42.6B, could support options for shareholder returns. However, given the annualized ROE of 1.8%, the focus in determining whether to resume shareholder returns will be sustained improvement in profitability.

Risk Factors

1. Inventory Accumulation Risk: Inventories were ¥24.3B, up from ¥20.7B in the same period of the previous year. Although eyewear retail requires a certain level of inventory due to the diversity of product numbers and prescriptions, continued growth in inventories could place pressure on the gross margin through discount sales and inventory valuation losses.

2. Profitability Vulnerability: Although the operating margin improved to 1.6%, its absolute level remains low, and the segment margin of eyewear retail also remained at 1.6%. The business structure is susceptible to a return to operating losses if customer traffic declines, price competition with competitors intensifies, or personnel and store-related expenses increase.

3. Weakness in the Wholesale Business: Eyewear wholesale revenue declined 11.6% YoY, and the segment recorded a loss of ¥0.02B. Together with the discontinuation of the overseas eyewear sales segment, this has further increased dependence on the retail business.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The operating margin is 1.6pt below the industry median, while the net profit margin is approximately in line with the median.

Growth and Capital Efficiency

The revenue growth rate is approximately in line with the industry median and is positioned toward the lower end of the growth-rate range.

※Source: Compiled by the Company

Key Takeaways from the Results

1. The turnaround from an operating loss of ¥0.9B in the same period of the previous year to operating income of ¥1.9B was driven by cost control that limited the increase in SG&A expenses to +0.7% against revenue growth of +3.0%. It will be necessary to determine over the coming quarters whether this improvement in the earnings structure is temporary or reflects the establishment of sustainable SG&A discipline.

2. Net income progress has already exceeded the full-year forecast (111.4%), but includes a gain on the sale of investment securities of ¥0.2B; therefore, evaluation should distinguish this from profit generated by the core business.

3. While the financial foundation is robust, with an equity ratio of 85.5% and a current ratio exceeding 500%, the upward trend in inventories is a point requiring monitoring from an inventory-efficiency perspective.

Theoretical Share Price (Reference Value)

Sensitivity: ¥465–¥492 at ±1% for the cost of equity, and ¥473–¥482 at ±0.1 for ω.

Notes:

• Because cumulative net income progress against the full-year forecast (111%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a range of +10% at the upper limit (because companies whose progress is ahead of plan tend to exceed forecasts. Adjustments may be excessive for businesses with strong seasonality).
• 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 gap relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices)

---

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 responsibility, after consulting with a professional as necessary.

---End of Report---