MAKIYA (9890) FY2026 Q3 Earnings Report

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Executive Summary

Cumulative results for FY2026 Q3 showed higher revenue but lower earnings, with the failure of revenue expansion to translate into profit growth being the defining feature. Revenue increased to ¥707.0B (+5.5% YoY), while Operating Income declined to ¥17.0B (-5.9%), Ordinary Income to ¥17.9B (-5.5%), and Net Income to ¥11.2B (-10.6%). Profit margins declined in the core Retail Business segment, while widening losses in the EC Business and recognition of store closure losses further offset the benefits of higher revenue.

Factors Affecting Performance

【Revenue】Revenue increased by +5.5% YoY to ¥707.0B. By segment, the Retail Business remained the main contributor at ¥648.0B (91.6% of total, +5.3% YoY), while the EC Business exceeded the Retail Business in growth rate, reaching ¥56.0B (7.9% of total, +7.7% YoY). The Real Estate Leasing Business remained stable at ¥3.1B (0.4% of total), although its scale was small. Food sales led growth, increasing to ¥526.4B (+7.1%), while Non-Food sales declined to ¥120.0B (-2.0%), suggesting a shift in sales toward lower-gross-margin products.

【Profit and Loss】Operating Income declined to ¥17.0B (-5.9% YoY), Ordinary Income to ¥17.9B (-5.5% YoY), and Net Income to ¥11.2B (-10.6% YoY). The gross margin was 23.0% and the Operating Income margin was 2.4%, both lower than in the previous year, as increases in personnel expenses, logistics costs, and other costs exceeded the benefits of higher revenue. An extraordinary loss of ¥1.0B, mainly comprising store closure losses, was recorded and reduced profit from Profit Before Tax to Net Income. As a result, the decline in Net Income exceeded the decline in Operating Income. Accordingly, the Company’s results for the period are characterized by higher revenue but lower earnings.

Segment Analysis

The Retail Business generated operating revenue of ¥648.0B (+5.3% YoY) and Operating Income of ¥20.0B (-4.2% YoY), with its margin declining from 3.4% to 3.1%. As the largest segment by revenue, its margin deterioration was the primary factor weighing on company-wide profit. The EC Business secured higher revenue of ¥56.0B (+7.7% YoY), but recorded an Operating Loss of ¥0.9B, widening from the previous year’s loss of ¥0.6B, indicating that investment to drive revenue growth is preceding monetization. The Real Estate Leasing Business generated operating revenue of ¥3.1B and Operating Income of ¥1.2B, representing a high margin of approximately 38.0%. Although its contribution to company-wide profit is small, the segment demonstrates high stability.

Key Financial Metrics

【Profitability】The Operating Income margin was 2.4% and the Net Income margin was 1.6%, both contracting from the previous year. ROE was 5.1%; the low Net Income margin was the largest downward factor. Although total asset turnover of 1.68x on an annualized basis indicates a certain level of efficiency, it was not sufficient to offset the low profitability.【Cash Flow Quality】Because the statement of cash flows has not been disclosed, a comparison between Operating Cash Flow (OCF) and Net Income cannot be evaluated. However, inventories were ¥61.2B (14.5% of total assets), while accounts payable were ¥79.9B, forming a structure that supports procurement financing.【Investment Efficiency】Property, plant and equipment amounted to ¥212.8B, representing 50.5% of total assets, and consisted primarily of store assets. Attention should therefore be paid to impairment risk if store profitability declines. Goodwill of ¥14.2B and intangible assets of ¥20.4B were both small relative to total assets, indicating limited dependence on M&A-related assets.【Financial Soundness】The Equity Ratio was 52.0%, the D/E ratio was 0.92x, and the interest coverage ratio was 46.02x, indicating that financial leverage was not excessive. However, the current ratio was 96.4%, below 1x, and working capital was negative ¥5.1B.

Cash Flow Analysis

Because cash flow statement figures have not been disclosed, a direct analysis of Operating Cash Flow, Investing Cash Flow, Financing Cash Flow, and FCF is not possible. However, certain trends can be identified from the movement of funds on the balance sheet. Cash and deposits were ¥43.8B, nearly unchanged from ¥44.6B in the previous year, indicating that no significant cash outflow occurred. Inventories increased to ¥61.2B, up +3.6% from the previous year, while accounts receivable increased +27.8% to ¥27.1B, indicating that working capital investment is expanding in line with revenue growth. Meanwhile, accounts payable increased +16.9% to ¥79.9B, expanding funding through trade payables and partially offsetting the increase in working capital. Property, plant and equipment increased +10.3% to ¥212.8B, highlighting continued store investment as a use of funds.

Quality of Earnings

The difference between Ordinary Income of ¥17.9B and Profit Before Tax of ¥17.2B resulted from a net gain in non-operating income and expenses, comprising non-operating income of ¥1.6B versus non-operating expenses of ¥0.7B. Dividend income of ¥0.4B was a major component, distinguishing this contribution from the earning power of the core business. The reduction from Profit Before Tax of ¥17.2B to Net Income of ¥11.2B was affected by income taxes of ¥6.0B (tax burden coefficient of 0.652x), as well as the difference between an extraordinary loss of ¥1.0B, mainly store closure losses, and an extraordinary gain of ¥0.2B. Both extraordinary gains and losses were temporary factors and contributed to the decline in Net Income of -10.6% exceeding the -5.9% decline in Operating Income. Comprehensive Income was ¥13.8B, exceeding Net Income of ¥11.2B, primarily due to a +¥2.8B gain on valuation differences on securities. This indicates that accrual-related factors unrelated to operating performance significantly boosted Comprehensive Income.

Earnings Forecast and Guidance

Progress toward the full-year forecast was 73.1% for Operating Income (¥17.0B/¥23.3B), 74.2% for Ordinary Income (¥17.9B/¥24.2B), and 73.7% for Net Income (¥11.2B/¥15.2B), all slightly below the standard Q3 progress rate of 75%. To achieve the full-year forecast, approximately ¥6.0B in Operating Income and approximately ¥4.0B in Net Income must be secured in Q4. Recovery in the Retail Business margin and a reduction in losses in the EC Business will be key to progress.

Shareholder Returns

The Q2 dividend was ¥15.00 per share, while the full-year dividend forecast is ¥30.00 per share. The Payout Ratio, based on dividends relative to Net Income of ¥11.2B, was 14.1%, indicating substantial dividend capacity from an earnings perspective. With an Equity Ratio of 52.0% and a D/E ratio of 0.92x, financial leverage is not excessive, providing a foundation to support dividend stability. No share repurchases were identified in the disclosed data, and this report therefore uses only the Payout Ratio.

Risk Factors

1. Declining Retail Business margin: The Operating Income margin of the Retail Business segment declined from 3.4% to 3.1%. As the segment accounts for 91.6% of total revenue, this decline is the primary factor weighing on the company-wide Operating Income margin of 2.4%.

2. Widening losses in the EC Business: The EC Business secured higher revenue of ¥56.0B (+7.7% YoY), but its Operating Loss widened to ¥0.9B (¥0.6B in the previous year). Investment to drive revenue growth is preceding monetization, and widening losses are weighing on company-wide profit.

3. Short-term liquidity considerations: The current ratio was 96.4%, below 1x, and working capital was negative ¥5.1B. Although the short-term debt ratio was 42.5%, cash and deposits of ¥43.8B covered short-term borrowings of ¥19.3B by 2.28x, indicating that the Company is not in a state of immediate funding shortfall.

Industry Benchmark (Reference; Compiled by the Company)

Key Takeaways from the Financial Results

1. Despite higher revenue, both Operating Income and Net Income declined. A key point to monitor in future results is whether the decline in margins is attributable to temporary cost increases or a structural change in profitability.

2. The EC Business remains on a revenue growth trajectory, but losses are widening. Whether this is within an acceptable range for growth investment will be determined by the balance between the pace of future revenue growth and the reduction in losses.

3. The Payout Ratio of 14.1% is low, and financial leverage is not excessive. Accordingly, the impact of the decline in earnings for the period on the dividend policy itself is expected to be limited.

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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 disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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AI Financial Analysis

Executive Summary

FY2026 Q3 performance was mixed: revenue expanded solidly, but margin compression and a store-closure loss caused operating and net earnings to decline. Cumulative revenue increased 5.5% YoY to ¥70.71bn. Operating income declined 5.9% YoY to ¥1.70bn despite the higher sales base. Ordinary income fell 5.5% to ¥1.79bn. Net income declined more sharply, by 10.6% YoY, to ¥1.12bn. Gross profit rose 2.3% to ¥16.30bn, but this lagged revenue growth. Consequently, gross margin compressed 68bp YoY to 23.0%. SG&A rose 3.4% to ¥15.07bn, slower than revenue growth but faster than gross profit growth. The SG&A ratio improved 42bp to 21.3%, yet the improvement was insufficient to offset lower gross-margin conversion. Operating margin contracted 29bp YoY to 2.4%. Net margin declined 28bp to 1.6%. Retail remained the core business, accounting for approximately 91.6% of segment revenue and generating ¥2.00bn of segment profit. Food sales increased 7.1% YoY, while non-food sales decreased 2.0%, illustrating reliance on food-category growth. The EC segment grew revenue 7.7% but its segment loss widened to ¥0.93bn from ¥0.57bn. A ¥100mn loss on store closures was the principal extraordinary item and contributed to net-profit underperformance. The annualized DuPont ROE was 6.8%, below the 8% benchmark, with thin net margin rather than balance-sheet leverage being the principal constraint. Management's full-year revenue forecast is broadly on track, while the operating-income forecast requires a modest Q4 profitability recovery. Liquidity is the key balance-sheet issue, as current liabilities exceed current assets and working capital is negative. The planned ¥30 annual dividend appears earnings-covered under the full-year forecast, but future distribution capacity will depend on restoring retail and EC profitability while maintaining liquidity discipline.

Profitability Analysis

Annualized DuPont ROE is 6.8%, decomposed into a 1.6% net profit margin, 2.236x asset turnover, and 1.92x financial leverage. Asset turnover is robust for a retailer and reflects the high-volume nature of the business. Financial leverage is moderate, while the reported debt-to-equity ratio is 0.92x and debt/capital is 17.1%, indicating that the low ROE is principally a margin issue rather than excessive financial leverage. The largest adverse earnings movement was net margin: it fell from 1.9% in the prior-year Q3 cumulative period to 1.6%, or 28bp. Operating margin similarly declined 29bp to 2.4%, materially below the 5% general profitability caution threshold. Gross margin fell from 23.7% to 23.0%, a 68bp deterioration, as cost of sales rose 6.5%, faster than 5.5% revenue growth. SG&A increased 3.4%, below revenue growth, and the SG&A ratio improved to 21.3% from 21.7%; therefore, fixed-cost control was not the source of the operating-margin decline. Rather, weaker merchandise margin conversion was the dominant factor. Retail segment profit declined 4.3% to ¥2.00bn despite 5.3% segment revenue growth, reducing its segment margin to 3.1% from 3.4%. Rental segment profit rose 4.4% to ¥117mn on essentially flat revenue, implying a relatively higher-margin and stable ancillary earnings stream. EC revenue rose to ¥5.60bn, but the segment loss widened by ¥36mn to ¥93mn, making it dilutive to consolidated profitability. Interest coverage remains very strong at 46.02x, and the five-factor interest burden of 1.008 indicates that financial costs are not constraining profitability. The 34.8% effective tax rate reduced the tax burden to 0.652, but the larger earnings issue remains the operating-margin structure. Under JGAAP, goodwill amortization may depress operating income relative with IFRS reporters; nevertheless, goodwill is only 6.5% of equity and is not a material balance-sheet distortion.

Growth Assessment

Revenue growth was underpinned by food sales, which rose 7.1% YoY to ¥52.64bn. Food represented 74.4% of consolidated revenue and remains the principal growth engine. Retail non-food sales declined 2.0% to ¥12.00bn, limiting mix diversification and likely contributing to the gross-margin pressure. EC sales increased 7.7% YoY to ¥5.60bn and accounted for 7.9% of revenue, but the deepening segment loss means that growth has not yet translated into earnings scale. Rental revenue was nearly flat at ¥308mn, while segment profit improved to ¥117mn, offering modest defensive support. Consolidated gross profit growth of 2.3% materially trailed the 5.5% sales increase, signaling weaker incremental gross-profit conversion. The ¥100mn store-closure loss was non-recurring in classification, though repeated closures would indicate ongoing portfolio optimization costs rather than an isolated event. The full-year sales forecast of ¥94.43bn has reached 74.9% at Q3, essentially in line with the standard 75% progress rate. Operating-income progress is 73.1% against the ¥2.33bn forecast, 1.9 percentage points below the seasonal benchmark. Ordinary-income progress is 74.1% against the ¥2.42bn forecast. Net-income progress is 73.7% against the ¥1.52bn forecast. Achieving the operating-income forecast requires Q4 operating income of ¥626mn, about 10.2% above the Q1-Q3 quarterly average of ¥568mn. This implies a Q4 operating margin of approximately 2.6%, modestly above the Q1-Q3 cumulative 2.4% margin. The outlook therefore depends less on further top-line growth than on stabilizing merchandise margins, reducing EC losses, and avoiding further store-portfolio charges.

Financial Health

Liquidity warrants explicit caution. The current ratio is 0.96x, below 1.0x, and the quick ratio is 0.53x. Current assets of ¥13.62bn are lower than current liabilities of ¥14.13bn, producing negative working capital of ¥509mn. This is a maturity mismatch risk because a portion of short-term obligations must be supported by ongoing inventory sales, trade-payable funding, and cash generation rather than current liquid assets alone. Cash and deposits total ¥4.38bn, equivalent to 2.28x short-term loans of ¥1.93bn, which provides a meaningful buffer against direct bank-debt refinancing needs. However, current liabilities also include ¥7.99bn of trade payables and ¥823mn of contract liabilities, so liquidity management depends materially on normal retail operating turnover. Interest-bearing debt totals ¥4.53bn, comprising ¥1.93bn short-term loans and ¥2.60bn long-term loans. Short-term loans represent 42.5% of interest-bearing debt, exceeding the 40% refinancing-risk alert threshold. This short-term debt mix raises rollover sensitivity even though interest coverage is strong and cash exceeds short-term borrowings. Total debt/capital is conservative at 17.1%, and interest-bearing debt is approximately 0.21x total equity, indicating manageable structural leverage. The reported debt-to-equity ratio of 0.92x remains below the 2.0x high-leverage warning threshold. Accounts receivable rose 27.8% YoY to ¥2.71bn, materially faster than sales growth. The receivables increase should be monitored for changes in settlement timing, corporate-sales mix, or slower collection. Asset retirement obligations total ¥1.32bn, equal to 6.5% of liabilities and above the 5% quality-alert threshold. This is consistent with a store-based retail model that carries restoration obligations, but it increases fixed exit costs if store closures accelerate. Goodwill of ¥1.42bn equals just 3.4% of assets and 6.5% of equity, limiting M&A-related impairment exposure. Equity increased 5.4% YoY to ¥21.91bn, and the equity ratio remained approximately 52%, providing a reasonable solvency cushion.

Notable B/S Changes

Accounts receivable: +¥590mn (+27.8%) to ¥2.71bn - growth materially exceeded the 5.5% sales increase; monitor settlement timing and collection quality.

Cash Flow Quality

Dividend Sustainability

The interim dividend is ¥15.0 per share. The company forecasts a full-year dividend of ¥30.0 per share, implying an expected year-end dividend of ¥15.0 per share if the interim payment is maintained. Against forecast EPS of ¥152.1, the forecast dividend payout ratio is approximately 19.7%. This is well below the 60% sustainability benchmark and leaves substantial earnings retention capacity. The Q2 dividend equated to a calculated cumulative payout ratio of 14.1% based on Q3 net income. Retained earnings total ¥18.99bn, providing a sizeable accounting capital base relative to the planned dividend. Dividend continuity nevertheless depends on preserving operating profitability because the annualized ROE is only 6.8% and operating margin is 2.4%. The low payout ratio offers flexibility to absorb moderate earnings volatility, including store-closure costs. Negative working capital and the sub-1.0x current ratio make liquidity preservation more important than a higher shareholder distribution rate. No share buyback is indicated; therefore, the relevant distribution metric is the dividend payout ratio rather than total return ratio.

Risk Assessment

Business risks include Merchandise-margin risk: gross margin fell 68bp YoY to 23.0%, and cost of sales grew faster than revenue., Food concentration risk: food sales account for 74.4% of consolidated revenue, making earnings sensitive to food-price competition, procurement costs, and local consumer traffic., Non-food demand risk: non-food sales declined 2.0% YoY, limiting the ability to improve category mix and gross-profit generation., EC execution risk: EC revenue grew 7.7%, but the segment loss widened to ¥93mn, requiring better fulfillment, marketing, and scale economics., Store-network risk: the ¥100mn store-closure loss and ¥1.32bn asset retirement obligation indicate financial exposure to portfolio restructuring and store exit costs..

Financial risks include Liquidity risk: the current ratio is 0.96x, the quick ratio is 0.53x, and working capital is negative ¥509mn., Refinancing risk: 42.5% of interest-bearing debt is short term, above the 40% quality-alert threshold, although cash covers short-term loans by 2.28x., Receivables risk: accounts receivable increased 27.8% YoY to ¥2.71bn, substantially exceeding sales growth and requiring monitoring of collection quality., Profitability buffer risk: the 2.4% operating margin leaves limited capacity to absorb further cost inflation or competitive pricing..

Key concerns include Highest priority: restoring gross-margin conversion, because gross profit grew only 2.3% against 5.5% revenue growth., High priority: narrowing the EC loss while retaining growth, as the segment is currently dilutive to group earnings., High priority: managing short-term liabilities and debt maturities while current assets remain below current liabilities., Moderate priority: ensuring that store closures are selective portfolio actions rather than evidence of broad underperforming-store pressure., Moderate priority: maintaining the full-year operating-income forecast, which requires Q4 operating profit approximately 10% above the Q1-Q3 quarterly average..

Investment Implications

Key takeaways include Sales momentum is intact, with revenue up 5.5% YoY and full-year sales forecast progress of 74.9% at Q3., Profit conversion has weakened: operating income fell 5.9% and net income fell 10.6% despite revenue growth., The core retail operation remains profitable but experienced a 4.3% decline in segment profit., Food growth and rental earnings offer support, whereas non-food weakness and expanding EC losses weigh on earnings quality., Balance-sheet solvency is reasonable, but liquidity and the short-term debt mix require close attention., The forecast ¥30 dividend is conservatively covered by forecast earnings, with an implied 19.7% payout ratio..

Metrics to watch include Gross margin and operating margin, currently 23.0% and 2.4%, respectively, Food versus non-food sales growth and resulting merchandise mix, EC segment loss, currently ¥93mn on ¥5.60bn of revenue, Q4 operating income versus the ¥626mn required to meet the full-year forecast, Current ratio, quick ratio, and working capital, Short-term debt ratio and refinancing conditions, Accounts receivable growth and collection trends, Store closure charges and asset retirement obligation movements.

Regarding relative positioning, Makiy a has retail-appropriate high asset turnover and a sound equity base, but its 2.4% operating margin and 6.8% annualized ROE place it below stronger retail profitability benchmarks. Its 23.0% gross margin is consistent with a discount/volume-oriented retail profile, while the sub-1.0x current ratio and loss-making EC operation are comparatively important execution constraints.