Joyfull Co., Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥19.32B
• Operating Income: ¥1.81B
• Net Income: ¥1.82B
• EPS: ¥36.57

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Verdict: FY2026 Q1 was a mixed quarter—top-line grew but profitability compressed, leading to a sizable decline in bottom-line earnings. Revenue rose 4.8% YoY to 193.19, while operating income fell 14.9% YoY to 18.12 and ordinary income declined 14.5% YoY to 18.17. Net income dropped 37.8% YoY to 11.30, indicating additional pressure below the operating line (e.g., taxes, one-offs). Operating margin was 9.4% (18.12/193.19), down from an implied ~11.6% a year ago, a compression of roughly 217 bps. Net margin fell to 5.9% from an implied ~9.9% last year, compressing by about 400 bps. Gross margin remained high at 62.7%, but SG&A intensity was elevated at 51.7% of sales, squeezing operating leverage. Interest coverage remains robust at 72.5x (OI/interest expense), so solvency is not the issue—liquidity is, with a current ratio of 0.58 and quick ratio of 0.51. Working capital is negative at -47.95, signalling reliance on short-term liabilities to fund operations, which is typical for restaurants but does increase liquidity risk. ROE is 8.3% via DuPont (NPM 5.8% × Asset Turnover 0.589 × Leverage 2.41x), respectable but pressured by margin compression. The effective tax rate was a low 13.9%, which aided net results but still could not offset margin headwinds. Non-operating items were nearly neutral (0.48 income vs 0.50 expense), so the earnings decline is mainly operational and tax/one-off mix. Cash flow data were not disclosed, preventing validation of earnings quality (OCF vs NI). Balance sheet leverage (D/E 1.41x) is moderate, and equity-to-asset ratio is about 41.5%, but liquidity remains the primary near-term watch point. With revenue growth positive, the key question is whether cost normalization (labor, food, utilities) can stabilize margins into Q2. Forward-looking, sustaining same-store sales growth and executing SG&A discipline will be critical to defend ROE and support dividends (calculated payout 28.3% appears manageable if OCF holds). Overall, top-line resilience is intact, but earnings quality and liquidity require close monitoring until cash flow data confirm support.

Profitability Analysis

ROE decomposition (DuPont): ROE 8.3% = Net Profit Margin 5.8% × Asset Turnover 0.589 × Financial Leverage 2.41x. The dominant change factor YoY is the net margin: operating income fell 14.9% despite 4.8% revenue growth, implying operating margin compression of ~217 bps (from ~11.6% to 9.4%), and net margin compressed by ~400 bps (from ~9.9% to 5.9%). The business driver is rising operating costs—SG&A at 51.7% of sales indicates wage, energy, and promotional cost pressure outweighed price/mix and volume gains. Asset turnover at 0.589 and leverage at 2.41x appear stable contributors; the margin shock is the primary drag. This looks partly cyclical (input inflation and wage step-ups) and partly executional (cost control), suggesting some normalization potential but not purely one-time. Concerning trend: SG&A intensity is high relative to revenue growth (revenue +4.8% vs OI -14.9%), indicating negative operating leverage; management must rein in fixed/semi-fixed costs or improve traffic/mix.

Growth Assessment

Revenue rose 4.8% YoY to 193.19, demonstrating demand resilience. However, profit growth was negative: operating income -14.9% and net income -37.8% YoY, highlighting cost headwinds. Current margin structure: gross margin 62.7%, SG&A ratio 51.7%, operating margin 9.4%, net margin 5.9%. The mix of nearly neutral non-operating items suggests core operations drove the decline, with a low tax rate partly cushioning net. Sustainability hinges on same-store sales growth, ticket size initiatives, and procurement/energy savings; any moderation in food and labor inflation would help. With no cash flow data, near-term growth investments (new stores/renovations) and their funding capacity cannot be assessed; prudence on capex is implied by liquidity constraints. Outlook: modest top-line growth is plausible, but margin recovery is needed to restore double-digit ROE; watch Q2 pricing and SG&A control.

Financial Health

Liquidity is weak: current ratio 0.58 and quick ratio 0.51—explicit warning triggered. Working capital is -47.95, indicating reliance on short-term liabilities to fund operations, a potential stress point if sales soften. Short-term debt is 18.80 against cash of 20.46, providing coverage for loans but not for broader current liabilities of 113.52. Maturity mismatch risk exists as current liabilities exceed current assets by 47.95, though restaurant models often operate with negative working capital; careful cash planning is essential. Solvency is acceptable: D/E 1.41x (within typical non-financial thresholds) and implied equity ratio ~41.5% (136.29/328.15). Interest coverage is very strong at 72.5x, suggesting low near-term interest burden risk. Long-term loans are 32.28; refinancing risk is moderate given coverage, but higher rates could incrementally pressure earnings. No explicit off-balance sheet items were disclosed; however, operating lease obligations are common in this sector under JGAAP and likely material.

Cash Flow Quality

Operating cash flow was not disclosed; therefore, OCF/Net Income cannot be assessed (no quality ratio). Given net income of 11.30 and strong interest coverage, earnings appear supported by operations, but the absence of OCF data prevents validation of accruals or working capital dynamics. Free cash flow and capex were also unreported, so coverage of dividends and debt service cannot be confirmed. Working capital structure (negative WC) could inflate or deflate OCF depending on timing of payables and seasonality; no signs of manipulation can be inferred without cash flow details. Until OCF is available, treat earnings quality as unverified.

Dividend Sustainability

Calculated payout ratio is 28.3%, which is comfortably below the 60% benchmark and appears sustainable on earnings alone. However, FCF coverage is unreported; combined with a low current ratio (0.58), near-term cash distributions should be evaluated against liquidity needs. Interest burden is light, supporting dividend capacity, but any margin pressure or negative working capital swings could constrain cash available. Policy outlook cannot be inferred without stated guidance; stability depends on maintaining operating margins and positive OCF.

Risk Assessment

Business Risks:

• Input cost inflation (food commodities) pressuring gross-to-operating margin conversion
• Labor cost increases (minimum wage, staffing tightness) elevating SG&A
• Utility/energy cost volatility impacting store operating expenses
• Demand sensitivity to consumer confidence and weather/seasonality
• Competitive pricing and promotions within family-restaurant space

Financial Risks:

• Low liquidity (current ratio 0.58, quick ratio 0.51) and negative working capital
• Refinancing/rollover risk on short-term borrowings (18.80) amid tighter credit
• Exposure to interest rate increases, though current interest burden is low
• Potential off-balance sheet lease obligations under JGAAP increasing fixed charges

Key Concerns:

• Operating and net margin compression (~217 bps and ~400 bps, respectively)
• SG&A intensity at 51.7% of sales, indicating negative operating leverage
• Absence of OCF/FCF data limits validation of earnings quality and dividend coverage

Investment Implications

Key Takeaways:

• Top-line growth (+4.8% YoY) but profit decline (OI -14.9%, NI -37.8%) points to cost pressure
• Operating margin compressed to 9.4% (-217 bps YoY) and net margin to 5.9% (-400 bps YoY)
• Liquidity is the near-term weak point (current ratio 0.58; WC -47.95), despite strong interest coverage
• ROE at 8.3% remains acceptable but is primarily constrained by margin pressure
• Non-operating items were neutral; performance hinges on core operations and cost control

Metrics to Watch:

• Monthly same-store sales (traffic vs average check) and pricing/mix effects
• SG&A-to-sales ratio and labor cost trends
• Food cost ratio and procurement/energy savings initiatives
• Operating cash flow vs net income (OCF/NI) once disclosed
• Capex and store rollout/remodel cadence vs cash generation
• Short-term debt refinancing schedule and interest rate sensitivity

Relative Positioning: Within Japan’s family-restaurant cohort, revenue growth is decent and leverage moderate (D/E 1.41x), but liquidity is weaker than ideal and margin compression is steeper this quarter; sustaining ROE near 8% will require rapid stabilization of SG&A intensity and recovery of operating margin.

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
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