| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | - | - | - |
| Operating Income / Operating Profit | ¥-36.1B | ¥-34.9B | -3.6% |
| Ordinary Income | ¥-30.7B | ¥-28.7B | -6.9% |
| Net Income / Net Profit | ¥-57.9B | ¥-75.8B | +23.7% |
| ROE | -21.3% | -23.1% | - |
For the fiscal year ending February 2026, consolidated external sales totaled ¥917.9B (YoY +¥43.1B +4.9%). Operating loss was ¥36.1B (YoY -¥1.2B, operating loss widened by 3.6%), ordinary loss was ¥30.7B (YoY -¥2.0B, loss widened by 6.9%), and net loss attributable to owners of the parent was ¥56.3B (YoY +¥11.2B, loss narrowed by 23.7%). Although revenue increased at the operating level, the operating loss continued; however, the final loss improved because extraordinary losses halved to ¥24.4B (prior year ¥45.6B). The operating margin was -3.9% (prior year -4.0%), roughly unchanged; gross margin deteriorated to 44.0% (prior year 46.6%, -2.6pt), but SG&A expense ratio improved to 47.9% (prior year 50.6%, -2.7pt), indicating progress in cost containment. Domestic operations (sales composition 89.7%) were solid with sales +5.6% but operating loss widened to ¥33.4B (loss widened 39.1%); overseas operations (composition 10.3%) reported an operating loss of ¥2.7B but improved by 74.8% with a notable contraction of the deficit. Impairment losses narrowed significantly to ¥19.7B (prior year ¥44.96B), suggesting the store restructuring is converging.
Revenue: External customer net sales were ¥917.9B (YoY +4.9%), maintaining growth. By segment, Domestic Business was ¥823.5B (+5.6%) and Overseas Business was ¥94.4B (-0.6%). The domestic increase was driven by company-operated store merchandise sales expanding significantly from ¥304.5B to ¥379.4B (+24.6%), while franchisee-related revenues declined to ¥273.8B (-8.6%). Overseas sales slightly decreased but the rate of decline narrowed. Overall, the decline in franchise revenues was offset by growth in company-operated sales, indicating a shift from franchise to company operation. Profitability: Operating loss was ¥36.1B (prior year ¥34.9B), with the deficit widening ¥1.2B, but the operating margin remained around -3.9% (prior year -4.0%). Gross profit was ¥403.6B (-1.0%), gross margin 44.0% (-2.6pt), with both absolute gross profit and margin deteriorating—suggesting pricing pressure, adverse mix, increased discounts, and higher spoilage. SG&A was slightly down to ¥439.7B (-0.6%), improving the SG&A ratio to 47.9% (-2.7pt). Key SG&A components: advertising ¥13.9B (prior year ¥12.7B +10.2%), rent ¥2.9B (prior year ¥2.7B +8.2%), depreciation ¥16.2B (prior year ¥30.7B -47.3%), where the large decline in depreciation contributed to SG&A compression. Non-operating income included interest income of ¥4.7B which supported results, leaving ordinary loss at ¥30.7B (loss widened 6.9%). Extraordinary losses were ¥24.4B (prior year ¥45.6B), mainly due to impairment losses of ¥19.7B, a substantial reduction of -56.2% from prior year ¥44.96B, and store closure losses declined to ¥2.6B (prior year ¥4.0B). Income taxes were ¥2.8B (prior year ¥1.8B), affected by valuation allowances on deferred tax assets. Net loss attributable to non-controlling interests improved to ¥1.6B (prior year loss ¥8.1B). In conclusion, there are positive trends of revenue growth, reduced impairment, and improved SG&A ratio, but the pattern of “higher revenue, lower profit” continues due to declining gross margin and persistent operating loss.
Domestic Business recorded net sales of ¥823.5B (YoY +5.6%) and an operating loss of ¥33.4B (equivalent to prior year ¥24.0B; loss widened 39.1%), with a segment margin of -4.0%. Company-operated store merchandise sales expanded substantially to ¥379.4B (prior year ¥304.5B +24.6%) driving revenue, but lower gross margins and heavy fixed-cost burden widened the loss. Overseas Business posted net sales of ¥94.4B (-0.6%) and an operating loss of ¥2.7B (equivalent to prior year ¥10.9B; loss narrowed 74.8%), with a segment margin of -2.9%. Despite a small sales decline, the deficit narrowed markedly, aided by a reduction in depreciation (¥1.3B → ¥0.03B) and improved cost structure. Impairment losses were ¥19.6B domestically (prior year ¥37.7B) and ¥0.09B overseas (prior year ¥7.3B), both substantially reduced. Domestic accounts for 89.7% of sales and 92.4% of operating loss, indicating that domestic restructuring is key to overall company performance.
Profitability: Operating margin -3.9% (prior year -4.0%), ordinary margin -3.3% (prior year -3.3%), net margin -6.1% (prior year -8.7%); all negative, though net margin improved. ROE -21.3% (prior year -20.9%) indicates persistently low capital efficiency. Return on invested capital (ROIC) is estimated at -22.6%, well below the industry median of 8%. Gross margin 44.0% (prior year 46.6%, -2.6pt) highlights pricing and mix challenges. SG&A ratio improved to 47.9% (prior year 50.6%, -2.7pt) driven by lower depreciation and efficiency measures. Cash Quality: Operating Cash Flow (OCF) was ¥17.9B versus net loss ¥56.3B, giving OCF/Net Income of -0.32x, a large disconnect. OCF relied on working capital contributions (accounts payable increase +¥54.1B, receivables decrease -¥38.4B), indicating low-quality cash generation and far below the industry median of 1.57x. EBITDA (operating income + depreciation) was ¥-19.9B, and EBITDA / interest expense was -71.2x, indicating extremely weak interest coverage. Investment Efficiency: Total asset turnover was 1.33x (¥917.9B ÷ total assets ¥690.1B), above industry median 1.17x, showing relatively good asset utilization. Capex / depreciation was 1.34x (capex ¥21.6B ÷ depreciation ¥16.2B), above industry median 1.16x, indicating continued replacement/growth investment. Financial Soundness: Equity Ratio 39.4% (prior year 43.5%) declined and is below industry median 50.2%. Current ratio 133.5% (prior year 146.4%), quick ratio 125.5% (prior year 139.3%)—short-term liquidity acceptable but both down from prior year. Cash and cash equivalents ¥231.6B, cash and deposits ¥111.7B provide near-term payment capacity. Financial leverage 2.54x (total assets ¥690.1B ÷ equity ¥271.6B) exceeds industry median 1.88x—leverage is somewhat high. Interest coverage was -128.9x (operating income ¥-36.1B ÷ interest expense ¥0.28B), indicating extremely weak interest tolerance under loss conditions.
Operating Cash Flow was ¥17.9B (prior year ¥19.4B, -7.8%), remaining positive, but the gap with net loss ¥56.3B results in OCF/Net Income of -0.32x, indicating very low cash conversion. Operating cash subtotal (pre-working capital changes) was ¥16.0B, with non-cash impairment ¥19.7B adjusting loss. Working capital movements: inventories increased -¥3.0B (stock build-up), accounts payable increased +¥54.1B (build-up of trade payables), other current assets decreased +¥1.7B, other current liabilities increased +¥1.5B—especially the accounts payable increase significantly boosted OCF. This working capital contribution is transitory and poses cash flow deterioration risk on reversal. Corporate tax paid was -¥2.3B, minor. Investing CF was -¥15.0B (prior year -¥4.9B), including purchase of tangible fixed assets -¥21.6B (prior year -¥30.3B), purchase of intangible assets -¥7.5B (prior year -¥15.2B), partially offset by redemption of securities +¥8.0B (prior year +¥30.0B). Free Cash Flow was ¥+2.8B (OCF ¥17.9B + Investing CF -¥15.0B) positive but insufficient to cover total dividends of ¥5.8B (FCF coverage 0.48x), indicating limited surplus fund generation. Financing CF was -¥2.2B (prior year -¥8.1B), comprising dividends -¥5.8B, net increase in short-term borrowings +¥2.8B, lease liabilities repayment -¥1.3B. Cash and cash equivalents increased slightly from ¥230.9B at the beginning to ¥231.6B at period-end (+¥0.74B), roughly balanced operations. OCF/EBITDA (OCF ¥17.9B ÷ EBITDA ¥-19.9B) is -0.90x, inverted because EBITDA is negative, and far below industry median.
From a sustainability perspective, the operating-stage loss of ¥36.1B shows structural weakness in earning power. Of the ¥25.6B difference between ordinary loss ¥-30.7B and net loss ¥-56.3B, extraordinary losses account for ¥24.4B (≈43.3% of net loss), mostly impairment ¥19.7B and store closure losses ¥2.6B. Compared to prior year extraordinary losses ¥45.6B, this is an improvement, but additional impairment risk remains until store portfolio restructuring completes. Non-operating income ¥6.1B (0.7% of net sales) is mainly interest income ¥4.7B, implying limited contribution from non-core financial income. From an accruals perspective, OCF ¥17.9B falls well short of net loss ¥56.3B (OCF/Net Income -0.32x), indicating very weak cash generation. The working capital contribution—accounts payable increase +¥54.1B—boosted OCF but is a timing effect and not indicative of sustainable earnings quality. Comprehensive income -¥56.0B is roughly aligned with net loss -¥57.9B, with minor effects from translation adjustments +¥0.5B, marketable securities valuation +¥0.3B, and retirement benefit adjustments +¥1.2B. Income taxes ¥2.8B (prior year ¥1.8B) were affected by deferred tax adjustments, resulting in an arithmetic negative effective tax rate (pre-tax loss -¥55.0B with tax expense recorded), driven by tax-effect accounting adjustments. The divergence between ordinary income and net income is attributable to extraordinary losses; narrowing of this divergence is expected next fiscal year, but earnings quality will not improve unless core operations return to profitability.
Company guidance for the fiscal year ending February 2027 targets operating income ¥15.0B, ordinary income ¥19.0B, net income attributable to owners of the parent ¥1.0B, EPS ¥3.45, and dividend ¥10 (interim ¥5, year-end ¥5). Versus this period’s results, this implies a swing of +¥51.1B at the operating level and +¥57.3B in net income—a large improvement assumption. To achieve operating profitability: (1) gross margin recovery (improvement of at least +2.6pt YoY via price/margin improvement, mix correction, and spoilage reduction), (2) maintenance or reduction of absolute SG&A expenses (continued compression of depreciation and efficiency gains), and (3) continued revenue growth (increase in customer traffic and average spend at existing stores) are required. The plan assumes compression of extraordinary losses, but net income could vary depending on next year’s impairment. Progress rate needs to be monitored quarterly against the ¥15.0B operating income target, and confirming improvement in the first half is important. The planned dividend of ¥10 is a cut from ¥20 in this period but can be seen as a defensive level contingent on return to profitability. DPS ¥10 implies a payout ratio of approximately 290% against net income ¥1.0B, a high level, so improvement in FCF coverage is key to sustainability.
Dividends were maintained at ¥20 per annum (interim ¥10, year-end ¥10), unchanged from prior year, with total dividends ¥5.8B. Given net loss ¥56.3B, payout ratio is arithmetically negative (-10.4%), making sustainability assessment on profit basis difficult. FCF ¥2.8B versus dividends ¥5.8B yields an FCF coverage of 0.48x, insufficient to fund the dividend from internal funds alone. Dividend funding is presumed to have been sourced from liquidity assets such as cash and deposits ¥111.7B and short-term marketable securities ¥8.0B. The company plans a dividend cut to ¥10 (interim ¥5, year-end ¥5) next fiscal year; this still implies a payout ratio of about 290% against net income ¥1.0B, but is interpreted as prioritizing return to profitability. There were no share buybacks; dividends are the sole shareholder return measure. Total return ratio concept does not apply without buybacks, so evaluation is based on payout ratio only. Achieving positive net income and FCF and raising FCF coverage to at least 1.0x is a prerequisite for a sustainable return policy.
Industry positioning (reference — company analysis): The sector is retail, and comparisons with the 2025 industry medians are shown. Operating margin -3.9% is far below the industry median 4.6%; net margin -6.1% is well below industry median 3.3%. Gross margin 44.0% is standard for retail, but SG&A ratio 47.9% exceeds gross margin, resulting in operating losses. ROE -21.3% is far below industry median 5.9%, indicating very poor capital efficiency. Equity ratio 39.4% is below the industry median 50.2%, reflecting weaker financial soundness. Total asset turnover 1.33x slightly exceeds industry median 1.17x, showing relatively efficient asset utilization. Cash conversion rate (OCF / Net Income) -0.32x is far below the industry median 1.57x, indicating among the weakest cash generation in the sector. Payout ratio is not comparable due to net loss, whereas industry median is 27%. Capex / depreciation 1.34x slightly exceeds industry median 1.16x, showing continued replacement/growth investment. Current ratio 133.5% is below industry median 184% but near-term payment capacity is maintained. ROIC -22.6% falls well short of the industry median 8%, showing poor return on invested capital. The convenience store industry has heavy fixed-costs; improvement in existing store KPIs (traffic, ticket size, sales) and efficient openings/closures are key to profitability. The company lags in domestic restructuring, making its industry position weak. Overseas loss contraction (-74.8%) is positive but small in scale and limited in overall contribution. Overall, operating and financial metrics are well below industry medians, and achievement of the FY2027 turnaround is a prerequisite for industry catch-up.
Key points from the financial results: (1) Large reduction in extraordinary losses and signs of bottoming in the deficit: Impairment decreased sharply from ¥44.96B to ¥19.7B (-56.2%), suggesting store restructuring convergence. Net loss also narrowed to ¥56.3B (prior year ¥67.7B), supported by compression of extraordinary losses. Operating loss persists, but SG&A ratio improvement (-2.7pt) and depreciation reduction (-47.3%) indicate progress in cost structure efficiency. Achieving next year’s operating profit target (¥15.0B) hinges on gross margin recovery; quarterly trends in same-store sales, gross margin, and company-operated store profitability are key monitoring points. (2) Cash flow quality and dividend sustainability: OCF ¥17.9B is positive, but the gap with net loss ¥56.3B (OCF/Net Income -0.32x) shows very weak cash-generation, and reliance on accounts payable increase +¥54.1B is transitory. FCF ¥+2.8B is positive but below dividends ¥5.8B (FCF coverage 0.48x); next year’s dividend cut to ¥10 is seen as defensive. Achieving profitability and FCF positive status is prerequisite for dividend sustainability; improving OCF and restoring FCF coverage to ≥1.0x after FY2027 is important. (3) Progress of domestic restructuring: Domestic operations account for 89.7% of sales and 92.4% of operating loss; operating loss widened to ¥33.4B (equiv. prior year ¥24.0B, +39.1%). Company-operated sales grew +24.6% but gross margin decline and fixed-cost burden deepened the loss, with conversion from franchise to company operation causing temporary cost increases and underperformance. Impairment ¥19.6B (prior year ¥37.7B) indicates processing of unprofitable stores is underway, but future success hinges on improvement in existing store KPIs (traffic, ticket size, margin) and lowering breakeven for company-operated stores.
This report is an AI-generated financial analysis document produced by analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information aggregated by the company from public filings. Investment decisions are the responsibility of the investor; please consult a professional advisor as needed before making investment decisions.