| Metric | This Period | Prior-Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | - | - | - |
| Operating Income / Operating Profit | ¥-20.1B | - | - |
| Ordinary Income | ¥-19.0B | ¥1.2B | -1736.2% |
| Net Income / Net Profit | ¥-23.5B | ¥-2.5B | -840.4% |
| ROE | -9.6% | -0.9% | - |
For the quarter ended March 2027 (Q1), operating gross revenue amounted to ¥249.1B (+5.0% YoY), achieving top-line growth, but operating loss widened to ¥-20.1B (prior year ¥0.0B), ordinary loss to ¥-19.0B (prior year ¥1.2B, YoY -1736.2%), and quarterly net loss attributable to owners of the parent to ¥-23.5B (prior year ¥-2.5B, YoY -840.4%). The deterioration was mainly driven by a decline in gross margin in the domestic business and increased SG&A, with operating margin worsening from 0.0% to -8.1%. Recognition of special losses of ¥4.0B (store closure losses ¥1.1B, impairments ¥0.6B) also contributed to the expansion of the net loss.
Revenue: Operating gross revenue reached ¥249.1B (+¥12.0B, +5.0% YoY). Domestic Business led with ¥224.1B (+¥10.2B, +4.8%), while Overseas Business maintained high growth at ¥25.1B (+¥1.7B, +7.4%). Segment mix was Domestic 89.9% / Overseas 10.1%, indicating high reliance on domestic operations. Within Domestic Business, merchandise sales (company-operated stores) expanded to ¥118.2B (prior year ¥89.9B significant increase), whereas franchise-related revenue fell to ¥63.2B (prior year ¥79.1B). Overseas merchandise sales held firm at ¥24.0B (prior year ¥22.0B). Other revenue (transportation fees/commissions received from product vendors) slightly declined to ¥35.5B (prior year ¥38.0B).
Profitability: Gross profit decreased to ¥103.0B (prior year ¥110.5B, -¥7.5B, -6.8%), with gross margin deteriorating to 41.4% (prior year 46.6%), a 5.2pt decline. The fall in gross margin is attributed to changes in product mix, intensified discount competition, and delayed passing-through of increased logistics and raw material costs. SG&A rose to ¥123.2B (prior year ¥110.5B, +¥12.7B, +11.4%), outpacing revenue growth (+5.0%), raising SG&A ratio to 49.5% (prior year 46.6%), up 2.9pt. Inflationary pressures on personnel expenses, logistics costs, and rent underlie the cost increases. As a result, operating loss turned to ¥-20.1B (prior year ¥0.0B). Non-operating items included interest income of ¥1.0B supporting the result; net non-operating income was ¥1.2B less ¥0.1B in non-operating expenses, resulting in ordinary loss of ¥-19.0B (prior year ordinary income ¥1.2B). Recognition of special losses of ¥4.0B (store closure losses ¥1.1B, impairments ¥0.6B, etc.) expanded pre-tax loss to ¥-23.0B. After deducting income taxes of ¥0.5B and accounting for net income attributable to non-controlling interests of ¥-0.4B, net loss attributable to owners of the parent was ¥-23.5B (prior year ¥-2.5B). The overall picture is revenue up, profit down.
Domestic Business recorded revenue of ¥224.1B (+4.8% YoY) and an operating loss of ¥-19.2B (prior year operating income ¥1.9B, YoY -1096.4%), a significant deterioration, with operating margin at -8.6% (prior year +0.9%). Overseas Business posted revenue of ¥25.1B (+7.4% YoY) and an operating loss of ¥-0.9B (prior year ¥-1.9B, improved by 52.1%), reducing the loss and improving operating margin to -3.7% (prior year -8.2%). The majority of the consolidated operating loss of ¥-20.1B stems from the deterioration in Domestic Business profitability; Overseas Business is improving but remains small and provides limited contribution to consolidated results.
Profitability: Operating margin was -8.1% (prior year 0.0%), ordinary profit margin -7.6% (prior year 0.5%), and net profit margin -9.4% (prior year -1.1%), all worsening. ROE was -9.6% (basis for prior-year comparison unclear), with equity returns on a quarterly loss basis turning sharply negative. Gross margin of 41.4% declined 5.2pt from 46.6% prior year; SG&A ratio rose to 49.5% from 46.6% (up 2.9pt), indicating operating leverage reversal.
Cash Quality: Interest coverage is negative due to operating loss, indicating very weak capacity to service interest-bearing debt. Interest income of ¥1.0B is the main component of non-operating income, modestly supporting ordinary profit/loss, but its scale is limited at 0.4% of revenue.
Investment Efficiency: Total asset turnover on an annualized basis is approximately 1.34x (Q1 revenue ¥249.1B ×4 ÷ total assets ¥744.1B), a standard level, but ROA is deeply negative due to margin deterioration.
Financial Soundness: Equity ratio declined to 32.9% (prior year 38.3%). D/E ratio is approximately 2.04x (interest-bearing debt equivalent ÷ equity ¥245.2B), reflecting high leverage. Current ratio is 121.3% (current assets ¥528.0B ÷ current liabilities ¥435.3B), and quick ratio is 114.7% (quick assets ¥499.4B ÷ current liabilities ¥435.3B), indicating short-term liquidity is provisionally secured. However, a sharp rise in deposits received to ¥157.3B (prior year ¥97.1B, +62.0%) has changed the short-term liability profile and increased cash-flow volatility.
No cash flow statement disclosure was provided, so funding dynamics are analyzed from the balance sheet changes. Cash and deposits increased significantly to ¥147.7B (prior year ¥111.7B, +¥36.0B, +32.2%). The cash increase despite an operating loss of ¥-20.1B is inferred to result from working capital movements. Deposits received rose sharply to ¥157.3B (prior year ¥97.1B, +¥60.2B, +62.0%), and accounts payable increased to ¥200.5B (prior year ¥191.9B, +¥8.6B, +4.5%), contributing to short-term cash inflows. Other current liabilities (e.g., advance receipts) also likely increased. Conversely, other current assets decreased slightly to ¥36.4B (prior year ¥39.0B), indicating working capital net inflows in the quarter. However, increases in deposits received and advance-type liabilities may reverse in the future (refunds/payments), so they do not represent sustainable cash generation. The special loss of ¥4.0B (store closures and impairments) suggests potential for future fixed-cost reduction and cash flow improvement, but without recovery of gross margin and control of SG&A, free cash flow stability will not necessarily improve.
Quality of earnings is low. Core operations produced an operating loss of ¥-20.1B; non-operating income of ¥1.2B (of which interest income ¥1.0B) provided slight support, but ordinary loss remained ¥-19.0B. Interest income represents recurring earnings from financial asset management but is small at 0.4% of revenue and insufficient to offset operational losses. Special losses of ¥4.0B (store closure losses ¥1.1B, impairments ¥0.6B, etc.) expanded pre-tax loss from ¥-19.0B to ¥-23.0B. Store closures and impairments are part of structural reforms and may contribute to future fixed-cost reductions, but in the quarter they acted as a drag on earnings. Comprehensive income was ¥-23.6B (net loss ¥-23.5B plus foreign currency translation adjustments ¥0.2B, valuation difference on available-for-sale securities ¥-0.1B, and retirement benefit adjustments ¥-0.1B), nearly aligned with net loss, indicating limited impact from other comprehensive income. From an accrual perspective, while operating loss of ¥-20.1B coincided with a cash and deposit increase of ¥+36.0B, this was driven by increases in deposits received and accounts payable — accounting-driven working capital inflows that do not reflect underlying profit generation. Restoring a recurring earnings base is the top priority.
Full-year guidance calls for operating income of ¥15.0B, ordinary income of ¥19.0B, net income attributable to owners of the parent of ¥1.0B, and EPS of ¥3.45. Q1 results show operating loss ¥-20.1B, ordinary loss ¥-19.0B, and net loss ¥-23.5B; progress versus the full-year plan is -134% for operating income, -100% for ordinary income, and -2350% for net income — substantial negatives. This deviates materially from the standard progress rate (Q1 = 25%), implying the plan assumes significant profit recovery in H2. Achieving a consolidated full-year profit requires gross margin recovery (product mix correction, price/cost optimization, logistics efficiency) and containment of SG&A growth (personnel cost control, rent/contract renegotiation, DX-driven labor savings). Store closures and impairments could contribute to fixed-cost reductions, but turning Domestic Business operating margin of -8.6% to full-year profitability will require substantial operational improvements. No forecast revision was made in Q1, but the clear shortfall suggests the possibility of revisions in coming quarters, which should be monitored.
The dividend forecast is ¥10.0 per share annually (single year-end dividend). Against the full-year EPS forecast of ¥3.45, the payout ratio is about 290%, exceptionally high and unsustainable from profit alone. Basic EPS for Q1 was ¥-79.58 (prior year ¥-5.21), indicating severely negative earnings per share at the quarter level and very limited capacity for dividend payment on a quarterly basis. Actual dividend funding will depend on interim cash flow generation and opening cash balances; unless the company achieves full-year operating profitability and net income of ¥1.0B, the payout ratio will increase numerically and the sustainability of the dividend policy will be called into question. Cash and deposits of ¥147.7B provide a certain buffer, but given the rapid increase in deposits received to ¥157.3B and changes in short-term liabilities, the health of dividend funding cannot be viewed optimistically. No share buyback is disclosed; total shareholder return policy is dividend-only.
Gross margin deterioration risk: Gross margin declined to 41.4% (prior year 46.6%), a 5.2pt deterioration, likely driven by product mix changes, intensified discounting, and delayed pass-through of rising logistics and raw material costs. Continued intense competition in the domestic convenience store industry and persistent consumer price sensitivity could further depress gross margin and entrench operating losses. Immediate review of merchandising strategy and procurement/logistics efficiency is required.
SG&A escalation risk: SG&A rose to ¥123.2B (+11.4% YoY), far exceeding revenue growth of +5.0%, pushing SG&A ratio to 49.5% (prior year 46.6%), up 2.9pt. Inflationary pressures on labor, logistics, and rent are driving this trend and reversing operating leverage. Continued labor shortages and wage inflation could prevent containment of SG&A growth and lead to further expansion of operating losses. Store network optimization (closure of loss-making stores/renovations) and investment in digitalization to reduce labor intensity are countermeasures.
Financial leverage and liquidity risk: Equity ratio fell to 32.9% (prior year 38.3%), and D/E ratio is approximately 2.04x, a high leverage level. Interest coverage is negative due to operating losses, substantially weakening financing resilience. The sharp rise in deposits received to ¥157.3B (+62.0%) increased short-term funding but also raises reversal risk and liquidity volatility; delayed recovery in operating cash flow could lead to liquidity concerns.
No industry benchmark data available
The trends in gross margin and SG&A ratio are the most important monitoring indicators. In Q1, gross margin fell by 5.2pt and SG&A ratio rose by 2.9pt, leading to an operating margin of -8.1% and a shift into loss. Confirmation of gross margin recovery (product mix correction, pricing optimization, logistics efficiencies) and SG&A growth restraint (personnel control, rent renegotiation, labor-saving investments) in coming quarters is key to achieving full-year guidance and improving the earnings structure.
Progress on store network optimization and the trajectory of special losses should be monitored. Q1 recognition of store closure losses ¥1.1B and impairments ¥0.6B indicates an ongoing pruning of unprofitable stores. Additional special loss recognition in future quarters will depress short-term net income but could contribute to future fixed-cost reductions and improved operating margins. The pace of store closures and timing of resultant SG&A reductions will influence the timing of recovery.
Sustainability of dividend policy and soundness of liquidity are medium-term issues. A payout ratio of about 290% is unsupportable at current profit levels; unless the company achieves full-year operating profitability and net income of ¥1.0B, dividend policy revision is a realistic option. The surge in deposits received (+62.0%) has thickened short-term funding but increased volatility in working capital structure; recovery of operating cash flow generation is a precondition for maintaining dividends.
This report is an AI-generated earnings analysis document created by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmark data are aggregated by the firm from public financial statements for reference only. Investment decisions are your responsibility; consult a professional advisor as needed.