| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1584.8B | ¥1542.9B | +2.7% |
| Operating Income / Operating Profit | ¥41.0B | ¥38.7B | +5.9% |
| Ordinary Income | ¥44.7B | ¥42.3B | +5.6% |
| Net Income / Net Profit | ¥28.8B | ¥28.0B | +3.0% |
| ROE | 1.5% | 1.4% | - |
For Q1 of the fiscal year ending March 2027, Revenue was ¥1584.8B (YoY +¥41.9B, +2.7%), Operating Income was ¥41.0B (YoY +¥2.3B, +5.9%), Ordinary Income was ¥44.7B (YoY +¥2.4B, +5.6%), and Quarterly Net Income attributable to owners of the parent was ¥28.8B (YoY +¥0.8B, +3.0%), resulting in a start of revenue and profit growth. While Revenue growth was modest, a decline in SG&A ratio (22.2%, -0.3pt YoY) improved the Operating Margin to 2.6% (+0.1pt from 2.5% a year earlier). Conversely, Gross Margin declined to 24.8% (-0.2pt from 25.0%), indicating margin pressure from product mix and competitive conditions.
[Revenue] Top-line reached ¥1584.8B, a YoY increase of +2.7%, reflecting steady growth as a food retailer. The company reports a single retail-related segment and does not disclose regional or format breakdowns; the result is presumed to be the combined contribution of comparable-store performance and new store openings. Gross Margin declined to 24.8% (-0.2pt YoY), with higher cost of goods sold, price reduction pressure, and changes in product mix weighing on gross profit.
[Profitability] Cost of Sales was ¥1191.7B (75.2% of Revenue), yielding Gross Profit of ¥393.1B. SG&A was restrained at ¥352.1B (22.2% of Revenue), up only +1.4% YoY, below Revenue growth. Compensation and benefits increased to ¥152.1B (+4.8% YoY) while utilities decreased to ¥28.6B from ¥30.4B (-6.2% YoY), reflecting benefits from lower energy costs. As a result, Operating Income rose to ¥41.0B (Operating Margin 2.6%), up +5.9% YoY. Non-operating income totaled ¥4.6B (dividend income ¥0.7B, equity-method investment income ¥0.2B, etc.), and non-operating expenses were ¥0.9B (interest expense ¥0.7B), producing a net non-operating contribution of +¥3.7B and Ordinary Income of ¥44.7B (+5.6% YoY). Extraordinary items included disaster losses of ¥0.2B; Profit Before Tax was ¥44.5B, and after corporate taxes of ¥15.7B (effective tax rate 35.3%), Net Income was ¥28.8B (+3.0% YoY). In conclusion: revenue and profit increased.
[Profitability] Operating Margin was 2.6%, up +0.1pt from 2.5% in the prior-year period, aided by a lower SG&A ratio. Net Margin was 1.8%, flat from 1.8% a year earlier; the high tax burden (effective tax rate 35.3%) constrained expansion at the Net Income level. ROE improved slightly YoY to 1.5% but remains low. [Cash Quality] Operating Cash Flow (OCF) was ¥95.2B, 3.3x Net Income of ¥28.8B, indicating very strong cash conversion. OCF subtotal was ¥130.4B, significantly exceeding accounting profit, supported by Depreciation of ¥24.5B and working capital movements (increase in accounts payable +¥49.9B offsetting increase in accounts receivable -¥27.7B). [Investment Efficiency] Capital Expenditure was ¥15.7B, only 0.64x Depreciation of ¥24.5B, indicating restrained maintenance/growth investment. [Financial Soundness] Equity Ratio was 64.7%, slightly down from 64.9% YoY but remaining high. Current Ratio was 168%; Cash and Deposits of ¥926.2B far exceeded Current Liabilities of ¥781.9B, indicating ample liquidity. Interest-bearing debt totaled ¥218.1B (Short-term borrowings ¥99.6B + Long-term borrowings ¥118.6B), producing a Net Cash position of +¥708.1B and an extremely healthy financial condition.
Operating Cash Flow was ¥95.2B (prior year ¥121.6B, -21.7%), a decrease, but still 3.3x Net Income of ¥28.8B, so cash generation remains strong. OCF subtotal was ¥130.4B, reflecting Depreciation of ¥24.5B and non-cash items such as provisions increases and equity-method investment P/L. In working capital, increases in Accounts Receivable -¥27.7B (prior year -¥16.3B) and Inventories -¥0.7B (prior year +¥7.7B) were negative contributors, but an increase in Accounts Payable +¥49.9B (prior year +¥43.0B) largely offset these, resulting in a net improvement in working capital. Corporate tax payments of -¥35.5B rose YoY and reduced OCF. Investing Cash Flow was -¥49.3B, with CapEx -¥15.7B and intangible asset acquisitions -¥15.6B as primary outflows, indicating restrained but ongoing renewal and digital investments. Financing Cash Flow was -¥49.5B, driven by long-term debt repayments of -¥19.3B and dividend payments of -¥23.6B. Free Cash Flow remained positive at ¥45.9B, providing about 1.9x coverage of dividends. Year-end Cash and Cash Equivalents were ¥907.7B, slightly down from ¥911.3B at prior year-end, and liquidity risk remains very limited.
Most of Ordinary Income ¥44.7B originates from Operating Income ¥41.0B, indicating primarily recurring earnings. Non-operating income of ¥4.6B is minor relative to Revenue ¥1584.8B (0.3%) and mainly consists of repeatable items such as dividend income ¥0.7B and equity-method investment income ¥0.2B. Extraordinary items were limited to disaster losses of ¥0.2B, so one-off impacts are small. Net Income of ¥28.8B represents a -35.6% decline from Ordinary Income ¥44.7B, driven mainly by corporate taxes of ¥15.7B (effective tax rate 35.3%), a typical tax cost associated with taxable income. Given OCF of ¥95.2B is 3.3x Net Income ¥28.8B, accounting profits appear not to be driven by accruals alone and are being converted to cash, indicating high quality of earnings. Comprehensive Income was ¥21.7B, ¥7.1B below Net Income ¥28.8B, due to other comprehensive income fluctuations such as valuation differences on available-for-sale securities -¥6.3B and actuarial gains/losses on retirement benefits -¥0.8B; these are temporary and have limited impact on core business earnings.
Full Year (FY) forecast remains unchanged at Revenue ¥6480.0B (YoY +3.4%), Operating Income ¥180.0B (YoY +2.1%), Ordinary Income ¥196.0B (YoY +2.3%), and EPS forecast ¥232.73. Q1 progress rates versus Full Year forecast are: Revenue 24.5% (Q1 actual ¥1584.8B ÷ FY forecast ¥6480.0B), Operating Income 22.8% (¥41.0B ÷ ¥180.0B), Ordinary Income 22.8% (¥44.7B ÷ ¥196.0B), Net Income 23.2% (¥28.8B ÷ implied ¥124.0B). All are near the standard 25% seasonal progress and represent an on-plan start. No revision to FY guidance was made; the company appears to assume steady performance into the second half. If Gross Margin improves and inventory efficiency increases in H2, there is upside potential to Operating Income.
Dividend payments in Q1 totaled ¥23.6B and were fully covered by Free Cash Flow of ¥45.9B. Full-year dividend guidance is ¥41 per share (approximately ¥21.8B annual dividend amount), implying a projected payout ratio of about 17.6% on the FY EPS forecast of ¥232.73, a conservative level. Given abundant liquidity (Cash and Deposits ¥926.2B) and strong OCF ¥95.2B, dividend sustainability is high. Historical dividend trend is not provided, so continuity of increases is unclear, but low payout and large cash balance make dividend cuts very unlikely. Conversely, the low payout ratio suggests substantial room for additional shareholder returns; the company could consider increased dividends or share buybacks while balancing growth investments.
Declining Gross Margin and Inventory Turnover Risk: Gross Margin declined to 24.8% from 25.0% (-0.2pt), with cost inflation and price pressure becoming apparent. Inventories of ¥211.7B rose slightly from ¥211.1B, and inventory turnover days are elongated at approximately 65 days (¥211.7B ÷ ¥1584.8B × 365 days ÷ 4). Seasonal or demand fluctuations that expand inventory valuation losses or markdown sales could further reduce Gross Margin and pressure Operating Income.
Persistently High Effective Tax Rate Pressuring Net Income: Corporate taxes of ¥15.7B led to an effective tax rate of 35.3%, reducing Pre-tax Profit ¥44.5B to Net Income ¥28.8B. Depending on tax-effect accounting and recoverability of deferred tax assets, the tax burden may remain elevated and Net Income may continue to lag Ordinary Income growth.
Investment Restraint and Mid-term Growth Concerns: CapEx of ¥15.7B is only 0.64x Depreciation of ¥24.5B, indicating low investment levels for renewals, new stores, and digital/logistics projects. While this boosts short-term Free Cash Flow, it could erode competitiveness, lead to store aging, and delay omnichannel capabilities, risking slower Revenue growth and market share loss over the medium term.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.6% | 3.4% (0.8%–7.7%) | -0.8pt |
| Net Margin | 1.8% | 2.2% (0.5%–6.2%) | -0.4pt |
Both Operating Margin and Net Margin are below industry medians, indicating relatively low profitability within the food retail segment.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.7% | 7.7% (0.8%–14.6%) | -5.0pt |
Revenue growth of +2.7% is well below the industry median of +7.7%, indicating a slower growth pace relative to peers.
※ Source: Company aggregation
Operating leverage through SG&A control: SG&A ratio of 22.2% declined -0.3pt YoY, with increases in compensation offset by reductions in utilities. If SG&A growth remains +1.4% versus Revenue growth +2.7%, further improvement in Operating Margin is possible. However, rising labor cost pressure could re-expand the SG&A ratio and should be monitored.
Strong cash generation and dividend capacity: OCF ¥95.2B is 3.3x Net Income ¥28.8B, and Free Cash Flow ¥45.9B is roughly twice dividend payments ¥23.6B, indicating very high cash generation. With a payout ratio of 17.6% and Cash and Deposits ¥926.2B, there is significant capacity for raising dividends or conducting buybacks; any change in capital policy will be noteworthy.
Trade-off between investment restraint and mid-term growth: With a CapEx/Depreciation ratio of 0.64x, short-term Free Cash Flow is supported, but underinvestment risks store refresh, digital initiatives, and logistics efficiency—potentially harming competitiveness and sales growth. H2 investment increases or a higher annual investment level will be decisive for sustaining growth.
This report is an AI-generated earnings analysis document produced by analyzing XBRL financial statement data. It is not a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; consult a professional advisor as necessary.