VALOR HOLDINGS (9956) FY2026 Q3 Earnings Report

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Executive Summary

Revenue, Operating Income, Ordinary Income, and Net Income all increased, achieving both growth and improved profitability centered on the core Supermarket Business. Revenue was ¥6938.2B (+7.2% YoY), Operating Income was ¥230.8B (+25.9%), Ordinary Income was ¥247.1B (+19.9%), and Net Income attributable to owners of the parent was ¥144.0B (+22.3%). In addition to revenue growth, the relative containment of the SG&A ratio pushed up Operating Income, resulting in the Operating Income growth rate significantly exceeding the revenue growth rate.

Factors Affecting Performance

【Revenue】Revenue was ¥6938.2B (+7.2% YoY). By segment, the Supermarket Business was the largest at ¥4031.8B (58.1% of total), driving overall growth with an increase of +9.8% YoY. The Drugstore Business was ¥1400.0B (+4.1%), the Home Center Business was ¥945.8B (△0.2%), remaining nearly flat, and the Pet Shop Business posted strong growth of +24.9% at ¥267.98B.

【Profit and Loss】Operating Income was ¥230.8B (+25.9% YoY), and the Operating Income margin was 3.3% (equivalent to 3.5% in the previous year). Against a gross margin of 26.4%, the SG&A ratio was 26.1%; the effect of revenue growth exceeded the increase in SG&A expenses (+7.9%), resulting in total segment profit of ¥294.2B (+19.9% YoY). Segment profit margins were 4.6% for the Supermarket Business, 24.2% for the Distribution-Related Business, 3.9% for the Home Center Business, 1.9% for the Drugstore Business, and 1.8% for the Fitness Club Business, indicating significant differences in profitability among businesses. Extraordinary gains and losses consisted of gains of ¥3.7B and losses of ¥6.8B, resulting in a net negative of ¥3.1B. The divergence between Ordinary Income and Net Income was primarily attributable to income taxes and other taxes (effective tax rate of 35.5%). Both revenue and profit increased.

Segment Analysis

The Supermarket Business was the largest source of revenue and profit, with revenue of ¥4031.8B (58.1% of total, +9.8% YoY) and Operating Income of ¥185.7B (profit margin of 4.6%). The consolidation of subsidiaries such as Domi Co., Ltd. contributed to revenue growth, while also resulting in an increase of ¥44.4B in goodwill. The Logistics and Facility Management Business was small in scale, with revenue of ¥167.1B, but had an exceptionally high profit margin of 24.2%, making it a core contributor to profitability within the Group. Although the Drugstore Business recorded revenue growth, its profit margin remained at 1.9%; together with the Home Center Business, it recognized impairment losses at certain stores (totaling ¥1.2B). The Fitness Club Business turned profitable, from a loss of △¥2.9B in the previous year to a profit of ¥1.5B.

Key Financial Indicators

【Profitability】The Operating Income margin was 3.3%, and the Net Income margin (on an attributable-to-owners-of-the-parent basis) was 2.1%. The business has a structure in which the SG&A ratio of 26.1% places pressure on profits relative to a gross margin of 26.4%. Annualized ROE was 10.5%, while the relatively high tax burden, reflected in a tax burden coefficient of 0.59 and an effective tax rate of 35.5%, was a factor depressing the Net Income margin.【Cash Quality】Although disclosure of cash flow from operating activities is not available, working capital items changed, including accounts receivable +36.1%, inventories +10.9%, and accounts payable +39.8%. Monitoring working capital trends is therefore necessary when evaluating earnings quality.【Investment Efficiency】Total assets were ¥5294.4B, up +14.9% from ¥4608.4B in the previous year. The expansion of M&A-related investments, including goodwill of ¥67.3B (+137.8% YoY), was one factor behind the increase in assets.【Financial Soundness】The Equity Ratio was 37.9%. Current assets of ¥1740.2B compared with current liabilities of ¥2098.9B resulted in a current ratio of approximately 82.9%, indicating somewhat limited short-term payment capacity.

Cash Flow Analysis

Although the statement of cash flows has not been disclosed, an analysis of funding trends based on changes in the balance sheet shows that cash and deposits increased +85.1% to ¥419.0B from ¥226.3B in the previous year. Meanwhile, short-term borrowings increased to ¥421.3B from ¥367.5B in the previous year, and short-term liabilities also increased, including ¥100.3B in bonds due for redemption within one year. This indicates that on-hand liquidity is being accumulated alongside additional financing. From a working capital perspective, the increase in accounts payable (+39.8%) has absorbed a certain portion of the increase in accounts receivable and inventories. However, the difference between current assets and current liabilities remains negative, indicating that working capital management may affect cash management amid seasonal purchasing and payment cycles. Property, plant and equipment increased to ¥2627.2B, up +8.4% from ¥2423.7B in the previous year, suggesting that store investments and the incorporation of assets from acquired subsidiaries are continuing.

Earnings Quality

Ordinary Income of ¥247.1B consists of Operating Income of ¥230.8B adjusted for non-operating income of ¥33.3B and non-operating expenses of ¥16.9B. Recurring income, including dividend income of ¥1.7B and other non-operating income of ¥10.3B, was the primary component. Extraordinary gains and losses were relatively small, comprising gains of ¥3.7B (including a gain on bargain purchase of ¥0.9B) and losses of ¥6.8B (including impairment losses of ¥1.2B and losses on disposal of fixed assets and other items of ¥1.4B). Their impact on Profit Before Tax of ¥244.0B was limited, indicating that current-period earnings were at a recurring level and did not depend heavily on temporary factors. Meanwhile, comprehensive income of ¥166.8B exceeded Net Income of ¥157.4B, aided by an increase from the valuation of other securities, including a valuation difference on securities of +¥9.1B. Net Income attributable to owners of the parent of ¥144.0B, after deducting Net Income attributable to non-controlling interests of ¥13.4B, differs from consolidated Net Income of ¥157.4B, reflecting the presence of non-controlling interests arising from the consolidation of subsidiaries.

Earnings Forecast and Guidance

The full-year earnings forecast is revenue of ¥9020.0B, Operating Income of ¥252.0B (+8.7% YoY), and Ordinary Income of ¥280.0B (+7.0%). Q3 cumulative revenue of ¥6938.2B represents progress of 76.9%, while Operating Income of ¥230.8B represents progress of 91.6%, indicating that Operating Income is progressing ahead of revenue. Ordinary Income was also at a high level of ¥247.1B, representing progress of 88.3%, and the progress against the full-year forecast suggests potential upside. Against forecast EPS of ¥265.80, cumulative Q3 basic EPS was already ¥273.34, exceeding the forecast; overall, progress toward the full-year earnings forecast remains steady.

Shareholder Returns

The company forecasts annual dividends of ¥70, including an interim dividend of ¥35, representing an increase from the previous year’s interim dividend of ¥29. The Payout Ratio calculated based on current-period Net Income of ¥157.4B is approximately 25%, indicating that dividends remain conservative relative to the earnings level. Since OCF has not been disclosed, a precise assessment of cash coverage, including the Total Return Ratio, is not possible. However, viewed solely in terms of dividends, the current dividend policy appears sustainable based on the current earnings level.

Risk Factors

1. Short-Term Liquidity Risk: The current ratio is approximately 82.9% (current assets of ¥1740.2B/current liabilities of ¥2098.9B), below 1x, while the quick ratio remains at approximately 48.6%. Given the presence of short-term liabilities, including short-term borrowings of ¥421.3B, continued monitoring of cash management is warranted.

2. Goodwill and Impairment Risk: Goodwill surged +137.8% YoY to ¥67.3B, primarily due to M&A involving companies such as Domi Co., Ltd. At the same time, the Drugstore Business and Home Center Business recognized impairment losses related to store closures and other factors (totaling ¥1.2B), leaving the possibility of future goodwill impairment.

3. Profitability Disparity Risk: Segment Operating Income margins remained low at 1.9% for the Drugstore Business and 1.8% for the Fitness Club Business, while the Logistics and Facility Management Business recorded a high margin of 24.2%. The disparity in profitability across the business portfolio is weighing on the overall Operating Income margin of 3.3%.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Profitability is slightly above the industry median, with the Net Income margin in particular exceeding the median by +0.9pt.

Growth and Capital Efficiency

The revenue growth rate significantly exceeds the industry median, placing the Company among the higher-growth group within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The Company achieved both revenue and profit growth centered on the Supermarket Business, which has been on a revenue-growth trend for 7 consecutive periods. Operating leverage is evident, with the Operating Income growth rate (+25.9%) significantly exceeding the revenue growth rate (+7.2%).

2. Goodwill surged +137.8% YoY, indicating progress in business expansion through M&A, while impairment losses were also recognized in certain segments. Future trends in the goodwill balance and the occurrence or absence of impairment losses are key points when evaluating earnings quality.

3. Progress against the full-year earnings forecast was high, at 91.6% for Operating Income and 88.3% for Ordinary Income, while actual EPS also exceeded the forecast. The difference from the revenue progress rate of 76.9% indicates that improved cost efficiency is driving profit progress.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,483–¥3,687 at Cost of Equity ±1%, and ¥3,575–¥3,588 at ω±0.1.

Notes:

• Since Net Income progress against the full-year forecast (103%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies progressing ahead of forecasts tend to exceed their forecasts. The adjustment may be excessive for businesses with strong seasonality).
• Since forecast ROE is below the Cost of Equity, the theoretical value is below Book Value Per Share.
• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Since Net Assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The 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 a professional as necessary.

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