| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥8425.1B | ¥8018.1B | +5.1% |
| Operating Income / Operating Profit | ¥468.3B | ¥445.0B | +5.2% |
| Ordinary Income | ¥462.2B | ¥438.4B | +5.4% |
| Net Income / Net Profit | ¥275.1B | ¥175.9B | +56.4% |
| ROE | 9.6% | 6.5% | - |
For the fiscal year ended March 2026, Revenue was ¥8425.1B (YoY +¥407.0B, +5.1%), Operating Income was ¥468.3B (YoY +¥23.4B, +5.2%), Ordinary Income was ¥462.2B (YoY +¥23.8B, +5.4%), and Net Income attributable to owners of the parent was ¥313.9B (YoY +¥6.4B, +2.1%). Revenue increased for the third consecutive period as both the Drugstore Business and Discount Store Business expanded; the operating margin improved slightly to 5.6% (+0.1pt YoY). Gross margin improved to 25.7% (+1.2pt YoY), but SG&A ratio rose to 20.1% (+1.0pt YoY), limiting operating leverage. Net profit margin improved to 3.7% (+1.5pt from 2.2% in the prior year), aided by a rebound from large special losses in the prior year. Operating Cash Flow was ¥432.97B, Investing Cash Flow was ▲¥320.76B, resulting in Free Cash Flow of ¥112.21B. Total assets were ¥4,755.1B, Net assets ¥2,860.0B, and the Equity Ratio was 60.1%, indicating a solid financial base. Dividends were maintained at an annual ¥131 (Payout Ratio 49.4%), continuing shareholder returns.
[Revenue] Revenue expanded to ¥8,425.1B (YoY +5.1%). By segment, the Drugstore Business recorded external sales of ¥4,784.0B (YoY +¥18.8B, +0.4%), and the Discount Store Business recorded external sales of ¥3,641.1B (YoY +¥218.6B, +6.4%). Although drugstore growth decelerated YoY, high growth in the discount store segment drove company-wide revenue increases. Cost of sales was ¥6,263.4B, implying a cost of sales ratio of 74.3% (prior 74.5%), improving by 1.2pt; optimization of product mix and price pass-through contributed to gross margin improving to 25.7%. SG&A was ¥1,693.4B, an increase of ¥97.5B YoY (+6.1%), and the SG&A ratio rose to 20.1% (+1.0pt YoY). Main drivers were higher rental expenses of ¥348.8B (prior ¥333.4B) and depreciation of ¥187.6B (prior ¥172.8B), reflecting increased fixed costs from store openings and capital expenditures.
[Profitability] Operating Income was ¥468.3B (YoY +5.2%), with an operating margin of 5.6% (+0.1pt), a modest improvement. Improvement in gross margin was offset by higher SG&A, limiting operating leverage. Ordinary Income was ¥462.2B (YoY +5.4%); non-operating income totaled ¥10.5B (including interest income ¥2.4B) while non-operating expenses totaled ¥16.6B (including interest expense ¥3.8B and equity-method losses ¥12.6B), resulting in net non-operating expense of ▲¥6.1B. Equity-method losses narrowed from ▲¥15.7B in the prior year to ▲¥12.6B but remain a drag on Ordinary Income. Extraordinary items amounted to net ▲¥4.2B (extraordinary gains ¥6.0B — gains on sale of investment securities ¥2.0B, gains on sale of fixed assets ¥0.8B, etc. — less extraordinary losses ¥10.2B — impairment losses ¥4.0B, loss on retirement of fixed assets ¥2.3B, etc.). Profit before tax was ¥458.0B; after income taxes of ¥144.1B (effective tax rate 31.5%), Net Income was ¥313.9B (YoY +2.1%). The large increase from the prior year Net Income of ¥175.9B mainly reflects the reversal from substantial special losses in the prior year. The company therefore achieved both revenue and profit growth.
The Drugstore Business reported Revenue of ¥5,393.8B (YoY +4.3%), Operating Income of ¥274.8B (YoY +3.1%), and an operating margin of 5.1%. The Discount Store Business reported Revenue of ¥3,641.2B (YoY +6.4%), Operating Income of ¥193.5B (YoY +8.4%), and an operating margin of 5.3%. The Discount Store segment maintained high growth in both revenue and profit, posting an operating margin 0.2pt higher than the Drugstore segment. Segment assets were ¥3,324.3B for Drugstore and ¥1,695.7B for Discount, totaling ¥5,019.9B (adjusted ¥4,755.1B). Depreciation was ¥119.3B for Drugstore and ¥68.3B for Discount, totaling ¥187.6B. Increases in tangible and intangible fixed assets were ¥163.1B for Drugstore and ¥136.3B for Discount, totaling ¥299.5B, reflecting active capital investment across both businesses. Impairment losses were limited at ¥3.7B for Drugstore and ¥0.3B for Discount, totaling ¥4.0B.
[Profitability] Operating margin 5.6%, Gross Profit Margin 25.7%, ROE 9.6%. Operating margin improved slightly by +0.1pt YoY, but rising SG&A limited operating leverage. ROE at 9.6% declined from 11.8% in the prior year, partly because the prior-year Net Income was artificially elevated by the rebound from special losses. Calculated against average Net Assets of ¥2,860.0B, the current Net Income of ¥313.9B is a reasonable level.
[Cash Quality] Operating Cash Flow (OCF) was ¥432.97B, 1.38x Net Income of ¥313.9B, indicating solid cash backing of profits. OCF/EBITDA was 0.66x (EBITDA = Operating Income ¥468.3B + Depreciation ¥187.6B = ¥655.9B), and inventory increase of ¥116.5B pressured working capital, softening cash conversion. Cash conversion from OCF subtotal (before working capital changes) of ¥573.5B was 75.5%.
[Investment Efficiency] Return on Assets (ROA) was 10.1%, EPS ¥268.36 (prior ¥262.91), BPS ¥2,444.81 (prior ¥2,305.89). Capital expenditures were ¥303.4B versus depreciation ¥187.6B, giving a CapEx / Depreciation ratio of 1.62x, indicating continued aggressive growth investment.
[Financial Soundness] Equity Ratio 60.1%, D/E ratio 0.17x (interest-bearing debt calculation: long-term borrowings ¥420.8B + short-term borrowings ¥10.0B + current portion of long-term borrowings ¥51.4B = ¥482.2B / Net Assets ¥2,860.0B), current ratio 177.6%, quick ratio 95.5%. Debt/EBITDA 0.73x and Interest Coverage 121.8x (Operating Income ¥468.3B / Interest Expense ¥3.8B), demonstrating an extremely healthy financial base.
Operating Cash Flow was ¥433.0B (YoY +5.2%). Starting from Profit before tax of ¥458.0B, adding non-cash depreciation of ¥187.6B produced an OCF subtotal of ¥573.5B. Working capital movements were a net cash outflow of ▲¥110.1B (inventory increase ▲¥116.5B, trade receivables increase ▲¥23.4B, trade payables increase +¥29.8B), with inventory buildup the main absorber. After tax payments of ▲¥142.9B, OCF of ¥432.97B was realized. OCF/Net Income was 1.38x, supporting profit quality, but OCF/EBITDA was 0.66x due to inventory increases which softened cash conversion. Investing Cash Flow was ▲¥320.8B, primarily capital expenditures of ▲¥303.4B. Proceeds from fixed asset sales and subsidies partially offset this, leaving Free Cash Flow of ¥112.2B. Financing Cash Flow was ▲¥56.5B: the company raised long-term borrowings of ¥140.0B, repaid long-term borrowings of ▲¥44.5B, saw a net decrease in short-term borrowings of ▲¥340.0B, and paid dividends of ▲¥152.0B. As a result, cash increased by ¥55.7B from opening balance ¥649.6B to ¥705.2B, leaving ample liquidity.
Ordinary Income of ¥462.2B is the core profit, representing Operating Income ¥468.3B less net non-operating expense ▲¥6.1B. Major non-operating items were interest income ¥2.4B, interest expense ¥3.8B, and equity-method losses ▲¥12.6B; equity-method losses remain a recurring drag but are narrowing from ▲¥15.7B in the prior year. Extraordinary items were net ▲¥4.2B (extraordinary gains ¥6.0B — gains on sale of investment securities ¥2.0B, gains on sale of fixed assets ¥0.8B, government grants received ¥4.8B, etc. — less extraordinary losses ¥10.2B — impairment losses ¥4.0B, loss on retirement of fixed assets ¥2.3B, etc.), so one-off impacts were limited. The difference between Profit before tax ¥458.0B and Ordinary Income ¥462.2B reflects these extraordinary items and is limited in scope. OCF of ¥433.0B exceeded Net Income of ¥313.9B; the accrual ratio (Net Income − OCF)/Total Assets was ▲2.5%, a low level, indicating good cash realization quality. The healthy recurring earnings structure and improvement in equity-method losses are expected to contribute to stabilization of Net Income.
Full-year guidance was Revenue ¥8,760.0B (YoY +4.0%), Operating Income ¥488.0B (YoY +4.2%), Ordinary Income ¥481.0B (YoY +4.1%), Net Income ¥249.0B (YoY ▲9.5%), EPS ¥274.87, Dividend ¥66.00. Actuals were Revenue ¥8,425.1B (96.2% of guidance), Operating Income ¥468.3B (96.0%), and Ordinary Income ¥462.2B (96.1%), with Revenue and Operating Income slightly below guidance. Net Income was ¥313.9B (126.1% of guidance), materially above guidance, largely because guidance was conservatively set given the prior-year special loss rebound. The gap between guided Net Income ¥249.0B and actual ¥313.9B is likely due to differences in estimated extraordinary items and tax effects. The roughly 4% shortfall in Revenue and Operating Income versus guidance appears attributable to timing differences in revenue recognition due to inventory build-up and weaker-than-expected same-store sales.
Annual dividend was ¥131 (interim ¥65, year-end ¥66), with a Payout Ratio of 49.4% (total dividends ¥152.1B / Net Income attributable to owners of the parent ¥313.9B). The dividend was maintained at the prior-year level (annual ¥131, interim ¥65, year-end ¥66). With Free Cash Flow ¥112.2B versus dividend payments ¥152.0B, FCF coverage was 0.74x, indicating dividends are not fully covered by FCF alone; however, given cash on hand of ¥705.2B and a strong financial base, the dividend level is sustainable. No share buybacks were conducted; shareholder returns are concentrated in dividends. A Payout Ratio of 49.4% is stable, and during this investment-led phase the company is balancing growth investment and dividends through a mix of retained earnings and borrowings.
Risk of persistently high inventory levels and deteriorating inventory turnover days: Inventories stood at ¥1,100.7B (YoY +¥116.5B, +11.8%), and inventory turnover days are approximately 64 days (Inventories ¥1,100.7B / Cost of Sales ¥6,263.4B × 365 days), worsening from about 60 days in the prior year. Prolonged inventory holding can pressure gross margins through markdowns or obsolescence and absorb Operating Cash Flow. Normalizing inventory turnover is key to near-term profitability and cash flow improvement.
Risk of rising SG&A ratio and reduced operating leverage: SG&A ratio rose to 20.1% (+1.0pt YoY), with SG&A growth +6.1% outpacing revenue growth +5.1%. Rising personnel, logistics, and rental costs (rental ¥348.8B, YoY +¥15.5B) are primary drivers, and future wage or logistics cost inflation could further erode operating leverage. Strengthening same-store sales to absorb fixed cost increases from scale expansion is necessary.
Continued losses from equity-method investees and volatility in Net Income: Equity-method losses of ▲¥12.6B pressured Ordinary Income; although improving from ▲¥15.7B the prior year, they persist. Investments in equity-method associates amount to ¥325.6B (6.8% of total assets), and continued losses could deteriorate investment returns and cash returns, impacting Net Income stability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.6% | 4.6% (1.7%–8.2%) | +1.0pt |
| Net Profit Margin | 3.3% | 3.3% (0.9%–5.8%) | -0.1pt |
Operating margin exceeds the industry median by +1.0pt, placing the company among the higher-profitability retailers. Net profit margin is in line with the median, reflecting the impact of non-operating items.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 5.1% | 4.3% (2.2%–13.0%) | +0.8pt |
Revenue growth outperformed the industry median by +0.8pt, driven by high growth in the Discount Store Business, maintaining above-average growth within the industry.
※ Source: Company compilation
Gross margin improvement and stable operating margin: Gross margin of 25.7% improved +1.2pt YoY due to product mix optimization and price pass-through. Operating margin of 5.6% exceeds the industry median of 4.6% by +1.0pt, indicating relatively high profitability among retailers. The structure appears to sustain operating leverage despite a rising SG&A ratio of 20.1%. The Discount Store Business operating margin of 5.3% exceeds the Drugstore Business margin of 5.1%, indicating progress in balancing growth and profitability.
Room to improve inventory management and expectations for cash flow recovery: Inventory turnover days lengthened to about 64 days (prior ~60), and OCF/EBITDA at 0.66x indicates softened cash conversion. OCF of ¥432.97B is 1.38x Net Income, supporting profit quality, but inventory buildup of ▲¥116.5B pressured working capital. Normalizing inventory turnover could restore OCF/EBITDA to above 0.8x, offering potential near-term cash flow improvement.
Strong financial base and sustainability of shareholder returns: Equity Ratio 60.1%, Debt/EBITDA 0.73x, and Interest Coverage 121.8x indicate an extremely solid financial foundation. Payout Ratio 49.4% is stable but FCF coverage 0.74x is somewhat tight during an investment phase. Given cash on hand ¥705.2B, the company appears capable of sustaining both growth investment (CapEx ¥303.4B) and dividends (¥152.0B).
This report was generated automatically by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.