YAMAYA (9994) FY2026 Q3 Earnings Report

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Executive Summary

Although Revenue remained at approximately the previous year’s level, the combination of a decline in gross margin and an increase in SG&A expenses resulted in a financial performance marked by a clear deterioration in profitability, with no increase in Operating Income. Revenue was ¥1228.7B (-0.1% YoY), remaining broadly flat, while Operating Income was ¥34.5B (-26.3%), Ordinary Income was ¥35.1B (-26.6%), and Net Income was ¥24.7B (-29.5%), all recording double-digit declines. The primary factors were deterioration in gross margin (28.6%, compared with 29.2% in the previous year) and a 1.9% increase in SG&A expenses despite the lack of Revenue growth, causing negative operating leverage. Profit margins declined in both core businesses, Liquor Retail and Food Service, while impairment losses also increased from the previous year.

Factors Affecting Financial Performance

【Revenue】Consolidated Revenue was ¥1228.7B, essentially flat at -0.1% YoY. The core Liquor Retail Business generated ¥1006.8B (-0.3% YoY), accounting for approximately 82% of total Revenue, while the Food Service Business generated ¥221.9B (+0.5% YoY), representing only a modest increase. Neither business has entered a phase of expanding its Revenue scale.

【Profit and Loss】Operating Income was ¥34.5B (-26.3% YoY), and Ordinary Income was ¥35.1B (-26.6% YoY). The impact of non-operating income and expenses was limited (net non-operating income of +¥0.6B), indicating that most of the decline in profit was attributable to deterioration in the profitability of the core businesses. Of ¥3.0B in extraordinary losses, impairment losses of ¥2.7B pressured Profit Before Tax, which was ¥33.4B (-29.0% YoY). Net Income was ¥24.7B (-29.5% YoY), while Net Income attributable to owners of the parent, excluding profit or loss attributable to non-controlling interests, was ¥20.4B (-30.5% YoY). Segment profit in the Liquor Retail Business was ¥26.4B (-24.8% YoY; profit margin of 2.6%), while the Food Service Business posted ¥8.1B (-30.9% YoY; profit margin of 3.6%). Profit margins declined in both businesses, and although neither experienced a decline in Revenue and profit simultaneously, the overall performance can be summarized as increased Revenue but decreased profit.

Segment Analysis

The Liquor Retail Business, the core business accounting for approximately 76% of consolidated Operating Income, recorded external customer Revenue of ¥1006.8B (-0.3% YoY), segment profit of ¥26.4B (-24.8% YoY), and a profit margin of 2.6% (3.5% in the previous year), indicating deteriorating profitability. The Food Service Business recorded external customer Revenue of ¥221.9B (+0.5% YoY), segment profit of ¥8.1B (-30.9% YoY), and a profit margin of 3.6% (5.3% in the previous year). Despite increased Revenue, the extent of margin deterioration was greater than that of the Liquor Retail Business. The difference in profit margins between the two businesses narrowed from approximately 1.8pt in the previous year to approximately 1.0pt, highlighting the reduced cost absorption capacity of the Food Service Business. Impairment losses were ¥1.4B in the Liquor Retail Business and ¥1.3B in the Food Service Business, indicating pressure to reassess low-profitability assets in both segments.

Key Financial Indicators

【Profitability】Operating margin deteriorated to 2.8% (3.8% in the previous year), while Net Profit Margin declined to 1.7% (2.4% in the previous year). This reflected simultaneous deterioration in gross margin to 28.6% (29.2% in the previous year) and an increase in the SG&A ratio to 25.8% (25.4% in the previous year). 【Cash Flow Quality】Comprehensive Income was ¥30.0B, exceeding Net Income of ¥24.7B, with an ¥5.3B contribution from valuation differences on securities. However, as this is not directly related to business profit or loss, the trend in Operating Income from the core business should be prioritized when assessing earnings quality. 【Investment Efficiency】ROE (annualized) was 8.3%. Although high asset turnover compensates for the low Net Profit Margin, capital efficiency also declined accordingly due to the deterioration in the current-period profit margin. 【Financial Soundness】The Equity Ratio was 55.5%, Cash and Deposits were ¥158.6B, and Long-Term Borrowings were ¥16.2B. While the capital base and liquidity remain stable, Accounts Receivable increased substantially YoY to ¥84.8B, making collection trends an item requiring monitoring.

Cash Flow Analysis

Although detailed disclosure of the Statement of Cash Flows is unavailable, funding trends can be assessed from changes in the balance sheet. Cash and Deposits were ¥158.6B, an increase of ¥32.7B from ¥125.9B in the same period of the previous year, strengthening liquidity. Meanwhile, Inventories were ¥200.0B, down ¥25.4B from ¥225.4B in the previous year, suggesting that inventory reduction was one factor behind the increase in cash. Long-Term Borrowings were ¥16.2B, down ¥13.5B from ¥29.7B in the previous year, indicating cash outflows from debt repayment. Nevertheless, cash increased, suggesting that the business maintained its cash-generation capacity. Accounts Receivable increased by ¥20.2B YoY to ¥84.8B, and any change in the collection period could affect future cash efficiency.

Earnings Quality

Ordinary Income of ¥35.1B was only slightly above Operating Income of ¥34.5B, indicating limited supplementation from non-operating income. The primary components of non-operating income of ¥1.6B included dividend income of ¥0.3B, which remains at a scale that can be regarded as recurring income. Meanwhile, impairment losses of ¥2.7B within extraordinary losses of ¥3.0B increased substantially from ¥1.1B in the same period of the previous year, representing a temporary factor reflecting the profitability of low-profitability assets in both the Liquor Retail and Food Service Businesses. The ¥5.3B difference between Net Income of ¥24.7B and Comprehensive Income of ¥30.0B resulted from an increase in valuation differences on securities and is unrelated to the earnings power of the core business. Overall, current-period profit was depressed by both deterioration in the profitability of the core businesses and temporary impairment charges, with the decline in recurring earnings power representing the more important issue.

Earnings Forecast and Guidance

Progress against the full-year plan was 77.1% for Revenue (exceeding the standard progress rate of 75%), 101.5% for Operating Income, 103.3% for Ordinary Income, and 104.0% for Net Income attributable to owners of the parent. Thus, the profit indicators had already exceeded the full-year plan on a cumulative Q3 basis. The company’s full-year forecast assumes Revenue of ¥1593.4B (-0.5% YoY), Operating Income of ¥34.0B (-37.3% YoY), and Ordinary Income of ¥34.0B (-38.9% YoY), premised on substantial declines in profit. Working backward, the company plans for modest deficits in both Operating Income and Net Income in Q4. This conservative setting may incorporate seasonal expense recognition and the potential occurrence of additional impairment losses. Q4 results and whether the company revises its plan will therefore be key items to monitor.

Shareholder Returns

The full-year annual dividend forecast is ¥75.00 per share, of which the Q2 dividend of ¥37.00 has already been paid. Based on forecast EPS of ¥180.79, the Payout Ratio is approximately 41.5%. When assessed as a single consistent Payout Ratio, this is below a level that would serve as an indicator of sustainability. Cumulative Q3 Net Income attributable to owners of the parent was ¥20.4B, already exceeding the full-year forecast of ¥19.6B, providing sufficient coverage for the current dividend plan. Cash and Deposits of ¥158.6B and the low level of interest-bearing debt support financial flexibility in maintaining dividend payments.

Risk Factors

1. Deterioration in the profitability of the core business (Liquor Retail): The Liquor Retail Business is the core business, accounting for approximately 76% of consolidated Operating Income. Its Revenue declined 0.3% YoY, while segment profit declined 24.8% YoY, meaning that deterioration in its profit margin has a significant impact on company-wide earnings. The profit margin declined to 2.6% (3.5% in the previous year).

2. Inventory efficiency and gross-margin protection: Although Inventories declined 11.2% YoY, annualized inventory turnover days were approximately 62 days, exceeding the cautionary level for the retail industry. The risk of markdowns and inventory write-downs could place further pressure on gross margin.

3. Reduced cost absorption capacity in the Food Service Business: Despite a 0.5% YoY increase in Revenue, segment profit in the Food Service Business declined substantially by 30.9% YoY. The business may not have been able to sufficiently pass increases in labor and food ingredient costs on to prices.

Industry Benchmark (For Reference; Company Research)

Profitability and Returns

Operating margin is slightly below the industry median, while Net Profit Margin exceeds the industry median, indicating relative strength in the lower tier of the earnings structure.

Growth and Capital Efficiency

Revenue growth is substantially below the industry median, indicating that the company is lagging its industry in terms of growth.

※Source: Company research

Key Takeaways from the Financial Results

1. Against flat Revenue, gross margin declined (28.6%, compared with 29.2% in the previous year) while the SG&A ratio increased (25.8%, compared with 25.4% in the previous year), resulting in a year-on-year decline of approximately 1.0pt in Operating Margin to 2.8%. While the top line remained stable, room for improvement in the cost structure remains an issue.

2. Profit margins declined in both the Liquor Retail and Food Service Businesses. In particular, the Food Service Business experienced a significant decline in its profit margin despite increased Revenue. Differences in cost absorption capacity between businesses have appeared as a narrowing gap in profit margins between the segments.

3. The full-year profit plan has already achieved a progress rate exceeding 100% on a cumulative Q3 basis, while the company’s forecast itself assumes a substantial decline in full-year profit. The occurrence of impairment losses and the timing of expense recognition in Q4 will be key factors determining the final full-year results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,046–¥3,218 at ±1% Cost of Equity, and ¥3,114–¥3,140 at ω±0.1.

Notes:

• Since progress of Net Income against the full-year forecast (104%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies whose progress is ahead of plan 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 quarter-end have been used (there is a timing difference from the full-year forecast).
• Since Net Assets include non-controlling interests, the theoretical value may be calculated at a somewhat high level.

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

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This report is a financial results analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial results data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

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