DAIKOKUTENBUSSAN CO.,LTD.

Business Details

The Daikokuten Bussan Group operates mainly a food-focused supermarket business, comprising 19 consolidated subsidiaries. Its only reportable segment is the retail business. The group promotes a "high quality, low price" strategy centered on achieving the lowest prices in each region through ESLP (Every Day Same Low Price) and the rollout of its in-house developed D-PRIDE products. The three pillars of its strategy are: reducing logistics costs through building its own distribution network, improving freshness of perishable products via the shortest possible temperature-controlled logistics from production areas, and scaling up through rapid multi-store expansion. The company is expanding its store network from the Chugoku and Shikoku regions into the Kansai, Chubu, Kyushu, Hokuriku, and Tokai regions.

Recent Overview

Net sales rose 9.0%, but a sharp increase in SG&A expenses and a change in the estimate of asset retirement obligations led to a large 46% decline in operating income.

In FY2026 (ending May 2026), the company opened 25 new stores (including its first stores in Yamanashi and Oita prefectures) and achieved net sales of ¥319,208 million (up 9.0% year on year). However, salaries, allowances and bonuses rose to ¥29,045 million (up 16.2% year on year), depreciation expense rose to ¥8,472 million (up 33.5% year on year), and SG&A expenses expanded to ¥68,925 million (up 17.0% year on year). In addition, a change in the estimate of asset retirement obligations (an increase of ¥2,063 million) reduced operating income and ordinary income by ¥487 million. The company raised ¥30,000 million through long-term borrowings and continued to invest aggressively. For FY2027 (ending May 2026), the company plans to open 10 new stores and renovate 15 stores, and forecasts operating income of ¥7,400 million (up 39.7% year on year).

Key Products

Growth Drivers

• Expansion of sales scale through rapid multi-store openings (25 new stores in FY2026 (ending May 2026); 10 new stores planned for FY2027 (ending May 2026))
• Cost reduction in store openings and operations through expansion of the SFO store format (7 of the new stores opened in FY2026 (ending May 2026) were SFO format)
• Maintaining customer traffic through the ESLP strategy amid growing consumer thrift
• Cost reduction and enhanced competitiveness in fresh food through building in-house logistics and temperature-controlled logistics networks
• Development of new markets through store network expansion (first stores in Yamanashi, Oita, and other prefectures)
• Economies of scale from improved utilization rates at the Chugoku and Kansai distribution centers

Risks

• Rising construction costs increasing new store opening expenses and inflating SG&A expenses (depreciation expense up 33.5% year on year)
• Profit pressure from rising personnel costs (minimum wage increases) and logistics costs (salaries, allowances and bonuses up 16.2% year on year)
• Risk of changes in estimates for asset retirement obligations (an additional ¥2,063 million was recorded in FY2026 (ending May 2026), reducing profit by ¥487 million)
• Rising financial leverage and increased interest burden due to a sharp increase in long-term borrowings (from ¥3,945 million to ¥21,519 million; interest expense rose from ¥52 million to ¥271 million)
• Decline in equity ratio (from 52.3% to 43.9%) and a sharp drop in the interest coverage ratio (from 230.3x to 37.6x)
• Sluggish growth in average customer spending and intensifying price competition amid continued consumer thrift
• Rising prices of imported goods and energy due to geopolitical risks (such as the situation in the Middle East)
• Decline in operating margin (from 3.3% to 1.7%) and deteriorating asset efficiency (return on total assets based on ordinary income falling from 9.1% to 4.3%)