Watami FY2026 Net Profit Falls 16% as Izakaya Chain Eyes U.S. Franchise Expansion

Watami Co., Ltd. (TSE: 7522), one of Japan's best-known izakaya and casual dining operators, released full-year consolidated results for the fiscal year ended March 31, 2026 on May 13, 2026. Net sales rose 5.1% year-on-year to ¥93,268 million, up from ¥88,713 million, as the group's restaurant recovery and food-delivery expansion continued to gain traction. Operating profit climbed 5.9% to ¥4,837 million, representing an operating margin of roughly 5.2%, in line with the prior year. However, the profit story diverged sharply below the operating line: ordinary profit fell 12.2% to ¥5,246 million, and net profit attributable to owners of the parent dropped 15.9% to ¥3,522 million, down from ¥4,107 million. Earnings per share declined to ¥75.90 from ¥90.48.

The decline in ordinary and net profit despite the top-line and operating profit gains reflects increased non-operating charges and a less favourable non-recurring item contribution compared with the prior year, which had included a larger positive swing. Comprehensive income fell to ¥4,199 million from ¥5,848 million the prior year (−28.2%), and the equity ratio edged down to 37.5% from 40.4%, largely due to an increase in total assets to ¥74,556 million from ¥71,491 million as the group invested in its network and international operations. Operating cash flow remained solid at ¥7,567 million, and the group ended the year with cash of ¥14,704 million.

Izakaya recovery and food-delivery drive revenue growth

Watami operates across three principal business pillars: its core izakaya and casual dining chain under the Watami and related brands, a domestic food-delivery and meal-kit subscription service ("takushoku"), and an overseas restaurant business spanning multiple Asian and other international markets. The FY2026 revenue growth of 5.1% was underpinned by a continued recovery in dining-out demand in Japan following the post-pandemic normalisation, as well as steady expansion of the food-delivery and boxed-meal segment, which has become an increasingly important earnings contributor. The group also operates an agriculture and food-production arm that supplies ingredients to its restaurant operations, providing some vertical integration benefit. On the cost side, higher food and labour costs weighed on profitability below the operating line, a challenge shared across Japan's restaurant industry as wage inflation accelerated in FY2026.

U.S. franchise launch signals overseas ambition

A notable development in the fiscal year was the establishment of two new U.S. subsidiaries — Watami US Franchise LLC and H&W Hospitality Partners, LLC — which brought these entities into the consolidation scope for the first time. This move signals Watami's intention to extend its brand internationally via a franchise model targeting the United States, one of the world's largest restaurant markets. The group already operates overseas restaurants across parts of Asia, and the U.S. initiative represents a step-up in ambition. These additions to the consolidated group perimeter are reflected in slightly higher total assets and drove incremental costs that contributed to the year-on-year pressure on ordinary and net profit.

Dividend maintained; FY2027 guidance withheld

Watami maintained its annual dividend at ¥10.00 per share for FY2026 (¥0 interim + ¥10.00 year-end), consistent with FY2025, for a total dividend payout of approximately ¥401 million. The payout ratio rose to 13.2% on the lower net profit base. For FY2027 (April 2026–March 2027), the company stated it is not disclosing a guidance forecast at this time, citing the difficulty of making a reasonable quantitative estimate given uncertainty stemming from the Middle East and Ukraine conflicts and their broader global economic impact. The absence of guidance is unusual for a TSE-listed company and underscores the degree of macro caution management is exercising heading into the new fiscal year.

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