Palemo Holdings Co.,Ltd. (2778) AI Stock Analysis

• Market Cap: ¥1.38B
• Dividend Yield: N/A
• Average Volume (3M): 71.97K
• Price to Earnings (P/E): ―
• Beta (1Y): 0.94
• Revenue Growth: -6.40%
• EPS Growth: -590.11%
• Country: JP
• Employees: 135
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Apparel - Retail
• EPS (TTM): -8.11
• Shares Outstanding: 12,051,384
• 10 Day Avg. Volume: 66,600
• 30 Day Avg. Volume: 71,970
• PEG Ratio: 0.31
• Price to Book (P/B): 1.03
• Price to Sales (P/S): 0.11
• P/FCF Ratio: 6.48
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 45 Neutral
• Price Target: ¥113.00 ▼(-11.72% Downside)
• Action: Reiterated Date: 03/24/26
• Date: Action: Reiterated 03/24/26

Overall score reflects weakening fundamentals (sharp revenue decline and return to losses) and a bearish technical setup (below all major moving averages with negative MACD). Positive operating/free cash flow and balance-sheet deleveraging provide partial support, but negative earnings and limited valuation visibility keep the score subdued.

Positive Factors

Multi-channel retail model

Palemo's combined physical store network and e-commerce sales creates a durable omni-channel business model. This mix diversifies revenue sources, supports customer reach across segments, and helps smooth seasonal variability. Long-term, channel flexibility aids inventory turnover and marketing efficiency as consumer buying behavior continues shifting toward blended online/offline experiences.

Improving cash generation

The company’s recovery to positive free cash flow and improved operating cash flow in 2025 reflects stronger cash conversion despite accounting losses. Durable cash generation reduces dependence on external financing, supports working capital needs, and creates optionality for reinvestment or debt reduction over the medium term, improving financial flexibility.

Stable equity base

A 22.6% equity ratio indicates a measurable capital buffer despite liabilities exceeding assets overall. This relatively stable equity base provides creditors and suppliers some confidence and gives management room to execute restructuring or efficiency measures. Over several quarters, it can help absorb shocks while profitability and leverage are addressed.

Negative Factors

High leverage

A persistently high debt-to-equity position constrains financial flexibility and raises interest and refinancing risk. With ongoing losses and modest equity, leverage magnifies downside during demand slowdowns and limits the company’s ability to invest in store experience, inventory, or digital initiatives without committing to more costly financing or asset sales.

Declining revenue trend

A multi-year revenue decline reduces scale economics, weakens negotiating leverage with suppliers, and pressures gross margins. Continued top-line contraction makes it harder to cover fixed retail costs and invest in growth initiatives, risking a structural loss of market share unless product mix, merchandising or channel strategy are materially improved.

Persistent negative profitability

Ongoing negative net margins and a negative ROE signal the business is not yet generating sufficient returns to justify reinvestment from earnings. This erodes retained capital, pressures credit metrics, and may force continued reliance on external capital or asset optimization, limiting strategic investments and competitive positioning over the medium term.

Palemo Holdings Co.,Ltd. Business Overview & Revenue Model

Company Description

Palemo Holdings Co.,Ltd. owns and operates a chain of specialty stores for women's apparel in Japan. It is also involved in the delivery agency business. The company was formerly known as Palemo Co., Ltd. and changed its name to Palemo Holdings Co.,Ltd. in August 2017. The company was incorporated in 1976 and is headquartered in Nagoya, Japan.

How the Company Makes Money

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Palemo Holdings Co.,Ltd. Financial Statement Overview

Summary

Financials are mixed: the company returned to a net loss in 2025 with a sharp revenue decline (-19.85%) and weaker operating leverage (EBIT margin ~1.4% vs ~3.1% in 2024). Offsetting this, cash flow has improved to consistently positive levels in 2023–2025 and leverage has trended down materially since 2022, though profitability volatility still elevates balance-sheet risk.

Income Statement

Profitability has weakened materially: the company moved from positive earnings in 2023–2024 to a small net loss in 2025, alongside a sharp revenue decline (-19.85% in 2025 after modest declines in prior years). Gross margin has been steady around ~52%, but operating leverage has deteriorated, with EBIT margin compressing from ~3.1% (2024) to ~1.4% (2025). Strength: gross profit resilience suggests pricing/merchandising discipline. Weakness: persistent top-line contraction and shrinking operating profitability raise concerns about demand and fixed-cost absorption.

Balance Sheet

Leverage remains elevated but has improved versus the peak-stress period. Debt-to-equity declined from very high levels in 2022 (~8.3x) to ~1.2x in 2025, supported by higher equity and lower debt versus 2023–2024. However, balance-sheet risk is still meaningful given relatively thin equity for the size of the asset base and the return on equity turning negative in 2025 after strong levels in 2023–2024. Strength: clear deleveraging trend since 2022. Weakness: profitability volatility makes the capital structure more fragile than it appears in a single year.

Cash Flow

Cash generation improved significantly from negative operating and free cash flow in 2021–2022 to positive levels in 2023–2025, with 2025 free cash flow remaining solidly positive. Cash flow quality is mixed: in 2025, operating cash flow is positive despite a net loss (helpful for liquidity), but free cash flow relative to net income is not a clean signal in a loss year and has been volatile historically (very low conversion in 2023). Strength: turnaround to consistent positive cash flow in the last two years. Weakness: cash flow conversion has been uneven across the cycle, implying working-capital and/or capex variability.

Breakdown	TTM	Feb 2025	Feb 2024	Feb 2023	Feb 2022	Feb 2021
Income Statement
Total Revenue	18.41B	15.04B	15.94B	17.51B	17.91B	18.26B
Gross Profit	9.71B	7.90B	8.28B	9.14B	9.35B	9.39B
EBITDA	497.65M	386.86M	612.78M	766.40M	-417.38M	-1.02B
Net Income	-6.83M	-47.63M	411.77M	562.00M	-1.39B	-1.88B
Balance Sheet
Total Assets	7.03B	7.02B	8.47B	8.82B	9.22B	10.05B
Cash, Cash Equivalents and Short-Term Investments	1.86B	2.04B	2.95B	3.04B	2.21B	2.14B
Total Debt	1.79B	1.93B	2.92B	3.49B	3.49B	3.35B
Total Liabilities	5.35B	5.44B	6.83B	7.57B	8.80B	8.25B
Stockholders Equity	1.68B	1.58B	1.64B	1.25B	418.48M	1.81B
Cash Flow
Free Cash Flow	0.00	250.40M	434.84M	24.57M	-400.13M	-1.41B
Operating Cash Flow	0.00	363.48M	565.81M	207.26M	-158.58M	-1.16B
Investing Cash Flow	0.00	-218.86M	-80.72M	362.78M	107.19M	76.94M
Financing Cash Flow	0.00	-1.05B	-584.75M	264.96M	125.43M	970.67M

Palemo Holdings Co.,Ltd. Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 128.00
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Positive
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:2778, the sentiment is Negative. The current price of 128 is below the 20-day moving average (MA) of 144.05, below the 50-day MA of 145.86, and below the 200-day MA of 143.82, indicating a bearish trend. The MACD of -5.27 indicates Positive momentum. The RSI at 24.99 is Positive, neither overbought nor oversold. The STOCH value of 9.75 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:2778.

Palemo Holdings Co.,Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
2792	72 Outperform	¥40.46B	10.95	―	3.62%	-0.98%	-29.86%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%
2778	45 Neutral	¥1.38B	-4.22	―	―	-6.40%	-590.11%
8013	45 Neutral	¥2.44B	46.31	―	―	2.54%	―
3189	43 Neutral	¥8.26B	-1.54	―	―	-34.49%	―
7603	41 Neutral	¥3.18B	-1.51	―	―	-7.88%	-11.22%