Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>It is going to be challenging for <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> to meet the 1QFY22 consensus revenue and OP, when it releases the first quarter results next week.</li>
<li>Comps were quite strong in the last year, driven by pent-up demand and consensus is expecting 1QFY22 to be marginally higher than the same period of the previous year.</li>
<li>We think there could be a substantial miss in 1QFY22, driven by lower than expected performance in Uniqlo’s Japan and Chinese businesses.</li>
</ul>


It is going to be challenging for Fast Retailing (9983 JP) to meet the 1QFY22 consensus revenue and OP, when it releases the first quarter results next week.
Comps were quite strong in the last year, driven by pent-up demand and consensus is expecting 1QFY22 to be marginally higher than the same period of the previous year.
We think there could be a substantial miss in 1QFY22, driven by lower than expected performance in Uniqlo’s Japan and Chinese businesses.


Fast Retailing: An Earnings Miss Could Be Around the Corner

Japan’s largest apparel retailer, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> delivered 4QFY21 results on 14th October 2021 with revenue falling behind the consensus estimate by ¥32.2bn (7%). Operating profit came ¥4.3bn above the consensus estimate of ¥16.9bn. The company’s FY22 revenue and operating profit guidance of ¥2,200bn (3.1% YoY) and ¥270bn (8.4% YoY) are not particularly impressive considering Fast Retailing’s business operations are yet to get back to the pre-COVID level.

Japan’s largest apparel retailer, Fast Retailing (9983 JP) delivered 4QFY21 results on 14th October 2021 with revenue falling behind the consensus estimate by ¥32.2bn (7%). Operating profit came ¥4.3bn above the consensus estimate of ¥16.9bn. The company’s FY22 revenue and operating profit guidance of ¥2,200bn (3.1% YoY) and ¥270bn (8.4% YoY) are not particularly impressive considering Fast Retailing’s business operations are yet to get back to the pre-COVID level.

Fast Retailing: Additional 20% Downside Is Possible As Growth Breaks Down in Uniqlo International

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

<a href="https://www.smartkarma.com/entities/ryohin-keikaku-co-ltd" target="_blank" data-smartkarma-citation="entities:2765:1" rel="noopener">Ryohin Keikaku (7453 JP)</a> fired a broadside at Uniqlo last month when it confirmed not only that its new president would be a former lieutenant to Tadashi Yanai, but also that it plans to reduce prices to compete with Uniqlo in apparel and <a href="https://www.smartkarma.com/entities/nitori-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20386:1" rel="noopener">Nitori Holdings (9843 JP)</a> in home.While Muji is today a quarter of the size of <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>, it has big plans to become a ¥3 trillion behemoth in just 10 years with more stores in Japan than even discount apparel chain, Shimamura.Is this a real plan or just a rallying of the troops, Uniqlo-style?

Ryohin Keikaku (7453 JP) fired a broadside at Uniqlo last month when it confirmed not only that its new president would be a former lieutenant to Tadashi Yanai, but also that it plans to reduce prices to compete with Uniqlo in apparel and Nitori Holdings (9843 JP) in home.While Muji is today a quarter of the size of Fast Retailing (9983 JP), it has big plans to become a ¥3 trillion behemoth in just 10 years with more stores in Japan than even discount apparel chain, Shimamura.Is this a real plan or just a rallying of the troops, Uniqlo-style?

<ul>
<li>While domestic revenues may have slowed, Uniqlo's domestic OP shows upside potential driven by gross margin growth and a gradual reduction in SG&amp;A costs.</li>
<li>Meanwhile, we expect Uniqlo’s International business OP to surpass ¥75bn, driven by a rebound in China demand  and strong momentum in South Korea, SE Asia &amp; Ocenia.</li>
<li>Thus, we see the upcoming earnings as a compelling opportunity for trading <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>.</li>
</ul>


While domestic revenues may have slowed, Uniqlo's domestic OP shows upside potential driven by gross margin growth and a gradual reduction in SG&amp;A costs.
Meanwhile, we expect Uniqlo’s International business OP to surpass ¥75bn, driven by a rebound in China demand  and strong momentum in South Korea, SE Asia &amp; Ocenia.
Thus, we see the upcoming earnings as a compelling opportunity for trading Fast Retailing (9983 JP).


Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Minimal changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.</li>
<li>The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.</li>
<li>There is the upweight to Nitori (9843) AND funkiness with Fast Retailing (9983) to consider. We are right on the threshold. The question is whether it gets "help" in January.</li>
</ul>


Minimal changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
There is the upweight to Nitori (9843) AND funkiness with Fast Retailing (9983) to consider. We are right on the threshold. The question is whether it gets "help" in January.


March 2024 Nikkei 225 Rebal - Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade

Japan

Nitori Holdings Co., Ltd., is based in Hokkaido and operates a furniture retail chain.  The Company sells living room furniture, storage furniture, dining furniture, office furniture, beds, and interior goods.  Nitori Holdings also sells original brand merchandise and imported merchandise.

ABC-MART, INC. plans, develops, wholesales, and retails shoes.  The Company also plans and develops brand name shoes such as VANS and G.T. HAWKINS.  ABC-Mart imports and wholesales shoes, apparel, bags, and sundries as well.

HIKARI TSUSHIN, INC. is a mobile telecommunication service subscription agency. The Company also operates telecommunication services stores, HIT SHOP, which sell cellular telephones, and related goods.  Hikari Tsushin also sells office automation equipment and insurance.

Sanrio Company, Ltd. manufactures and sells character goods including gift merchandise, greeting cards, and stationery products.  The Company also produces books, magazines, and movies, and though its subsidiary, operates restaurants and amusement parks.

USS CO LTD manages used car auction facilities throughout  Japan. The Company al so conducts auto auctions through satellites, and provides used car information through internet.

SHIMAMURA CO., Ltd. operates chain stores selling mainly clothing for men, women, children, and also bedding and furnishing goods.  The Company has stores in mainly suburb areas throughout Japan.

YAMADA DENKI CO., LTD. operates consumer electronic mass sales stores throughout Japan.  The Company sells home appliances, audio & visual systems, office automation equipment, telecommunication equipment, software, and computers. The Company also provides repair services for its merchandises.

WORKMAN CO., LTD. designs, produces, and retails work uniforms and related goods including work gloves and safety shoes.  The Company operates its own stores and franchise stores located throughout eastern Japan.

BIC CAMERA INC. operates electronic retail stores throughout Japan focusing on the Tokyo metropolitan area.  The Company sells audio and video equipments, electrical home appliances and telecommunication equipments.  Bic Camera also runs an Internet shopping site.

K'S HOLDINGS CORPORATION, based in Ibaraki prefecture, operates large scale electrical appliance store chain.  Franchise stores operates throughout Japan. The Company sells a variety of electrical appliances including refrigerators, washing machines, cooking appliances, computers, audio & visual systems, and air conditioners.

Dick's Sporting Goods, Inc. operates as a sporting goods retailer that manages stores primarily in the eastern and central United States. The Company owns stores that offers a broad selection of brand name sporting goods equipment, apparel, and footwear.

Burlington Stores, Inc. owns and operates clothing retail stores. The Company offers, through its stores and internet sites, men's, women's, and children's apparel. Burlington Holding operates within the United States and Puerto Rico.

Tractor Supply Company operates a retail farm store chain in the United States. The Company provides farm maintenance products, animal products, general maintenance products, lawn and garden products, light truck equipment, work clothing, and other products.  Customers include hobby, part-time, and full-time farmers and ranchers, as well as rural customers, contractors, and tradesman.

Lowe's Companies, Inc. is a home improvement retailer that distributes building materials and supplies through stores in the United States. The Company offers a complete line of products and services for home decorating, maintenance, repair, remodeling, and property maintenance.

Murphy USA Inc. produces and distributes petroleum products. The Company engages in refining, marketing, and transportation of oil and gas products. Murphy USA provides products and services worldwide.

O'Reilly Automotive, Inc. retails and supplies automotive aftermarket parts, tools, supplies, equipment, and accessories.  The Company sells its products to do-it-yourself customers and professional mechanics or service technicians. O'Reilly operates stores throughout the United States.

Ulta Beauty, Inc. operates a chain of beauty stores. The Company offers cosmetics, fragrance, skin, and hair care products, as well as salon services. Ulta Beauty serves customers throughout the United States.

Williams-Sonoma, Inc. retails cooking and serving equipment, home furnishings, and home accessories through retail stores, mail order catalogs and e-commerce. The Company offers its merchandise under the Williams-Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, and West Elm.

Hotai Motor Company Ltd. operates as an automobile dealership. The Company sells and services new and used cars and trucks in Taiwan.

GameStop Corporation operates specialty electronic game and PC entertainment software stores throughout the United States, Australia, Canada and Europe. The Company stores sell new and used video game hardware, video game software and accessories, as well as PC entertainment software, and related accessories and other merchandise.

FAST RETAILING CO., LTD. operates a chain of clothing stores, UNIQLO, throughout Japan and in other markets overseas including UK, China, Hong Kong, South Korea, US, France, Singapore and Russia.  The Company designs, manufactures, and retails its own line of casual clothing.

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Fast Retailing (9983 JP)

Fast Retailing: An Earnings Miss Could Be Around the Corner

It is going to be challenging for Fast Retailing (9983 JP) to meet the 1QFY22 consensus revenue and OP, when it releases the first quarter results...

Oshadhi Kumarasiri

Fast Retailing: Additional 20% Downside Is Possible As Growth Breaks Down in Uniqlo International

With Uniqlo International’s growth struggling to get going after the South Korea boycott, Hong Kong protests and COVID-19, we were expecting a...

Oshadhi Kumarasiri

Muji: A ¥3 Trillion Brand by 2030?

Muji has confounded critics in the last decade by finding new growth domestically despite perceived saturation. Now it wants to increase sales 6...

Michael Causton

Fast Retailing: Earnings Preview

Uniqlo's domestic OP shows potential with margin growth and cost reduction, while international OP is expected to surpass ¥75bn due to rebounding...

Oshadhi Kumarasiri

March 2024 Nikkei 225 Rebal - Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade

The March 2024 Nikkei 225 Rebalance is aiming at JPY 1 trillion to trade. The big one to the buy side is Disco (6146) but there are several large...

Travis Lundy

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Fast Retailing: An Earnings Miss Could Be Around the Corner

It is going to be challenging for Fast Retailing (9983 JP) to meet the 1QFY22 consensus revenue and OP, when it releases the first quarter results...

Oshadhi Kumarasiri

Fast Retailing: Additional 20% Downside Is Possible As Growth Breaks Down in Uniqlo International

With Uniqlo International’s growth struggling to get going after the South Korea boycott, Hong Kong protests and COVID-19, we were expecting a...

Oshadhi Kumarasiri

Muji: A ¥3 Trillion Brand by 2030?

Muji has confounded critics in the last decade by finding new growth domestically despite perceived saturation. Now it wants to increase sales 6...

Michael Causton

Fast Retailing: Earnings Preview

​Uniqlo's domestic OP shows potential with margin growth and cost reduction, while international OP is expected to surpass ¥75bn due to rebounding...

Oshadhi Kumarasiri

March 2024 Nikkei 225 Rebal - Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade

The March 2024 Nikkei 225 Rebalance is aiming at JPY 1 trillion to trade. The big one to the buy side is Disco (6146) but there are several large...

Travis Lundy

Uniqlo's domestic OP shows potential with margin growth and cost reduction, while international OP is expected to surpass ¥75bn due to rebounding...