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

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?

Japan Specialist

Mark Chadwick

<ul>
<li>We anticipate a sluggish beginning to the fiscal year with 1Q8/24 earnings reflecting slower growth in Japan, China, and Southeast Asia.</li>
<li>Our forecast for 1Q24 operating profit stands at ¥130 billion, slightly below the consensus estimate of ¥138 billion. Assuming our estimates are accurate, we anticipate a slightly negative share-price reaction.</li>
<li>Our bearish stance on the stock persists, driven by the fact that it trades at a premium to our DCF and at a premium compared to global peers</li>
</ul>


We anticipate a sluggish beginning to the fiscal year with 1Q8/24 earnings reflecting slower growth in Japan, China, and Southeast Asia.
Our forecast for 1Q24 operating profit stands at ¥130 billion, slightly below the consensus estimate of ¥138 billion. Assuming our estimates are accurate, we anticipate a slightly negative share-price reaction.
Our bearish stance on the stock persists, driven by the fact that it trades at a premium to our DCF and at a premium compared to global peers


Fast Retailing (9983) | Q1 Preview - Slight Miss

<ul>
<li>Uniqlo is such a mainstay of Japanese retailing, and indeed life, that its dominance seems inevitable and unchanging. </li>
<li>Yet it has morphed from a mess of poorly judged acquisitions and failed overseas experiments into Japan’s biggest retail export – and still manages to pull off 20% growth.</li>
<li>Its latest target of ¥10 trillion in 10 years is far-fetched but its history of persistent determination suggests continued expansion is a certainty.</li>
</ul>


Uniqlo is such a mainstay of Japanese retailing, and indeed life, that its dominance seems inevitable and unchanging. 
Yet it has morphed from a mess of poorly judged acquisitions and failed overseas experiments into Japan’s biggest retail export – and still manages to pull off 20% growth.
Its latest target of ¥10 trillion in 10 years is far-fetched but its history of persistent determination suggests continued expansion is a certainty.


Fast Retailing: Great Fundamentals for Uniqlo, Shame About the Share Price

<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).


Japan

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: 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 (9983) | Q1 Preview - Slight Miss

Anticipating slow growth in Japan, China, and Southeast Asia, 1Q8/24 earnings are expected to be sluggish, leading to a slightly negative share...

Mark Chadwick

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

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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 (9983) | Q1 Preview - Slight Miss

​Anticipating slow growth in Japan, China, and Southeast Asia, 1Q8/24 earnings are expected to be sluggish, leading to a slightly negative share...

Mark Chadwick

Fast Retailing: Great Fundamentals for Uniqlo, Shame About the Share Price

Insights summarises Uniqlo's strong long-term fundamentals that are providing the basis for the recent results but which are often forgotten as...

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

Anticipating slow growth in Japan, China, and Southeast Asia, 1Q8/24 earnings are expected to be sluggish, leading to a slightly negative share...

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