Japan Specialist

Mark Chadwick

Thematic (Sector/Industry)

<ul>
<li>The Nikkei 225 closed the week +0.2% higher after sharp gains on Friday</li>
<li>The Japanese yen dropped to a 32-year low on Thursday, trading at around 147.65 against the dollar, hitting its weakest point since August 1990</li>
<li>Higher rates and weakening economic growth are proving a stern headwind for tech stocks; Yaskawa cut full year OP guidance</li>
</ul>


The Nikkei 225 closed the week +0.2% higher after sharp gains on Friday
The Japanese yen dropped to a 32-year low on Thursday, trading at around 147.65 against the dollar, hitting its weakest point since August 1990
Higher rates and weakening economic growth are proving a stern headwind for tech stocks; Yaskawa cut full year OP guidance


Japan Weekly | Fast Retailing, Disco, Nidec

Equity Bottom-Up

<ul>
<li>We were Bearish on Fast Retailing, mainly due to valuation concerns against global peers. That view still stands.</li>
<li>We expected cautious guidance reflecting a harsh macro environment. Fast surprised with bullish guidance. That could be a risk.</li>
<li>We highlight the key slides from the results presentation and re-iterate our view that Fast should not trade at such a premium to its global peers</li>
</ul>


We were Bearish on Fast Retailing, mainly due to valuation concerns against global peers. That view still stands.
We expected cautious guidance reflecting a harsh macro environment. Fast surprised with bullish guidance. That could be a risk.
We highlight the key slides from the results presentation and re-iterate our view that Fast should not trade at such a premium to its global peers


Fast Retailing (9983) | Fantastic Execution at Fantastical Valuation

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. 

<ul>
<li>Low demand and slightly higher unemployment during the pandemic dampened the rising cost of part-time employees but that short respite is now over. </li>
<li>Hourly wages hit a new high in August and are set to rise further in coming months, renewing pressure on sectors like hospitality, retailing and logistics.</li>
<li>Retailers with high ratios of part-time wages such as the 100 Yen retailers like <a href="https://www.smartkarma.com/entities/seria-co-ltd" target="_blank" data-smartkarma-citation="entities:12989:1" rel="noopener">Seria Co Ltd (2782 JP)</a> and apparel retailers, will be hit particularly hard.</li>
</ul>


Low demand and slightly higher unemployment during the pandemic dampened the rising cost of part-time employees but that short respite is now over. 
Hourly wages hit a new high in August and are set to rise further in coming months, renewing pressure on sectors like hospitality, retailing and logistics.
Retailers with high ratios of part-time wages such as the 100 Yen retailers like Seria Co Ltd (2782 JP) and apparel retailers, will be hit particularly hard.


New Highs for Part-Time Wages a Worry for Japan's Retailers

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.

<ul>
<li>Although we are not expecting a major miss 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> in FQ4, we believe FY23 guidance could be disappointing to prompt a substantial correction in FY23 consensus.</li>
<li>China is continuously failing to live up to the company’s expectations and the only factors holding Uniqlo’s share price from breaking-down are the North America growth and the Yen depreciation.</li>
<li>Those too are now under threat, with a looming recession and Fed rate hikes failing to curb inflation.</li>
</ul>


Although we are not expecting a major miss for Fast Retailing (9983 JP) in FQ4, we believe FY23 guidance could be disappointing to prompt a substantial correction in FY23 consensus.
China is continuously failing to live up to the company’s expectations and the only factors holding Uniqlo’s share price from breaking-down are the North America growth and the Yen depreciation.
Those too are now under threat, with a looming recession and Fed rate hikes failing to curb inflation.


Fast Retailing – FY23 Guidance Could Knock Some Sense into Market

<ul>
<li>Fast Retailing's share price has risen 24% year-to-date, outperforming the index and global peers</li>
<li>The share price has been driven by multiple expansion, which we believe is now at risk of reversing</li>
<li>With an uncertain economic backdrop, we believe management may issue conservative guidance for the next fiscal year. We turn Bearish.</li>
</ul>


Fast Retailing's share price has risen 24% year-to-date, outperforming the index and global peers
The share price has been driven by multiple expansion, which we believe is now at risk of reversing
With an uncertain economic backdrop, we believe management may issue conservative guidance for the next fiscal year. We turn Bearish.


Fast Retailing (9983) | Elevated Multiple and Guidance Risk

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)

Japan Weekly | Fast Retailing, Disco, Nidec

We highlight the key stocks that moved in the market over the past week. The Nikkei was looking ugly until US stocks rebounded on Thursday. The yen...

Mark Chadwick

Fast Retailing (9983) | Fantastic Execution at Fantastical Valuation

We highlight the key slides from the results presentation and re-iterate our view that Fast should not trade at such a premium to its global peers

Mark Chadwick

New Highs for Part-Time Wages a Worry for Japan's Retailers

Wage growth slowed during the pandemic in Japan but is now relentlessly on the rise again. Retailers in particular are vulnerable, especially those...

Michael Causton

Fast Retailing – FY23 Guidance Could Knock Some Sense into Market

The US apparel industry is faced with a threat of a recession and the USD is likely to fall from a 20-year high with a pause on rate hikes. Thus,...

Oshadhi Kumarasiri

Fast Retailing (9983) | Elevated Multiple and Guidance Risk

Fast Retailing is trading at an excessive valuation premium to the broader index and global peers. Given the rising interest rate environment we...

Mark Chadwick

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