Fast Retailing Earnings: Strong Results For Uniqlo International Except China; Shares Fairly Valued

Wide-moat Fast Retailing reported revenue and operating income up 14% and 31% year over year, respectively, for the quarter ended May, tracking ahead of our estimates. We increased our revenue forecast by 2% and operating income by 4% for fiscal 2024 (ending August 2024). This leads to a fair value estimate increase of 1% to JPY 45,400 per share. The shares are fairly valued. Strong results were driven by the operations in North America, Europe, Southeast Asia, and Japan, but mainland China revenue and profit contracted in local currency terms in the quarter. We expect to see revenue growth in fiscal 2025 in CNY terms, however, as management adopts a new strategy. If the Japanese yen appreciates in the near term due to a narrowing interest-rate differential between Japan and overseas, we could see pressure on Fast Retailing’s revenue, with the financial impact offset by a lower cost of sales for overseas production.