Fast Retailing Earnings: Operating Profit Beat; China’s Profit Will Rise Next Fiscal Year

Wide-moat Fast Retailing reported fiscal year 2024 (ended August 2024) revenue and operating income that were 1% and 7% higher than our estimates, respectively. We commend the company for achieving stronger profitability in the second half versus the first half, bucking the historical trend of sequentially lower profitability in the second half, which was achieved by stocking sufficient inventory. We raised our operating income estimate for the fiscal year 2025 by 4% and for both fiscal years 2026 and 2027 by 3% due to stronger projected performance in Uniqlo Japan, North America, and Europe, and revised up our fair value estimate by 12% to JPY 50,700 per share. We believe the shares are fairly valued.