Japan’s Quick Retailing probably hit by South Korea boycott; succession plans in focus: analysts


TOKYO (Reuters) – A South Korean boycott of Japanese items is seen dragging down gross sales at Quick Retailing Co Ltd’s (9983.T) Uniqlo shops, denting in any other case sturdy monetary outcomes because of be introduced on Thursday by Asia’s largest vogue group, analysts mentioned.

FILE PHOTO: A Uniqlo retailer is seen on fifth Ave in New York, New York, U.S., March 19, 2019. REUTERS/Carlo Allegri/File Picture

However one other focus will probably be on succession plans after founder Tadashi Yanai, Japan’s richest particular person in keeping with Forbes, turned 70 earlier this 12 months.

Analysts on common count on working revenue of 258.6 billion yen ($2.41 billion) for the 12 months ended August, up 9.5% from a 12 months prior, Thomson Reuters information confirmed. They see a 14% rise within the present 12 months, helped by energy in China and new markets.

Some have been marking down forecasts since Uniqlo and different Japanese companies have been focused by South Korean boycotts amid a diplomatic spat – a reminder of dangers that include abroad enlargement. The corporate opened its first retailer in India final week and can also be increasing in markets reminiscent of Malaysia and Indonesia.

Gross sales in South Korea, which account for round 8% of gross sales in Quick Retailing’s flagship Uniqlo enterprise, fell 40% year-on-year in July and extra in August, the Nikkei reported.

J.P. Morgan analyst Dairo Murata lately lowered his Quick Retailing earnings forecast for the present 12 months by 4.6% and minimize his worth goal on the shares to 68,000 yen from 70,000 yen.

The shares final traded at round 61,300 yen, up 15% within the 12 months thus far.

“We foresee a double-digit decline in gross sales and a roughly 40% fall in working revenue for the South Korea enterprise,” Murata mentioned in a consumer be aware, including that the yen’s appreciation in opposition to China’s yuan was one other near-term damaging issue.

Quick Retailing’s largest development market lately has been China, the place it opened its first Uniqlo retailer in 2002 and now has over 700 areas. The corporate has mentioned it expects Larger China income to develop to 1 trillion yen in fiscal 2022.

The Japan market, against this, has proven little development. Uniqlo’s September same-store gross sales information confirmed a 4.2% decline from a 12 months earlier, with analysts saying they’d anticipated stronger gross sales forward of a consumption tax hike this month.

SUCCESSION

One other key concentrate on Thursday will probably be succession planning. Beforehand, Yanai mentioned he would retire at 65 however shelved such plans when the time approached.

He has mentioned he doesn’t need his two sons to take the highest job, although each have been promoted to the ranks of firm administrators final 12 months.

The subsequent chief will probably be tasked not solely with sustaining development in China but in addition addressing long-term issues, reminiscent of its battle to ascertain its model in the US. Traders are additionally eager for extra outcomes from current know-how investments together with automated checkout and state-of-the-art logistics programs.

Doable successors embrace finance chief Takeshi Okazaki, who joined Quick Retailing from McKinsey & Co in 2011, and Pan Ning, head of Uniqlo’s China operations.

Maki Akaida, head of Uniqlo’s Japan operations, can also be thought of a candidate after Bloomberg Information reported Yanai as preferring a feminine chief.

Reporting by Ritsuko Ando; Modifying by Christopher Cushing

Author: Maxwell C.

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