Japan’s Fast retailing sees $5bn day on gains, Yen drops

Bloomberg

After the strengthening yen forced Fast Retailing Co. to slash its full-year net income forecast by a quarter, the currency’s reversal along with signs of recovery in the company’s Uniqlo clothing business drove the shares up by their daily limit.
The stock rose 18 percent to 32,660 yen at the close in Tokyo trading, the most since 1998, adding 530 billion yen ($5 billion) to the market value of Asia’s largest clothing retailer. The Nikkei 225 Stock Average rose 0.7 percent. Last week, after the market closed, the retailer posted third-quarter sales and operating income that beat analyst estimates.
“The recovery in six months is amazing. The business has recovered faster than expected,” Masafumi Shoda, an analyst at Nomura Holdings Inc., said in an interview. Confidence about Uniqlo, in particular the brand’s operations in Japan, has risen, said the analyst, who upgraded Fast Retailing stock to a “buy” after the results.
Chief Financial Officer Takeshi Okazaki predicted strength in the Japanese currency would lead to a 37 billion yen foreign exchange loss for the fiscal year ending August. The rising currency had already helped push the company’s shares down 44 percent this fiscal year as of the close on Thursday.
The yen fell as much as 1 percent to 106.32 per dollar. Last week headed for its biggest weekly drop since 1999 as speculation Prime Minister Shinzo Abe’s stimulus plan will weaken the currency has increased and as better-than-expected Chinese economic data sapped demand for havens.
Should the yen “stabilise,” it won’t be an issue for Fast Retailing earnings going ahead, said Shoda.
Fast Retailing’s full-year net income forecast is based on an exchange rate of 114.3 yen per dollar, Okazaki said.
Fast Retailing Co. cut its full-year profit forecast for the third time in six months as a strong yen eroded earnings from overseas and overshadowed improving sales at its Uniqlo casual-wear chain.
Net income will probably be 45 billion yen ($427 million) for the year ending August 2016, a 25 percent drop from the forecast it gave in April, the company said Thursday. That compared with the 57 billion-yen average estimate of 15 analysts compiled by Bloomberg. The company left its forecasts for operating income and revenue unchanged.