---
endpoint: analytics
pattern: Consumer
status: done
latency_ms: 180639
conversation_id: af18b6ba-b3d8-4127-995a-1e7b46924598
citations: 1
created: 2026-05-31 20:33:28Z
---

# How does Fast Retailing’s valuation compare to peers, and what justifies its premium/discount?

# Fast Retailing (9983 JP) — Peer Valuation & Premium Justification

**Setup**: Latest CLSA peer comp (3 Jun 2025) places Fast Retailing at a **substantial premium to global apparel peers on every multiple — but the premium is NOT justified by superior ROE or near-term EPS growth**. Instead, it's a **scarcity / brand / international-runway premium** that sits uneasily next to Inditex on the fundamentals.

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## 1. Peer Valuation Table (CLSA, priced 2 Jun 2025) [1]

| Company | Ticker | Mkt cap (US$bn) | PE 2025 / 2026 | EV/EBITDA 2025 / 2026 | EPS growth 2025 / 2026 | ROE 2025 / 2026 |
|---|---|---:|---:|---:|---:|---:|
| **Fast Retailing** | **9983 JP** | **107.0** | **35.2 / 35.2** | **16.8 / 15.4** | **12.0 / 0.0** | **21.5 / 18.9** |
| Inditex (Zara) | ITX SM | 168.9 | 23.9 / 21.9 | 12.6 / 11.7 | 5.1 / 9.4 | 30.2 / 31.2 |
| H&M | HMB SS | 23.1 | 19.2 / 16.8 | 7.2 / 6.7 | (0.9) / 14.6 | 25.2 / 28.3 |
| Adastria (Point) | 2685 JP | 1.0 | 10.5 / 10.0 | 4.3 / 4.1 | 26.9 / 5.2 | 14.9 / 14.7 |
| Shimamura | 8227 JP | 5.2 | 16.6 / 15.9 | 6.4 / 6.1 | 5.7 / 4.5 | 8.7 / 8.7 |
| United Arrows | 7606 JP | 0.4 | 10.2 / 9.6 | 5.2 / 5.0 | 31.3 / 6.2 | 14.3 / 14.4 |
| **Peer Average** | | | **19.3 / 18.2** | **8.7 / 8.2** | **13.4 / 6.7** | **19.1 / 19.4** |

**Premium magnitude** [1]:
- **PE 2025**: Fast Retailing 35.2x vs peer avg 19.3x → **+82% premium**; vs Inditex 23.9x → **+47% premium**
- **EV/EBITDA 2025**: 16.8x vs peer avg 8.7x → **~2x the average**; vs Inditex 12.6x → **+33% premium**
- **PE/EBITDA 2026**: premium widens because Fast Retailing's EPS goes flat (0% growth) while peers re-accelerate

The May-02 prior comp (broadly identical numbers, mcap then US$104.6bn at PE 34.6x) confirms this is a sustained valuation level, not a one-day distortion [6].

---

## 2. What the Multiples Are Resting On — Fast Retailing standalone [2]

CLSA's FY8/23A–FY8/27CL build:
- Revenue: ¥2,766bn (FY23A) → ¥3,402bn (FY25CL) → ¥3,981bn (FY27CL) — **~9.5% CAGR**
- Operating profit: ¥381bn → ¥556bn → ¥649bn — **~14% CAGR**
- EPS: ¥966 → ¥1,358 → ¥1,470 — but growth tails off, only **+12% in FY25 and 0% in FY26** before re-accelerating +8.1% in FY27
- ROE: 20.8% → 21.5% → 17.9% (declining)
- Dividend yield: 0.6% → 1.0% (de minimis vs European peers)

**Target price**: ¥51,853, derived from **17x EV/EBITDA on blended FY8/26-FY8/27 earnings** [4]. The math: EBITDA ¥891.7bn × 17x = ¥14,792bn EV, add ¥1,100bn net debt buffer to equity, ÷ 318.2m shares = ¥51,853 [4]. At ¥47,800 spot (2 Jun), implied upside +8% [5]. Rating: **O-PF (Outperform)**.

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## 3. What Justifies the Premium

### Genuine premium-warranting factors

- **Scale + scarcity**: At US$107bn market cap, Fast Retailing is the only Asian apparel name in Inditex's weight class — no Japanese peer is even 5% of its size (Shimamura US$5.2bn, Adastria US$1.0bn) [1][5]. Index-inclusion bid is structural.
- **Greater China brand premium**: CRR's May-13 China consumer survey (CLSA proprietary) found Uniqlo emerged "stronger than ever" — ranked #1 best value-for-money brand, awareness 87% (rising), well ahead of Zara/H&M/Gap/Ralph Lauren among Chinese shoppers in a down-trading environment. Greater China sales were ¥677bn in FY8/24 (+9.2% YoY), ~22% of group, ~40% of international.
- **International growth runway**: Company guides **double-digit revenue and profit growth in 2H and FY2026 for UNIQLO International** across N. America, Europe, S. Korea, SEA / India / Australia [7] — multi-region simultaneous expansion that European peers cannot replicate (Inditex/H&M are already saturated in their core EU geography).
- **Margin trajectory**: 1H FY2026 already showed double-digit revenue + profit growth in Europe with gross margin improvement from less airfreight and SG&A leverage as the new automated warehouse comes online [7].

### What the premium is NOT justified by

- **ROE**: Fast Retailing's 21.5%/18.9% (2025/26) is **below Inditex's 30.2%/31.2% and below H&M's 25.2%/28.3%** — yet it trades at a **47% PE premium to Inditex** [1]. A pure ROE-based DCF would value FR cheaper than Inditex, not more expensive.
- **Near-term EPS growth**: 12% in FY25 but **flat (0%) in FY26** — vs Inditex +9.4%, H&M +14.6% in 2026 [1]. The premium is not a PEG-based outcome.
- **Yield**: 1.0% div yield is meaningfully below Inditex (~3–4%) — investors aren't being paid to wait.

### Discount factors / risks already priced

CLSA flags forex hedge headwinds, CEO Tadashi Yanai retirement risk (he holds 20.8% — succession overhang) [5], slowdown in overseas expansion, raw-material costs in yen terms, Nikkei weighting changes, and M&A overpayment risk. These are the standard "kill the multiple" triggers.

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## 4. Forensic Read — Is the Premium Defensible?

**Bear case**: On any quantitative cross-section (ROE, EPS growth, yield, EV/EBITDA-to-ROE), Fast Retailing screens **richer than Inditex without superior fundamentals**. The PE gap (35x vs 24x) implies the market is paying ~10–12 turns of multiple for the *option* of Uniqlo becoming a true global brand at Inditex scale — i.e., this is a long-duration story stock, not a value-screen winner.

**Bull justification**: The 17x target EV/EBITDA multiple CLSA applies (vs 12.6x Inditex spot) is the embedded "Asian growth scarcity" premium. If Greater China inflects and N. America/Europe execute as guided (double-digit growth, margin expansion) [7], FY27+ EPS re-accelerates above the 0% FY26 trough and the multiple gets validated by earnings catch-up.

**Discrepancy alert**: The premium narrative leans heavily on FY26+ guidance (Uniqlo Int'l double-digit growth) while FY26 group EPS is modeled at **0%** by CLSA [2]. That gap — bottom-up regional commentary very bullish, top-down EPS line flat — is the single biggest tension in the thesis. It means the FY26 flat-EPS print is likely a function of FX, accounting one-offs (new warehouse multi-system overlap) [7], and Japan margin normalization rather than core business deceleration — but it's the kind of "narrative vs P&L" divergence that gets punished if a single quarter misses.

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## 5. Bottom Line

**Fast Retailing trades at a structural premium to every relevant apparel peer** — most starkly +47% PE and +33% EV/EBITDA to Inditex despite **lower ROE and equal-or-worse 2026 EPS growth** [1][2]. The premium is justified by (1) scarcity as the only globally-scaled, Asia-domiciled apparel pure-play, (2) Uniqlo's demonstrated brand power in China where peers are losing share, and (3) the multi-region international growth runway management is guiding for [7]. It is **not** justified by financial returns or near-term earnings momentum, which is why CLSA holds at O-PF (modest +8% upside to ¥51,853) [3][5] rather than a Buy: the multiple already prices in execution, and any FX, succession, or Greater China stumble has asymmetric downside.

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**Sources**
[1] Fast Retailing - O-PF (May momentum) — CLSA (3 Jun 2025) — Peer valuations table — 607961111LinqAlpha.PDF
[2] Fast Retailing - O-PF (May momentum) — CLSA (3 Jun 2025) — FY8/23A-27CL financials — 607961111LinqAlpha.PDF
[3] Fast Retailing - O-PF (May momentum) — CLSA (3 Jun 2025) — Valuation details (17x EV/EBITDA fair-value) — 607961111LinqAlpha.PDF
[4] Fast Retailing - O-PF (May momentum) — CLSA (3 Jun 2025) — Target price derivation table — 607961111LinqAlpha.PDF
[5] Fast Retailing - O-PF (May momentum) — CLSA (3 Jun 2025) — Priced on 2 June 2025 snapshot — 607961111LinqAlpha.PDF
[6] Fast Retailing - O-PF (Spring slump) — CLSA (2 May 2025) — Peer valuations table — 607957912LinqAlpha.PDF
[7] Fast Retailing FY2026 Investor Presentation — Q2 2026 slides (1H FY2026)

## Citations

- [7] **Fast Retailing Co., Ltd., Q2 2026** · external

