Delays in Reopening Weigh on Fast Retailing's Third-Quarter Results; FVE Maintained at JPY 48,000

The coronavirus pandemic significantly impacted narrow-moat Fast Retailing's end-May third-quarter results as most of its stores across the world were forced to close or open for shorter hours. Its 39% sales drop in the quarter was higher than our expectations while reporting a net loss of JPY 9.8 billion versus a JPY 72.9 billion net profit booked in the same period last year. Management also lowered its fiscal 2020 revenue and operating profit guidance by 5% and 10% respectively, on slower-than-expected store reopenings. We align our fiscal 2020 forecast with the new guidance by slightly reducing top- and bottom-line projections. Since the downward adjustments are isolated to fiscal 2020, our fair value estimate remains unchanged at JPY 48,000. Shares of Fast Retailing appear slightly overvalued.