27/3 Q1 results: Growth expectations unlikely to rise: Quick Note

Research evidence excerpt

27/3 Q1 results: Growth expectations unlikely to rise: Quick Note

7.7

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology We obtain our target price of ¥1,180 by multiplying our 28/3 EPS forecast of ¥60.7 by a P/E of around

19–20x. We apply a premium of around 10% to the average P/E of around 17–18x on FY27 forecasts for the retailers under our

coverage. We expect major retailers to generate average profit growth of around 7–8% based on past performance by the

Russell/Nomura Large Cap retail trade sector and our forecasts for FY26 onward for retailers under our coverage. For Zozo, we

forecast an operating profit CAGR in line with the average for the retailers we cover as growth in the fashion e-commerce

market and sustained new customer acquisitions result in GMV growth. Zozo has established a solid footing as a fashion e-

commerce site, and we think its valuations should reflect the strong prospects for earnings growth backed by this advantage.

We also think the stock deserves to trade at a modest premium versus the average for retailing companies under our coverage

in view of management's increased focus on capital efficiency.

Risks that may impede the achievement of the target price Risks that could cause the share price to come in above/below

our target price include: (1) easing/intensification in the competitive environment, tenant entries/departures, and

acceleration/deceleration in GMV growth owing to an economic upturn/downturn; (2) a sharp decrease/increase in promotional

expenses owing to easing/intensification of competition; (3) decrease/increase in payroll and logistics costs; and (4) earnings

contributions brought forward/delayed from Zozocosme and other new businesses.