Fast Retailing is making a global expansion push, targeting the U.S. and China and potentially even acquiring U.S.-based J.Crew, but is the owner of the popular Uniqlo clothing brand moving too quickly?
Investors outside Japan might have some doubts about the Japanese retailer's plans. Fast Retailing's Hong Kong depositary receipts initially surged as much as 31.5 percent to 36.00 Hong Kong dollars from their HK$27.36 offering price on their trading debut Wednesday, but quickly retraced much of the gains to trade around HK$29.00 as short-term speculators took profit.
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The Japan-listed shares may be pricey, trading at more than 34 times earnings, compared with Hennes & Mauritz at around 23 times and Inditex, the owner of the Zara brand, at around 25 times, according to data from Thomson Reuters.
But some analysts appear unfazed.
"The valuations are high," acknowledged Amir Anvarzadeh, head of Japan equity sales at BGC Securities. But he added, "It's a fantastically well-managed business. People are willing to pay that kind of premium for the aggressive expansion plans," he said, noting the company has no debt on its balance sheet.