On Tuesday, UBS adjusted its price target for Shimamura Co Ltd (TYO:8227:JP), a leading Japanese retail firm, to JPY8,550, up from the previous JPY8,420. The firm's stock rating remains at Neutral. The revision follows Shimamura's impressive operational performance, setting new operating profit (OP) records in recent fiscal years.
After reaching a high in operating profit in FY2/17, Shimamura saw a decline over the next three fiscal years due to challenges in its core business. However, the company's efforts to improve inventory management and product appeal paid off, with a turnaround that led to record operating profits in FY2/22 and FY2/23, surpassing the previous high with an operating margin of 8.7%.
The company's continued success in FY2/24, marked by another record in operating profit, has led to a positive outlook from UBS. Analysts project further growth in operating profit for the fiscal years FY2/25 and FY2/26. UBS attributes this optimistic forecast to Shimamura's ongoing initiatives to enhance product quality and leverage data analysis, sales promotions, and IT logistics to solidify its earnings base.
Shimamura's strategic moves to optimize inventory levels and strengthen product appeal have been instrumental in its financial recovery and growth. With the company's sustained efforts in upgrading its offerings and improving operational efficiency, UBS anticipates a robust earnings foundation for Shimamura in the medium term.
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