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Morgan Stanley (NYSE:MS) downgraded Chiyoda Co Ltd (8185:JP) from Equalweight to Underweight on Monday, while lowering its price target to JPY1,100.00 from JPY1,250.00.
The investment bank reduced its operating profit forecast for Chiyoda’s fiscal year ending February 2026 to ¥2.5 billion from ¥2.7 billion. While Morgan Stanley expects year-over-year operating profit growth compared to the ¥2.193 billion in fiscal 2025, it projects the company will fall short of its ¥3.6 billion guidance.
The downgrade reflects concerns about Chiyoda’s shoe business, which saw quarterly same-store sales turn negative in the first quarter of fiscal 2026, declining 2.2% after 14 consecutive quarters of growth. This marks the first negative growth period since the fourth quarter of fiscal 2022, when sales began recovering from pandemic lows.
Morgan Stanley attributes the sales decline to a potential tapering off in both the recovery trend for outing demand and the popularity of Chiyoda’s private-brand products. The firm also expects operating profit in the shoe business to be lower than the ¥2.994 billion recorded in fiscal 2025.
The investment bank further reduced its operating profit forecast for fiscal 2027 from ¥2.7 billion to ¥2.4 billion, citing challenges in achieving short-term recovery despite the company’s divestiture of its loss-making clothing business in fiscal 2025.
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