Hello Kitty Maker Sanrio Falls After Goldman Cuts TargetsYuki Yamaguchi
Sanrio Co., maker and licenser of Hello Kitty goods, plunged in Tokyo trading after analysts including Sho Kawano at Goldman Sachs Group Inc. cut targets for the company, citing a waning outlook for U.S. sales.
The shares fell 16 percent, the most since 1995, to 2,598 yen at the close in Tokyo trading. The stock has declined 41 percent this year, compared with a 10 percent fall for the broader Topix index.
Kawano at Goldman lowered the estimate for operating profit in the year ending March by 7 percent, citing costs related to the company’s shift back to merchandise sales from a focus on licensing. Sanrio founder Shintaro Tsuji had previously sought to reduce the reliance on marketing Hello Kitty goods by licensing character rights to companies that make different items based on them.
“We see little prospect of a rapid turnaround given that this is a transition period,” Kawano wrote in a note to clients dated yesterday. Kawano cut the price target for the Tokyo-based company to 3,200 yen from 3,800 yen earlier.
The licensing strategy had helped hold operating margins above 25 percent since fiscal 2011, according to data compiled by Bloomberg. Sanrio surged 61 percent last year, after dropping 31 percent in 2012 and more than doubling in the previous year.
“The changes are part of our effort to supplement the licensing business, which is our profit driver,” said Hideo Yamaguchi, a spokesman for the company.
Sales will rise 3.4 percent to 79.6 billion yen ($784 million) for the year ending March 2015, compared with 3.7 percent growth a year earlier, the company said on May 15. Operating profit will rise 4.7 percent to 22 billion yen in the year ending March, the company forecasts.
Investors may be concerned that the company’s profit targets may no longer be achievable, Mia Nagasaka, an analyst at Morgan Stanley MUFG Securities Co., wrote in a note to clients, after the company held a briefing yesterday.
(An earlier version of this story was corrected to show that the company’s founder is still alive.)