On Friday, Citi downgraded Askul Corp (2678:JP) stock, changing the rating from Buy to Sell and reducing the price target significantly to JPY1,800 from the previous JPY2,800. The downgrade follows the release of parent sales data on October 1, which indicated a sluggish start to the quarter with only a marginal increase in year-over-year sales.
The Tokyo-based company, which specializes in office supplies and equipment, has maintained its full-year guidance for FY5/25. Askul is banking on various measures, including improved foreign exchange positions, precise adjustments to sales prices, and the introduction of new products, to boost earnings starting in the second quarter. However, Citi views these targets as increasingly ambitious given the current sales trajectory.
Askul's recent performance has shown that sales have not grown as expected. The September sales figures revealed just a 0.1% increase overall and a modest 0.7% rise in core business-to-business (B2B) operations. This slow growth is partly attributed to weak demand from small and medium-sized enterprises (SMEs), particularly in office automation (OA) equipment and furniture. The impact of inflation on business sentiment is expected to continue to suppress demand.
Additionally, technical issues with Askul's new website have disrupted the transition to the updated platform, leaving the company unable to fully showcase user experience (UX) and user interface (UI) improvements. This has likely contributed to the company's inability to meet expectations and attract customers as initially hoped.
Based on these factors, Citi has revised its growth forecasts for Askul's B2B sales, now expecting a 3% increase for FY5/25 and a 5% increase for FY5/26, down from the previous forecast of a 7% growth for both fiscal years. The revised outlook reflects a more cautious stance on the company's ability to achieve its sales growth targets in the near term.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.