Japan's government sports spending has been on the up in recent years, and this tailwind directly benefits domestic sporting goods manufacturers.

The Japan Sports Agency committed JPY 8.2bn additional funding in FY 25, followed by JPY 5.7bn in its FY 26 budget proposal, i.e. a combined JPY 13.9bn, to reform community club activities nationwide. This pushes school-age athletes out of teacher-led clubs and into community-run programs, which means more participants buying their own equipment through retail channels.

Separately, Aichi Governor Hideaki Omura confirmed that hosting costs for the September 2026 Asian Games will reach the upper range of JPY 300bn, triple the original JPY 105bn to JPY 108bn estimate.

Mizuno, an Osaka-based maker of sporting footwear, apparel, and equipment across baseball, golf, football, and running, is central to both forces.

The company operates four geographic segments: Japan, Americas, EMEA and Asia/Oceania. Its corporate headquarters is in the host region for the Asian Games, and a deliberate pivot toward direct-to-consumer (DTC) channels positions it to capture disproportionate domestic demand right as public spending peaks.

Sustained growth

Mizuno’s FY 25 numbers look clean at first glance, although the detail matters. Revenue came in at JPY 259bn, up 7.8% y/y from JPY 240.3bn. The growth was broad-based with golf, football, and sportstyle footwear driving demand, although the bigger shift was channel mix: more DTC sales lifted pricing power rather than just volumes.

Operating profit rose to JPY 22.6bn, up 8.8% y/y from JPY 20.8bn last year. That’s only slightly faster than sales growth, which tells you cost inflation didn’t fully go away - SG&A grew over 10% y/y, eating into the benefit of higher gross margins. The operating margin barely moved (8.7% vs 8.6%), so this wasn’t a rewrite of the cost structure.

Net profit rose to JPY 18.4bn, up 20.6% y/y from JPY 15.2bn. That jump is much larger, helped by better product mix and DTC-led margin gains, not cost control.

Limited conviction

Mizuno’s stock has had a good run, up 31.4% over the past 12 months, although it is still well below its 52-week high of JPY 4,385. At JPY 3,425, the stock is about 20% off that peak, which suggests that the market has already cooled off after pricing in last year’s earnings momentum.

The stock is trading at a FY 26e P/E of 14.1x, versus a 3-year average of 10.8x. That’s a clear premium, and it tells you expectations have improved faster than the actual underlying business.

Street confidence looks cautious rather than aggressive. Analysts' average target price of JPY 4,235 implies 24.4% upside potential, although only one out of the two monitoring analysts rate it a buy. There’s upside on paper, but not everyone wants to lean into it.

Watch the cracks

Mizuno looks good on the surface, but there are a few things to keep an eye on. Profit growth is leaning more on product mix than deep cost fixes, and expenses continue to creep up. The demand tailwind from policy and events won’t last forever, and once it fades, the business needs to stand on its own two feet. If margins don’t improve significantly, the market may start questioning the premium that it’s currently giving the stock.