Fast Retailing’s profit falls on warm weather
TOKYO: Fast Retailing Co, the owner of Uniqlo, posted a surprise drop in profit as unseasonably warm weather hit sales of winter clothes, and outlined a tough second quarter as it offloads the inventory at a discount.
The bleak results come at a time when Uniqlo - known for its simple and affordable clothes such as lightweight down jackets - is battling saturation in its main home market, Japan. There are also worries it could come under pressure due to a slowdown in China, where it typically logs a major proportion of its growth.
Operating profit at Uniqlo’s Japan business, which accounts for more than a third of Fast Retailing’s operating profit, fell 30 per cent in the first quarter from the same period a year ago.
“We did extremely well domestically and ran out of stock on winter clothing in the previous year, so we went into this season with extra,” Chief Financial Officer Takeshi Okazaki said. “As a result, we were hit squarely by the mild weather.”
The retailer’s overall operating profit fell 8 per cent to 104.7 billion yen ($970.16 million) over September-november. That compared with an average estimate for a 3.5 per cent rise to 118 billion yen from four analysts, according to data from Refinitiv.
The domestic business is expected to record a larger-thanexpected decline in profit in the first half due to the discounting, Fast Retailing said in a statement
The company also said it will increase discounting in Greater China and South Korea to offload winter inventory.
However, it expects its Uniqlo international business to rake in strong first-half revenue and profit growth. Operating profit for the business jumped 12.6 per cent in the reported quarter, boosted by a double-digit growth in China.
Fast Retailing said it sees Japan Uniqlo profit rising sharply in the second half of the year on strong cost controls.
It also shrugged off concerns of a slowing economy in China.
“I believe Chinese economic growth is slowing down but it’s not showing an impact as far as our business is concerned,” Okazaki said, adding that he remained on alert.
A customer at a Fast Retailing’s Uniqlo store in Tokyo.