Fast Re­tail­ing’s profit falls on warm weather

The Gulf Today - Business - - INTERNATIONAL -

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.

Reuters

A cus­tomer at a Fast Re­tail­ing’s Uniqlo store in Tokyo.

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