Fast posts 21% profit drop for year

by Kaho Shimizu

Fast Retailing Co.’s profit declined for the business year that ended Aug. 31, due mainly to a warm winter and rising personnel, advertising and promotional costs, the company said Thursday.

Money-losing subsidiaries also put a dent in its bottom line.

The operator of the Uniqlo casual clothing chain said group net profit declined 21.4 percent to ¥31.7 billion, while operating profit dropped 7.7 percent to ¥64.9 billion.

Sales rose 17 percent from a year earlier to ¥525.2 billion.

Thanks to an increase in the number of Uniqlo outlets, revenue from that business rose in total. However, warm weather last winter forced the chain to offer massive discounts on autumn-winter clothing, which resulted in a lower profit margin, the company said.

As Fast Retailing continues its aggressive expansion, spending on ads and promotional campaigns, as well as personnel costs, have increased, it said.

Last October, the company established a subsidiary to launch a new casual family clothing chain named g.u., which has expanded to 50 outlets in Japan, but sales have been sluggish and it has yet to turn a profit.

Other money-losing subsidiaries include Cabin Co., which operates a women’s clothing chain, and shoe store chain Onezone Corp.

Fast Retailing hopes to rake in ¥1 trillion in sales and ¥150 billion in pretax profit by 2010. It said it will drive its earnings higher by opening large-scale Uniqlo outlets in Japan and overseas, and by diversifying its portfolio through mergers and acquisitions of domestic and foreign brands.

The company followed up the opening of the first Uniqlo global flagship store, with floor space of 3,300 sq. meters, in New York last November with a 2,310-sq.-meter outlet in Shanghai the next month.

This year, Fast Retailing plans to open two stores on Oxford Street in London in November, one of which will be another global flagship outlet.

Fast Retailing, which has been aggressive in seeking overseas M&A opportunities, recently failed in an attempt to acquire U.S. luxury fashion retailer Barneys New York Inc.