Warm winter means damp profits for Fast Retailing


Fast Retailing Co. cut its full-year operating profit forecast as unseasonably warm weather worldwide hurt sales of winter clothes for the retailer’s Uniqlo brand of casual wear, the Yamaguchi-based company said Thursday.

Operating profit will probably be ¥180 billion in the year ending August 2016. That compares with the company’s projection of ¥200 billion made in October, and the ¥199.6 billion average estimate of 16 analysts compiled by Bloomberg.

Fast Retailing last month announced November same-store sales in Japan fell 8.9 percent due to “unusually hot weather.” The weak performance threatens billionaire Chairman Tadashi Yanai’s goal to turn Asia’s biggest clothing retailer into a world leader with sales of ¥5 trillion by 2020. Fast Retailing also faces hurdles in the U.S., where low recognition of the Uniqlo brand has led to sustained losses.

Concerns are expected to arise over second-quarter earnings “as the firm enters its winter inventory disposal period,” Kuni Kanamori, an analyst at SMBC Nikko Securities Inc., wrote in a note last week.

Fast Retailing also cut its net income forecast to ¥110 billion, compared with the company’s projection of ¥115 billion made in October, and the ¥119 billion average of 13 analyst estimates compiled by Bloomberg.

The company reported that operating profit fell 17 percent to ¥75.9 billion in the three months ended in November, worse than the average estimate of ¥84.2 billion from three analysts compiled by Bloomberg. Sales in the company’s fiscal first quarter rose 8.5 percent to ¥520.3 billion.

Uniqlo Japan’s first-quarter operating profit slumped 12 percent while that for the brand’s international unit dropped 14.2 percent as its U.S. business continued to post losses, according to Fast Retailing. The brand also missed targets in Greater China and South Korea, the company said.

In Japan, the company last month announced November same-store sales fell 8.9 percent due to “unusually hot weather.” That slump worsened in December, with another drop of 12 percent, it said Thursday.

Same-store sales in Japan, for outlets open for at least a year, were down 2.3 percent in the first three months of the current fiscal year, according to Fast Retailing’s update released last month. That compares with its 4 percent growth projection for the fiscal year ending August 2016 given in October.

A ¥16.1 billion impairment loss relating to J Brand and some Uniqlo USA stores and a ¥1.8 billion charge on the retirement of fixed assets at flagship stores in London and Shanghai hurt profit last year, Fast Retailing said in October, when Yanai said the company wants to achieve an early profit turnaround in the U.S. He will send managers who know Uniqlo operations well to carry out reforms in the U.S., he said.