With Uniqlo’s boom in casual clothing fading away, Fast Retailing Co. on Thursday cut its earnings projections for the business year to August from its previous estimate in January.
The Yamaguchi-based retailer expects to post a pretax profit of 60 billion yen, down 20 billion yen from January’s projection, and an operating profit of 59.4 billion yen, down from the earlier forecast 79 billion yen. Net profit is now forecast to hit 34 billion yen, down by 11 billion yen from January.
In January and February, sales at Uniqlo shops open for more than a year fell by more than 30 percent on a year-on-year basis, the firm said.
The operator now expects sales to reach 360 billion yen, compared with its previous projection of 390 billion yen.
Fast Retailing attributed its poor performance to intensifying competition, failure to introduce attractive items and higher operating costs. But President Tadashi Yanai also blamed media reports for damaging its consumer image, though he did not specify the nature of the reports.
Yanai indicated his firm would continue pursuing aggressive business plans.
He said the chain would increase the number of Uniqlo shops in Japan from 550 to 1,000 within five years and shoot for 600 billion yen in annual sales and 120 billion yen in pretax profit.
Fast will also start selling vegetables and fruits by mail order and via the Internet in November, Yanai said, adding the firm is mulling a move into the grocery business.
To reverse the downward trend, Yanai said, “Uniqlo needs to destroy its successful experiences from the past and continue to improve the quality of its clothing.”
Fast Retailing also announced its midterm earnings. For the September-February period, its pretax profit dropped 35.6 percent from the same period the previous year to 40.11 billion yen.
Its operating profit fell 35.5 percent to 39.87 billion yen and its net profit dropped 36.1 percent to 23.08 billion yen. Sales fell 6.2 percent from the same period a year ago to 204.16 billion yen.
Seiyu’s profits soar
Supermarket operator Seiyu Ltd., which announced a capital tieup with U.S. retail giant Wal-Mart Stores Inc. last month, reported a consolidated pretax profit of 13.53 billion yen for the business year through February, up 67.9 percent from the year before.
Its operating profit on a group basis rose 28 percent from the previous year to 20.09 billion yen, while its net profit leaped to 5.2 billion yen, compared with 317 million yen. Group sales also rose 3.5 percent, to 1.11 trillion yen.
Seiyu President Masao Kiuchi attributed the gains to the contribution from a supermarket chain in Kyushu newly taken into the group.
On a parent-only basis, Seiyu posted a pretax profit of 8.08 billion yen, up 22.2 percent, and an operating profit of 13.31 billion yen, up 0.4 percent.
But net profit fell 93 percent to 214 million yen due to an increase in costs for retirement allowances brought on by changes in accounting rules. Parent-only sales also fell, by 5.7 percent, to 784.57 billion yen.
For the current business year to February 2003, the retailer forecasts a consolidated pretax profit of 16 billion yen, net profit of 3 billion yen and sales of 1.15 trillion yen.
On a parent-only basis, it projects a pretax profit of 9 billion yen, net profit of 2 billion yen and sales of 798 billion yen.
Kiuchi said he wants to apply Wal-Mart’s expertise on store operations and procurement to Seiyu stores as soon as possible. The two firms started feasibility studies last week for cooperation in Japan.
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