Fast Retailing Co. said Monday it will terminate its fresh food business after abandoning hope of turning a profit from selling premium vegetables.
The operator of the Uniqlo casual clothing chain said it will close all Skip stores by the end of April and disband its subsidiary FR Foods Co., which operates the stores, in June. The decision comes less than two years after the launch of the business.
“We have studied various measures to keep our operations, but we have no clear prospect of moving into the black,” FR Foods President Osamu Yunoki told a news conference.
The termination of the food business marked the second major setback for Fast Retailing, following a drastic cutback in its U.K. operations in 2003, when its rapid-expansion policy stretched operational resources too far.
The firm said FR Foods had a loss of 930 million yen for the year that ended June 30 on a pretax basis which was calculated before counting extraordinary losses or profit.
It posted sales of 650 million yen, about half the initial target.
Yunoki said it was difficult to maintain steady customer traffic with fruits and vegetables alone.
Using only contracted farms as suppliers also proved a challenge for inventory control, he said.
He said the company will close its three existing outlets and the Internet shopping Web site by the end of April. A membership-based home delivery program will be halted after May 1.
Fast Retailing began the business in fall 2002, touting a healthy line of produce grown as naturally as possible by contracted farms.
It opened the first outlet in May at a department store in Tokyo’s Ginza district. Despite a hefty price tag, health-conscious consumers traveled a long distance to buy produce that included tomatoes and cabbages.
The company opened six Skip stores, but closed three in February as losses mounted.
“Our vegetables, though very high quality, are expensive, and it is the reason they failed to become an everyday item for consumers,” Yunoki said.
Tadashi Yanai, chairman and chief executive of Fast Retailing, said the company will concentrate its resources on its core apparel business for now.