• Bloomberg


Fast Retailing Co. reported a 64 percent spike in quarterly profit after selling more Uniqlo casual wear than expected in Japan and overseas, while the weakening yen further boosted returns.

Net income rose to ¥68.8 billion in its fiscal first quarter ended in November, compared with ¥41.9 billion a year earlier, Asia’s largest clothing retailer said Thursday.

This compares with the ¥48.4 billion average estimate from four analysts compiled by Bloomberg. Sales rose 23 percent to ¥479.5 billion.

Fast Retailing predicted in October that net income may rise 34 percent to ¥100 billion for the year to next August as it speeds up the Uniqlo chain’s overseas expansion. The retailer, headed by Tadashi Yanai, Japan’s richest man, maintained the forecast until it can get a clearer picture of its segment performances and foreign exchange trends.

Every ¥1 decline increases the group’s net income by about ¥1 billion, Chief Financial Officer Takeshi Okazaki said Thursday at a briefing in Tokyo, as the weaker currency boosts repatriated earnings from overseas as well as the value of foreign-currency-denominated assets such as cash.

Fast Retailing booked a ¥15.3 billion gain in the fiscal first quarter as it holds part of its cash in dollars and other foreign currencies, Okazaki said. The yen plunged about 14.5 against the dollar over the period.

Uniqlo Japan, which accounted for 48.5 percent of Fast Retailing’s sales in the first quarter, reported sales rose 12 percent to ¥232.6 billion as cold temperatures boosted sales of winter clothing.

The brand’s international sales leaped 47 percent to ¥168 billion, with greater than expected gains from its stores in South Korea, China, Hong Kong and Taiwan, the retailer said.

Billionaire Yanai has relied on flagship stores in cities including New York, Paris and Shanghai to fuel Uniqlo’s sales growth that has fizzled in Japan, while signing up sports stars such as tennis player Novak Djokovic and golfer Adam Scott to raise the brand’s global profile.

The company said sales at stores open at least a year increased 10 percent in December even as the number of walk-in customers dropped slightly. Cold weather at the beginning of the month boosted demand for winter merchandise, it said.

Fast Retailing’s immediate priorities are to speed up growth for its international Uniqlo stores and restructure its global brands operation while maintaining stable growth for Uniqlo in Japan, Yanai said in an Oct. 9 presentation.

The yen’s weakening will probably continue to hurt margins on Fast Retailing’s domestic business, leading the company to revise prices starting this spring, according to Credit Suisse analyst Taketo Yamate.

“However, doing so would increase risk of deterioration in earnings as it would halt the uptrend to date in per-customer spending,” Yamate wrote in a report issued Tuesday.

The Global Brands division, Fast Retailing’s third business segment comprising labels such as GU and Theory, grew sales by 18.6 percent to ¥78.1 billion, while the J Brand premium denim line was flat over the period. The retailer’s profit fell in the last fiscal year due to a writedown at the J Brand.

Uniqlo is targeting to open 100 stores each year in China, 30 annually in the U.S. and 10 per year in Europe, according to Yanai’s presentation, which was posted on Fast Retailing’s website. The company also has an interim target to hit ¥2.5 trillion in revenue in three years, while implementing low-cost operations to raise operating margins to 15 percent across its brands.

Fast Retailing’s shares underperformed the broader Japanese market last year, rising 1.5 percent compared with the Topix index’s 8.1 percent increase. Among the 22 analysts covering Fast Retailing, 14 have a hold rating on the stocks with four recommending buy and the same number advising to sell, according to data compiled by Bloomberg.

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