Companies

Fast Retailing forecasts profit dip

By Naoko Fujimura (China Daily)
Updated: 2010-10-09 14:30

Shoppers look at clothes at Fast Retailing Co's Uniqlo store in Tokyo. The company is expanding in overseas markets including China to reduce reliance on Japan. Kimimasa Mayama / Bloomberg

TOKYO - Fast Retailing Co, Asia's biggest clothing chain operator, forecast full-year profit will fall 17 percent because of lower same-store sales in the first half.

Net income will probably be 51 billion yen ($619 million) for the 12 months ending August, compared with 61.7 billion yen in the year just ended, the Uniqlo chain operator said in a statement on Friday. Revenue may grow 5 percent to 856 billion yen.

Fast Retailing faces increased competition from rivals such as Aeon Co, which have introduced similar products to Fast Retailing's Heattech thermal underwear range. The company is expanding in overseas markets including China to reduce reliance on Japan.

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"A lot depends on their success overseas, which is still in doubt," said Edwin Merner, president of Atlantis Investment Research Corp in Tokyo, which manages about $3 billion. Major retailers "are being hurt by the sluggish economy, continuing deflation and depressed consumer spending", Merner said.

The stock fell 2.3 percent to close at 12,390 yen on the Tokyo Stock Exchange before the earnings announcement. Fast Retailing has slumped 29 percent this year, compared with a 7.5 percent drop for the Topix index.

Sales at Uniqlo stores open at least a year in Japan plunged 24.7 percent in September from a year earlier, the Yamaguchi, Japan-based company said in a statement on Monday.

The drop is the biggest since February 2003, when sales slipped 25.8 percent, according to company data.

Heattech, Ecoheat

Aeon and other retailers have added more items to compete with the Heattech range, which is priced from 990 yen in Japan. Aeon aims to double sales of Heatfact garments to 20 million units this year, adding leggings for men, the company said on Sept 2. Seiyu GK cut prices of its Ecoheat brand by about 25 percent to between 580 yen and 980 yen for a month from Oct 1.

Fast Retailing forecasts sales of Heattech apparel will rise 40 percent to 70 million units in the current fiscal year.

The retailer, which began expanding abroad in 2001 by entering the UK market, opened a Uniqlo outlet in New York's Soho district in 2006 and across the road from the Galeries Lafayette department store in Paris last year.

It also plans to add a store on New York's Fifth Avenue. Chief Executive Officer and biggest shareholder Tadashi Yanai said in May that he aims to increase Uniqlo stores in China to 1,000 within 10 years, from 47 outlets in February.

Overseas sales

Fast Retailing expects overseas sales to overtake domestic revenue as soon as 2014, Yanai said in March. The company aims to boost sales to 5 trillion yen by 2020 through acquisitions and accelerating store openings, he said last year. Yanai was named Japan's richest man by Forbes Asia magazine in its January issue.

Net income rose 24 percent for the 12 months ended August, compared with 49.8 billion yen a year earlier, Fast Retailing said on Friday. Sales increased 19 percent to 814.8 billion yen.

Sales at Uniqlo stores open at least a year in Japan rose 4.7 percent for the year ended August, compared with Fast Retailing's July estimate of a 4.4 percent increase. Same-store sales strip out the effect of recently opened outlets.

Fast Retailing other brands include Princesse tam.tam, Theory and Comptoir des Cotonniers.