Uniqlo owner sees return to pre-pandemic profit on Asia rebound

Despite operating profit fell 42% and revenue declined 12%, Fast Retailing’s projections for 2021 represent a return to pre-pandemic levels

TOKYO • Asia’s largest retailer Fast Retailing Co Ltd sees profits growing slightly beyond analysts’ expectations this fiscal year, driven by a robust recovery from the Covid-19 pandemic in the Uniqlo owner’s key China and Japan markets.

Operating profit will probably be ¥245 billion (RM9.8 billion) for the year through August 2021, the Japanese company said in a statement yesterday. That compares to the average analyst estimate of ¥242.4 billion compiled by Bloomberg. Sales are seen at ¥2.2 trillion, roughly in line with average analyst expectations of 2.28 trillion.

While operating profit for the year just ended fell 42% and revenue declined 12%, Fast Retailing’s projections for 2021 represent a return to pre-pandemic levels. The company said revenue will continue to decline in the first half due to the pandemic, with a recovery kicking in after that.

Retailers have been reeling as Covid-19 upends shopping habits. Fewer people are venturing outside amid lockdowns and fear of crowds, while shoppers are tightening purse strings amid job losses and economic upheaval. Apparel retailers from Brooks Brothers to J Crew have filed for bankruptcy protection, though some brands are weathering the storm better thanks to heavy e-commerce traffic.

Analysts say Fast Retailing is in a position to recover faster compared to its global peers, with its geographic focus on Asia, where Covid-19 cases are more subdued at present, and its emphasis on affordable, basic clothing suitable for working from home.

Investors are already betting on Fast Retailing’s ability to recover. The company’s stock has bounced back from a March low, closing at a record high yesterday before earnings were announced. Hennes & Mauritz AB and Zara operator Inditex SA’s shares are both down more than 15% for the year.

During the spring and summer, Fast Retailing shuttered Uniqlo stores in China, followed by Japan and then Western nations, as part of efforts to contain the spread of coronavirus.

Fast Retailing is seeing business improve in China at a faster pace than expected, as the economy reopens and Covid-19 outbreaks remain largely under control. The company said Uniqlo’s revenue in China, where it has almost 800 stores, will be strong in 2021, including double-digit growth in e-commerce.

Uniqlo Japan’s operating profit rose for the year, while same-store sales have increased every month since June compared to a year ago. — Bloomberg