UNIQLO owner Fast Retailing Co. issued an outlook for profit and sales ahead of analysts’ projections for the current fiscal year, thanks to better demand for its cheap casual apparel in Japan and a weaker yen bolstering profits brought back home from overseas.
Operating profit for the year ending August 2023 is forecast to reach ¥350 billion ($2.4 billion), ahead of the ¥332 billion average projected by analysts, the clothing retailer said in a statement Thursday. Net sales are seen at ¥2.65 trillion, compared with analysts’ prediction for ¥2.48 trillion.
Asia’s largest apparel maker is shifting its focus to markets such as North America and Europe where the outlook is relatively stable, as the Russia-Ukraine war and a Covid resurgence in China is still fueling uncertainty about clothing sales globally. The retailer is in the middle of a push to expand its footprint in North America, where it CHECK reported annual profit for the first time.
“The only factors holding Uniqlo’s share price from breaking down are the North America growth and the yen depreciation,” Oshadhi Kumarasiri, equity analyst at LightStream Research, wrote in a note posted on Smartkarma before the announcement. “Those too are now under threat” with recession looking likely and rate hikes failing to curb inflation, he said.
Fast Retailing’s shares have climbed 20% this year as Japan’s weak currency helps to lift reported profits and the impact of the pandemic and war in Ukraine recede. The benchmark Topix Index has dropped 6.9%. The stock rose less than 1% in Tokyo before the results.
For the year ended August, operating profit rose to ¥297 billion on net sales of ¥2.3 trillion, the company said, exceeding projections.
“Our operation in Russia remains closed, resulting in a large decline in revenue and an operating loss for the year following the recording of impairment losses,” the Uniqlo unit said in the statement, adding that the impact on consolidated results was limited.
In March, Fast Retailing joined a growing list of companies to suspend operations in Russia, before reversing the move after founder Tadashi Yanai said clothing is a “necessity of life” and that Russians have “the same right to live as we do.” Other fashion retailers, including rivals Hennes & Mauritz AB and Zara’s Inditex SA, have previously stopped selling there.
Revenue in Japan is likely to climb in the coming year as domestic consumption picks up and overseas tourists return after travel curbs were eased, the company said. The island began letting in vaccinated visitors from 68 countries without visas this week, ending more than two years of tighter border controls that kept foreign tourists out.
As one of the last rich economies to reopen for tourism, there’s anticipation of an economic lift that could eclipse the pre-pandemic travel boom. Inbound spending could rise 32% to 6.6 trillion yen annually after a full reopening, compared with 2019, according to a recent report by Goldman Sachs Group Inc. economists.
Fast Retailing said earlier this year that it would redouble efforts in North America, where it has struggled to reach the same scale of success seen in Japan and China since it opened its first store in New Jersey in 2005. It’s doubling down on the market, targeting 200 Uniqlo stores in five years from about 60 now. – Bloomberg / pic AFP