Uniqlo owner Fast Retailing Co. dropped the most in eight months after operating profit in the first fiscal quarter fell short of analysts’ average projection due to sluggish sales in China.
(Bloomberg) — Uniqlo owner Fast Retailing Co. dropped the most in eight months after operating profit in the first fiscal quarter fell short of analysts’ average projection due to sluggish sales in China.
Shares in the retailer fell as much as 5.8% in early trading Friday, the steepest intraday decline since May 9, after reporting profit of ¥117 billion ($906 million) for the three months ended November. The prediction was for ¥140 billion, based on estimates compiled by Bloomberg.
Although China abandoned its Covid Zero policy last month, the results reflect the period just before that when movements were more restricted. Sales in latest period rose 14% to ¥716 billion. Analysts were predicting revenue of ¥721 billion.
“The gap with our forecast mainly reflects the impact of Covid-19 in China,” Kuni Kanamori, analyst at SMBC Nikko Securities Inc., wrote in a note to clients. “While the shortfall in the first quarter precludes a rise in consensus for now, we expect the share price to reflect expectations for a recovery in China ahead.”
The decline in profit was limited as the company diversified its pillars for growth to areas such as North America, Europe and Southeast Asia, Chief Financial Officer Takeshi Okazaki said in a briefing in Tokyo. The company expects further growth as customers embrace high quality clothing at reasonable prices, he said.
“The China market correlates with Covid curbs and the infection trend, and is changing rapidly,” Okazaki said. “We are already seeing a strong recovery in January. As people in China accept living with coronavirus, the business will get back on a growth track.”
Fast Retailing kept its outlook for profit and sales intact for the current fiscal year, as growth in overseas markets is likely to make up for any increased costs stemming from its decision to raise employee wages in Japan.
Operating profit for the year ending August is forecast to reach ¥350 billion, the clothing retailer said. That compares with the ¥357 billion average projected by analysts. Net sales are seen at ¥2.65 trillion, in line with analysts’ prediction.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.