Uniqlo owner Fast Retailing Co. kept its outlook for profit and sales intact for the current fiscal year, as growth in overseas markets appears to be making up for any increased costs stemming from the retailer’s decision to raise employee wages in Japan.
(Bloomberg) — Uniqlo owner Fast Retailing Co. kept its outlook for profit and sales intact for the current fiscal year, as growth in overseas markets appears to be making up for any increased costs stemming from the retailer’s decision to raise employee wages in Japan.
Operating profit for the year ending August is forecast to reach ¥350 billion ($2.7 billion), the clothing retailer said in a statement Thursday. That compares with the ¥357 billion average projected by analysts. Net sales are seen at ¥2.65 trillion, in line with analysts’ prediction.
The retailer, which is raising salaries in Japan as inflation picks up, reported profit of ¥117 billion for the three months ended November, missing analysts’ projection for ¥140 billion based on the average of estimates compiled by Bloomberg. Sales rose 14% to ¥716 billion. Analysts were predicting revenue of ¥721 billion.
Key Insights:
- Covid curbs in China and losses in Russia impacted quarterly profit, the company said in the statement.
- 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 is set to rely more on growth from markets outside of Japan, which has a shrinking population and sluggish consumer spending, Catherine Lim, a Bloomberg Intelligence consumer analyst wrote on Jan. 10. The lower-priced GU label could be on track to become a second growth engine as the pandemic wanes, she added.
- China rapidly reversed three years of its Covid Zero policy and reopened all borders without quarantine on Jan. 8, raising the prospect for increased retail spending in the world’s second-largest economy.
- Benefits from a weaker yen may recede as the Japanese currency strengthens against the dollar following the Bank of Japan’s decision to raise its bond-yield cap last month, which is fueling expectations of a shift in monetary policy.
Market Performance:
- Fast Retailing fell 2% in Tokyo trading Thursday before the earnings announcement. The stock rose 23% in 2022.
- Fast Retailing will conduct a 3-for-1 stock split effective March 1 to increase the liquidity of the stock and expand the retailer’s investor base after resisting the move for years, which will likely to help lower its dominance on the benchmark Nikkei 225 Stock Average.
(Adds executive comments in key insights.)
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