An unseasonably warm winter from Asia to the US is wreaking havoc for one of the world’s leading sellers of fleece sweaters and self-heated legging, and there’s little the Japan-based owner of Uniqlo can do about it but hope for spring to start sooner.
Fast Retailing Co will launch its spring clothing lineup earlier and introduce products that are less “weather-sensitive,” chief financial officer Takeshi Okazaki told a briefing held in Tokyo on Thursday, after Asia’s biggest clothing retailer cut its operating profit forecast by 10% to ¥180bn ($1.5bn) for the year ending August 2016.
The company’s new targets “aren’t necessarily easy to achieve as the outlook is uncertain for spring and summer at this moment,” said Dairo Murata, an analyst at JPMorgan Securities Japan Co. “It’s tough to recover from this – winter clothing sales in November and December are the most important.” Fast Retailing’s weak performances in Japan and Greater China, its biggest overseas market, threatens billionaire chairman Tadashi Yanai’s goal to turn the company into a world leader with sales of ¥5tn by 2020. The company also faces hurdles in the US, where low recognition of the Uniqlo brand led to sustained losses in the latest quarter.
The company’s shares fell 2.8% to ¥39,050 by the close of Tokyo trading, before the results were released. The Topix index fell 2.1%.
Hennes & Mauritz AB, Fast Retailing’s larger Stockholm-based competitor, last month reported revenue for the quarter ending November that missed analysts’ estimates, also blaming unseasonably mild weather that weighed on demand in North America and Europe.
Fast Retailing also cut its net income forecast to ¥110bn, compared with the company’s projection of ¥115bn made in October, and the ¥119bn average of 13 analyst estimates compiled by Bloomberg.
It reported operating profit fell 17% to ¥75.9bn in the three months ended in November, worse than the average estimate of ¥84.2bn from three analysts compiled by Bloomberg. Sales in the company’s fiscal first quarter rose 8.5% to ¥520.3bn.
Uniqlo Japan’s first-quarter operating profit slumped 12% while that for the brand’s international unit dropped 14.2% as its US business continued to post losses, according to Fast Retailing.
The brand also missed targets in Greater China and South Korea, the company said. Still, China’s economic slowdown hasn’t affected its business, CFO Okazaki said.
In Japan, the company last month announced November same- store sales fell 8.9% due to “unusually hot weather.” That slump worsened in December, with another drop of 12%, it said Thursday.
Same-store sales in Japan, for outlets open at least a year, were down 2.3% in the first three months of the current fiscal year, according to Fast Retailing’s update released last month. That compares with its 4% growth projection for the fiscal year ending August 2016 given in October.
A ¥16.1bn impairment loss relating to J Brand and some Uniqlo USA stores and a ¥1.8bn charge on the retirement of fixed assets at flagship stores in London and Shanghai hurt profit last year, Fast Retailing said in October, when Yanai said the company wants to achieve an early profit turnaround in the US. He will send managers who know Uniqlo operations well to carry out reforms in the US, he said.
Fast Retailing has 1,708 Uniqlo shops worldwide as of the end of November, with 844 from Japan and 414 in mainland China.
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