Fast Retailing Lowers Forecasts After Longer Summer Hurt Sales
January 15, 2012, 4:04 PM ESTBy Cheng Herng Shinn and Shunichi Ozasa
Jan. 13 (Bloomberg) -- Fast Retailing Co., Asia’s biggest clothing retailer, lowered its forecasts for annual sales and profit after a longer-than-expected summer damped demand for its Uniqlo brand winter clothing.
Net income will probably be 70 billion yen ($910 million) in the year ending Aug. 31, compared with a previous estimate of 71 billion yen a year earlier, the Yamaguchi, Japan-based company said in a statement yesterday. It forecast sales of 937 billion yen, down from a previous target of 965 billion yen.
The casual clothing retailer had faster sales growth in the most recent quarter than global rivals Gap Inc., Inditex SA and Hennes & Mauritz AB as its strategy of opening more stores outside Japan helped offset sluggish demand at home. Fast Retailing’s overseas sales jumped 59 percent in the quarter, led by China and South Korea.
“I don’t think the market expected the company to slash their full-year forecast as their sales in December and January were really good,” Dairo Murata, a Tokyo-based analyst for JPMorgan Chase & Co., said by phone yesterday. Fast Retailing’s profit will probably drop 9 percent this year, he said.
Fast Retailing is “doing really well” in Asia outside of Japan, Group Executive Vice-President Nobuo Domae told reporters yesterday in Tokyo at a briefing to discuss earnings. “Asia will be the next growth pillar for us.”
Cotton, China Labor
Fast Retailing fell 0.5 percent to 14,520 yen at the 3 p.m. close in Tokyo yesterday, before the forecast and results were announced. The stock has gained 18 percent in the past 12 months, compared with a 22 percent slide for the broader Topix index.
Higher prices for materials including cotton and an increase in China labor costs also narrowed margins in the first quarter, according to the statement.
Operating profit dropped 2.8 percent to 48.4 billion yen in the three months ended Nov. 30, according to the statement. Sales gained 8.6 percent to 272.7 billion yen.
Sales at Inditex, operator of the Zara casual clothing chain, rose 4.8 percent in the three months ended Oct. 31, while Hennes & Mauritz reported an 0.1 percent gain in its most recent quarter, and Gap had a 1.9 percent decline.
Fast Retailing’s biggest shareholder, with a 22 percent stake, is Chief Executive Officer Tadashi Yanai, 62, according to data compiled by Bloomberg. The billionaire turned his father’s tailoring business into a company with a market value of more than 1.5 trillion yen, making him Japan’s second-richest person.
The stock is the biggest gainer on the Nikkei 225 Stock Average in the past five years, climbing 51 percent. The benchmark has lost 51 percent in the same period.
--Editors: Dave McCombs, Frank Longid
To contact the reporter on this story: Cheng Herng Shinn in Tokyo at hcheng52@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net
To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net
