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Fast Retailing Net Profit Slides 12%

Uniqlo parent said unseasonable weather and a poor product mix hurt its performance.

A view of the Uniqlo store.
Appeared In
Special Issue
Men'sWeek issue 10/13/2011

TOKYO — Uniqlo parent Fast Retailing Co. Ltd. said Wednesday that its full-year net profit slumped 12 percent as it blamed unseasonable weather patterns and an unsuitable product mix for the drop.

Net profit for the 12 months ended Aug. 31 declined to 54.35 billion yen, or $665.79 million at average exchange rates for the period. Operating profit fell 12.1 percent to 116.37 billion yen, or $1.43 billion. Net sales for the year were close to flat, rising just 0.7 percent to 820.35 billion yen, or $10.04 billion.

Both the net profit and sales figures are lower than the guidance the company gave when it released nine-month results in July.

The retailer said it faced a shortage of popular products such as its Heattech line of heat-retaining inner wear. It also said unseasonable temperature patterns hurt the sale of certain items, causing the retailer to discount prices in order to move stock later in the season. That bit into the retailer’s margins, which were also impacted by the sharp rise in raw cotton prices.

“Our product creation itself was a little off,” Fast Retailing’s chairman, president and chief executive officer Tadashi Yanai said at a press conference on Wednesday, before flying to New York to inaugurate two new Uniqlo flagships.

On a more positive note, Fast Retailing said it expects to post double-digit profit and sales growth for its current fiscal year, ending Aug. 31.

The retailer said it sees net profit rising 30.6 percent to 71 billion yen, or $925.91 million at current exchange rates. The company is predicting sales of 965 billion yen, or $12.58 billion, an increase of 17.6 percent.

While full-year sales from Uniqlo’s operations in Japan were down 2.4 percent year-on-year, Fast Retailing’s international business continued to grow. Sales from Uniqlo stores outside Japan increased by 28.7 percent on the year, and Yanai said Wednesday that by the year 2015 he expects Uniqlo’s international sales to surpass those in Japan.

Uniqlo International’s operating profit spiked 40.6 percent to 8.9 billion yen, or $109.03 million while sales advanced 28.7 percent to 93.7 billion yen, or $1.15 billion.

Yanai laid out ambitious plans for Uniqlo’s continued international expansion. He said that he aims to open 200 to 300 stores a year in the near future, and that by the end of the current fiscal year the company will have 288 stores outside Japan, some 100 more than it had as of Aug. 31.

His expansion goals center on Asia, where he hopes to eventually open 100 stores a year in China and 50 in Korea. The executive also plans to expand his company’s presence in countries such as Vietnam, Indonesia, India, Australia and New Zealand, and he aims for Uniqlo’s first store in the Philippines to bow next spring.

The retailer is preparing to open two high-profile stores in New York City over the next two weeks, and Yanai said that he also wants to have a presence in other major U.S. cities such as Los Angeles, San Francisco and Chicago.

“Our Uniqlo business is valued more internationally than domestically in Japan, and we have great hope [for its growth],” Yanai said. “More than a risk, we see this as a big chance.”

When asked whether he worried about poor economic conditions in the U.S. and Europe affecting international expansion, the executive replied, “The economy in the West is bad, but Japan is the same. I don’t think that just because the economy is bad [a company] won’t grow.”