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Fast Retailing Misses FY Targets

The retailer still posted double-digit growth in profit and sales for the year.

TOKYO — Fast Retailing Co. Ltd. reported double-digit growth for the full year but missed its earnings and sales targets due to lower-than-expected sales both internationally and in its home market of Japan.

This story first appeared in the October 12, 2012 issue of WWD.  Subscribe Today.

The company, which is the corporate parent of Uniqlo, said Thursday that its net profit rose 31.8 percent to 71.65 billion yen, or $910.72 million at average rates, for the year ended Aug. 31. The company’s previous forecast was for 79 billion yen, or $1 billion at current exchange.

Sales spiked 13.2 percent to 928.67 billion yen, or $11.8 billion, just shy of its forecast of 929.5 billion yen, or $11.82 billion.

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Operating profit grew 8.7 percent to 126.45 billion yen, or $1.61 billion. That compares with a previous target of 131.5 billion yen, or $1.67 billion.

Fast Retailing cut its full-year earnings targets but increased its sales forecast when it released its nine-month figures in July.

Although the company didn’t break down its results for each quarter, its nine-month net profit, released in July, was 72.5 billion yen, or $922.9 million, meaning that Fast Retailing posted a small loss in the fourth quarter. A spokesman for the company attributed this to a decrease in tax benefits in both Japan and the U.S.

In Japan, Uniqlo posted sales of 620 billion yen, or $7.88 billion. This was up 3.3 percent from the previous year, but 0.2 percent shy of the company’s own forecast of 621.5 billion yen, or $7.9 billion.

Uniqlo’s international business saw sales jump 63.4 percent on the year to 153.1 billion yen, or $1.95 billion, however this fell short of the forecast of 157 billion yen, or $2 billion, by 2.4 percent. In the U.S., where Uniqlo has opened some high-profile New York stores during the past fiscal year, the company’s operations are currently in the red due to a lack of sales growth and efforts spent on brand building.

At a press conference in Tokyo on Thursday, Fast Retailing’s chairman, president and chief executive officer Tadashi Yanai reiterated his company’s ambitious plans to become a leading global retailer by opening between 200 and 300 stores worldwide each year. By the year 2020, Yanai said the company aims to have 1,000 stores each in Japan, China, elsewhere in Asia, and in Western countries.

“Greater China, ASEAN and India have a population of four billion, the biggest [regional] population in the world, and they say that over the next 10 years, between one third and half of those [people] will become the middle class,” Yanai said. “I think it’s an [exceptional] business chance. I say that this is the ‘gold rush.’ Asia is an exceedingly great business chance for us.”

Yanai also spoke of the huge potential he sees in San Francisco, where he said 1,000 customers lined up to enter the city’s first Uniqlo store when it opened last week.

“There’s Asia within North America, especially on the West Coast,” he said. “Among international students, number one and number two are students from India and students from China.”

The executive outlined plans to open an additional 20 to 30 stores in New York and its surrounding area, plus 20 to 30 in the San Francisco area. He said the company also plans to start global online sales from its offices in San Francisco, and to open doors in European cities such as Berlin, Milan and Barcelona. He said the current economic climate across the world will not make Fast Retailing slow its expansion pace.

“I’m always saying this, but there are chances during recessions [because] there are no [other] people who open stores [at those times],” Yanai told reporters.

Fast Retailing also released its guidance for the current fiscal year ending August 31, 2013. It expects net profit to grow 17.9 percent to 84.5 billion yen, or $1.08 billion at current exchange rates. The company forecasts operating profit will increase by 13.5 percent to 143.5 billion yen, or $1.83 billion.

The retailer also is expecting its full-year sales to exceed a trillion yen for the first time, forecasting a total of 1.06 trillion yen, or $13.49 billion.

Yanai said the company aims to achieve sales of 5 trillion yen, or $63.89 billion, by the year 2020.