Fast Retailing Q1 Net Plunges 34.9 Percent

The company kept its full-year earnings forecast but trimmed its sales target.

TOKYO — Fast Retailing Co. Ltd., parent of Japanese fast-fashion label Uniqlo, reported a 34.9 percent drop in net profits in the first quarter ended Nov. 30 to 22.71 billion yen, or $274.1 million at average exchange.

This story first appeared in the January 14, 2011 issue of WWD.  Subscribe Today.

The company said Thursday that sales for the period dropped 4.7 percent to 250.99 billion yen, or $3.03 billion. Uniqlo, which previously was showing continuous signs of strong growth, has reported decreases in same-store sales over the past months. November figures fell 14.5 percent, and December same-store sales, which will likely affect the company’s second-quarter performance, were down 15.5 percent.

“Uniqlo Japan same-store sales suffered a double-digit contraction [of 12.3 percent] year-on-year in the first quarter, resulting in large part from lingering summer weather and results overshadowed in comparison with the extremely strong sales of the previous year,” the company said.

A spokesman for Fast Retailing said Uniqlo Japan’s same-store sales are expected to decline by 9.8 percent overall for the first half ending Feb. 28, but the company said it expects some turnaround for the second half of the year.

“Same-store sales are seen improving to record an increase of 3 percent year-on-year with various business cost-cutting initiatives also anticipated to boost profitability further,” the company said.

First-quarter operating profit for the period dropped 18.4 percent to 49.853 billion yen, or $601.73 million. This is 5 billion yen, or $60.35 million, higher than the company’s initial forecast for the period, buoyed by higher sales and lower expenses than expected.

Unlike Uniqlo’s domestic performance, the company’s international operations gained in both sales and profit. First-quarter sales rose 29.3 percent compared with the previous year to 26.8 billion yen, or $323.48 million.

Uniqlo International’s operating income surged 52.5 percent to 4.8 billion yen, or $57.94 million. These increases are largely due to the company’s aggressive growth throughout Asia over the past year, including its first store in Taiwan, which opened in October. The region has seen “unprecedented sales strength,” according to the company.

On Thursday, the company maintained its full-year profit guidance but cut its sales forecast from 856 billion yen, or $10.29 billion at current exchange, to 846 billion yen, or $10.17 billion, a 3.8 percent increase on last year’s sales figures. The revised sales forecast is based on lower expectations for sales at Uniqlo Japan.