By Amanda Kaiser
with contributions from Kelly Wetherille
 on October 13, 2016

Not so fast.

Reeling from a 56.3 percent drop in full-year net profit, Fast Retailing has drastically dialed back its ambitions in its bid to become the world’s largest apparel retailer. The reality of a strong yen and weakening sales trends are setting in for the mass-market and fast-fashion player.

Tadashi Yanai, chairman, president and chief executive officer of the Uniqlo corporate parent, said Thursday that his company is now hoping to hit the 3 trillion yen ($27.5 billion) sales mark by 2020 — he had previously spoken of a goal to reach 5 trillion yen ($45.8 billion) in sales by that same year. Just last year, he was speaking about wanting to hit 30 trillion yen in sales (more than $275 billion) by 2030. Clearly the exec’s penchant for audacious forecasts has subsided for now.

“Sales of 5 trillion yen might be delayed by a little, but I would like to achieve that in the near future,” Yanai said at a press conference here.

Fast Retailing Co. Ltd. saw its full-year net profit slump 56.3 percent to 48 billion yen, or $425.47 million at average rates for the period, as it suffered the effects of a strong yen and impairment losses on J Brand and other operations, including Uniqlo stores in the United States and Japan.

Yanai, Japan’s richest man, said his strategy for getting his company back on track centers around globalization and digitization. His three pillars include growing Uniqlo internationally, particularly in Greater China, Southeast Asia and Oceania; expanding e-commerce to make up 30 percent of total sales [currently e-commerce accounts for just 5 to 10 percent of the business depending on the market], and focusing on the discount fast-fashion brand GU as the group’s number-two priority after Uniqlo.

“It’s not just the fashion industry, but the way in which people work is very old-fashioned. I think we need to change this into a new style of working,” Yanai said. “This new style of working has to be moving in the same direction that the world is moving and has to answer the needs of customers, offering products that improve their lives.”

With the opening of Fast Retailing’s new logistics and distribution center in Tokyo’s Ariake district, scheduled to open next spring, Yanai plans combine aspects of brick-and-mortar stores and e-commerce to offer customers new services that until now haven’t existed. He is calling the new project a “digital flagship store.”

Sales at Uniqlo’s parent company rose 6.2 percent to 1.79 trillion yen, or $15.87 billion, for the year ended Aug. 31. Operating profit slid 22.6 percent to 127.2 billion yen, or $1.13 billion.

A strong yen had already bit into Asia’s largest apparel retailer’s first-half and nine-month figures. Other Fast Retailing properties include Theory, Helmut Lang, Princesse Tam Tam and Comptoir des Cotonniers.

“This time the influence of foreign exchange adjustments was very strong,” said Yanai. “Of course the profits are low, but I think profits all across Japan will be low for the next two or three years.”

For fiscal 2017, Fast Retailing said it expects sales growth to slow compared to fiscal 2016 but to more than double its net profit on cost-cutting measures. The company said it expects net profit to grow 108.1 percent to 100 billion yen, or $915.41 million at current exchange, while sales should grow 3.6 percent to 1.85 trillion yen, or $16.94 billion.

Fast Retailing said Uniqlo’s USA business started to show signs of improvement in the second half but the full-year operating loss expanded year on year following the reporting of impairment losses on stores and other temporary losses. As reported, the company has stumbled in the U.S. and it is adjusting its strategy there by closing some of its smaller stores and opening larger ones elsewhere and focusing on e-commerce. Upcoming openings include Washington, D.C., and Denver.

Both Uniqlo’s Japan and international business units saw lower profits but higher sales for the year, Fast Retailing said. But the company noted that the operating profit improved significantly for both units in the second half of the year.

Uniqlo Japan saw its full-year operating profit fall 12.6 percent to 102.4 billion yen, or $907.7 million. Sales rose 2.5 percent to 799.8 billion yen, or $7.09 billion. But Fast Retailing said the unit’s second-half operating profit jumped 38 percent thanks to a combination of cost-cutting, better pricing for spring-summer and higher same-store sales. The company also flagged a 30.1 percent surge in e-commerce sales.

Uniqlo International saw its full-year operating profit fall 13.7 percent to 37.4 billion yen, or $331.5 million, while it sales rose 8.6 percent to 655.4 billion yen, or $5.81 billion. Operating profit in the second half  “rebounded strongly” thanks to Greater China, Southeast Asia & Oceania and Europe, the company said.

In terms of Fast Retailing’s other brands, the Japanese company continues to struggle with J Brand, a denim label it bought in 2012. For the year, it recorded an impairment loss of 13.8 billion yen, or $122. 3 million. Comptoir des Cotonniers and Princesse Tam Tam also recorded losses, while Theory saw higher profits, Fast Retailing said,  although it declined to break out figure for each of those brands.

GU, a cheaper sister line to Uniqlo, saw a double-digit jump in profit and sales. Operating profit grew 34.8 percent to 22.2 billion yen, or $196.8 million, and sales rose 32.7 percent to 187.8 billion yen, or $1.66 billion.

GU is currently celebrating 10 years since its launch, and its chief executive officer Osamu Yunoki said Thursday that the company has lofty goals for the next decade. He said he plans to remake the entire brand and company, and to build it into a 1 trillion yen, or $9.64 billion, business. Specific elements of Yunoki’s plan include opening 40 to 50 stores per year in Japan, strengthening its digital marketing and e-commerce activities, and growing its international presence. Within three years he aims to have 50 GU stores outside of Japan, with sales in those markets making up 10 percent of the company’s total.