A mock up of the planned Milan Uniqlo store.

TOKYO — Fast Retailing said Thursday that its first-half revenue and profit increased, even while its operating profit was lower than expected. 

The retailer’s net profit for the six months ended Feb. 28 grew by 9.5 percent to 114 billion yen.

Operating profit increased by 1.4 percent to 172.9 billion yen. The company attributed this somewhat stunted growth to poor performance of its Uniqlo Japan business segment.

Fast Retailing’s first-half sales were up by 6.8 percent on the year, totaling 1.27 trillion yen.

Driven by strong growth in the greater China region, Uniqlo International’s sales gained 14.3 percent to 580 billion yen, while its first-half operating profit was up by 9.6 percent to 88.4 billion yen.

“Uniqlo greater China, led by mainland China, generated double-digit growth in both revenue and profit despite the dampening effect of the mild winter weather,” Fast Retailing said in a statement. “The mainland China market saw a growth of both revenue and profit around 20 percent year-over-year.”

Uniqlo Japan, however, continued to struggle. Its sales slipped by 0.5 percent to 491.3 billion yen, while the segment’s operating profit dropped by 23.7 percent to 67.7 billion yen, affecting the company’s overall operating profit.

“Uniqlo Japan reported declines in both revenue and profit over the six months, partially due to weaker sales of core winter products in the first quarter. However, colder weather from December boosted sales of winter items, such as Heattech, down and fleece, in the second quarter,” the statement said.

GU, Uniqlo’s trendy, lower-priced sister brand, saw strong growth in the period, as it continues to open stores across Japan and expand within Asia. Its sales grew by 10.7 percent to 117.1 billion yen, and its operating profit jumped 54.3 percent to 14.1 billion yen.

At a results briefing, Fast Retailing’s chairman, president and chief executive officer Tadashi Yanai said the company has entered a new stage of its history, having achieved things that it never would have thought possible some years ago.

He spoke of the Ariake project, which refers to Uniqlo’s new global headquarters in Tokyo, where the company is rehauling its logistics systems from top to bottom. The executive said that the project, which he explained will never be completed because it is always evolving, is “revolutionizing the way we think and transforming the way we work.”

Yanai said the retailer is aiming to achieve complete customer satisfaction by eliminating instances in which the exact style, color or size of a particular item is not available when and where the customer wants to purchase it. For example, Fast Retailing is using artificial intelligence to gather information about customer preferences in order to more accurately predict future demand. In addition to meeting customer needs, the company is aiming to reduce unsold stock.

“Companies do not perish because of shortages, they perish because of excess,” Yanai said.

When asked about any plans for future store openings by Uniqlo in Japan, where recently the brand has closed more doors than it has opened, Yanai said the company needs to be strategic about the stores that it keeps.

“I think rather than thinking about the pace of store openings, I think we need to do some scrapping and building,” the executive said. “From now on I think we can’t have stores that don’t have a reason for existing. It’s important to think about whether or not they are offering something positive for customers, whether or not they have a function. And I think if that function is being surpassed by e-commerce, then we should replace them with e-commerce. However, particularly in the case of apparel there are a lot of products that if you don’t actually try them on you won’t know the size, color and feel of the material, so I think all companies will move to a new style of business that incorporates both stores and e-commerce.”

Due to the lower-than-expected results, Fast Retailing made a downward revision of 10 billion yen to its operating profit forecast for the 12 months ending Aug. 31. It now expects operating profit to reach 260 billion yen, an increase of 10.1 percent over last year’s figure.

The company left unchanged its guidance for net profit and sales. It is predicting a net profit of 165 billion yen, 6.6 percent higher than the previous year.

It is forecasting yearly sales growth of 8 percent, for a total revenue of 2.3 trillion yen.

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