TOKYO — Uniqlo’s corporate parent Fast Retailing’s first-half numbers slumped, but the company raised its full-year profit guidance and only slightly cut its sales target, appearing to shrug off the impact of Japan’s earthquake disaster last month even as a 7.1 aftershock rattled the northern part of the country late Thursday.
The retailer said net profit for the six months ended Feb. 28 fell 24.7 percent to 41.67 billion yen, or $503 million at average exchange.
Sales for the period totaled 457.33 billion yen, or $5.52 billion, down 2.9 percent from last year, and 1.2 percent lower than the company’s previous forecast. The company said it faced tough comps and unseasonably warm weather in December, which dampened sales of fall-winter products.
Fast Retailing’s fiscal first half closed shortly before March 11’s massive earthquake and tsunami slammed northeastern Japan. Last week, Uniqlo said its March comps fell 10.5 percent as consumers cut back after the disaster and the chain had to shutter some stores and reduce operating hours to conserve power. On Thursday, Fast Retailing chairman, president and chief executive officer Tadashi Yanai addressed the severity of the disaster. But in real terms, the company trimmed its full-year sales forecasts by just more than 1 percentage point. Fast Retailing said sales have been gradually recovering and it expects same-store sales to increase from April. That forecast was released before the latest aftershock, however, which reportedly knocked out some power in the northern part of Japan and was felt as far away as Tokyo.
“Because there’s been such a catastrophe, I think we really need to work hard [to recover],” Yanai said at a press conference. “But one strange thing is that recently, consumption in eastern Japan has been better than that of western Japan. The damage was in eastern Japan, but western Japan is consuming less. But overall I think Japan needs to try hard — individuals need to work hard, and corporations need to work hard.”
Yanai, who declined to field more than a couple of questions after the press conference, said ongoing problems with overheated nuclear reactors at a plant in the region struck by the disaster pose a serious risk.
“In the current situation, if the effects of the nuclear power plant increase, I think it will be very bad,” the executive said. “As I think everyone knows, very few foreigners are coming to Japan, and most of the foreigners that were here have gone back to their countries. I think this will be a big minus for Japan in terms of globalization.”
Still, Yanai said Uniqlo stores in the coming months will continue to cut back on their indoor lighting to conserve power, but he said it is important for stores to keep their outdoor signage lit to lure consumers. He went on to say that he thinks the reaction of businesses to the disaster has been out of proportion and that too many businesses and shops closing could have a large negative impact on the nation’s economy.
Fast Retailing altered its forecasts for the full year ending Aug. 31. Citing cost-cutting and steps to boost efficiency, the company raised its net profit guidance to 60 billion yen, or $703.8 million at current exchange, up from a previous forecast of 51 billion yen, or $598.2 million.
The sales forecast, however, was lowered to 836 billion yen, or $9.81 billion. A previous forecast saw sales coming in at 846 billion yen, or $9.92 billion. The company attributed the revision to the impact of the disaster and the fact it will have to cut back on some planned store openings.
Uniqlo’s international business, however, continues to grow. Sales at Uniqlo stores outside of Japan rose 24 percent over the six-month period to 50.2 billion yen, or $605.9 million, up from 40.5 billion yen, or $488.8 million, last year. The company also revealed Thursday that it will open its third Uniqlo store in the United States this fall, on 34th Street in New York. The 32,292-square-foot store will follow a previously announced global flagship on Fifth Avenue, which is also due to open in the fall. The company said it is looking to employ about 1,000 people to staff the two stores. “This will be our latest and greatest store in the world,” Yanai said of the Fifth Avenue store.
Fast Retailing has also come to an agreement with Mitsubishi Corporation to establish a joint venture in Thailand, which will be charged with opening Uniqlo’s first store there in the fall.
Yanai said Thursday that his company plans to open 200 stores a year across Asia, including 100 a year in China. But he also mentioned that Fast Retailing will slowly reduce the percentage of products it manufactures in China, while increasing production in countries such as Vietnam, Bangladesh and Cambodia.
“As we try to expand our business, we can’t only rely on China [for production],” a Fast Retailing spokesman said. “The growth potential for our business in China is much higher than the growth potential for production there, so we have to look elsewhere in Asia as well.”