Fast Retailing Co. Ltd. cut its full-year earnings and sales forecasts on the back of a weaker-than-expected first-quarter performance.
Asia’s largest apparel retailer and the corporate parent of Uniqlo said it experienced weak demand for winter apparel during an unseasonably warm season around the world. The company added that it saw a decrease in foreign exchange gains from the previous year.
Fast Retailing said it expects full-year net profit to come in flat at 110 billion yen, or $895.38 million, compared to its earlier estimate of 115 billion yen, or $936.08 million. Sales are now seen rising 7 percent to 1.8 trillion yen, or $14.65 billion, down from a previous estimate of 1.9 trillion yen, or $15.47 billion. The company said foreign exchange fluctuations are not incorporated into those new forecasts.
“Our latest estimates take into account the lower-than-expected performance in the first quarter,” the company said, predicting a decline in second-quarter gross margins at both its Uniqlo Japan and Uniqlo International business units.
Given its disappointing performance in recent months, the company is rethinking its product mix. Fast Retailing plans to launch its spring collection earlier and introduce less weather-sensitive products, a spokesman said.
The company said net profit for the three months ending Nov. 30 fell 30.2 percent to 48 billion yen, or $398.4 million at average rates for the period. First-quarter revenue rose 8.5 percent to 520.3 billion yen, or $4.32 billion. Operating profit slipped 16.9 percent to 75.9 billion yen, or $630 billion.
Uniqlo Japan saw lower profits and sales in the quarter, hurt by “heavy discounting,” Fast Retailing said. Uniqlo’s international operations fell short of its targets with weak performances in Greater China and South Korea and the United States. The company said Uniqlo’s operations in Europe and Southeast Asia fared better.
The company said Uniqlo’s U.S. operations continued to generate an operating loss. Fast Retailing said it is tweaking Uniqlo’s expansion strategy in the country to focus on major cities rather than suburban areas and ramping up its e-commerce efforts. Uniqlo recently opened in Chicago and Boston.
Beyond Uniqlo, Fast Retailing said its low-cost fast-fashion brand GU continues to perform strongly, seeing a double-digit growth in same-store sales.
But the company said its other brands did not put in a good performance. A “downturn” in the U.S. market hurt Theory and J Brand while the temporary closure of some stores in France after November’s terrorist attacks bit into the business of Comptoir des Cotonniers and Princesse Tam Tam.