Fast Retailing, the corporate parent of Uniqlo, said Thursday it saw higher sales in the first nine months of the year but its profits slid substantially, due in part to a strong yen. The currency impact also prompted it to trim its full-year earnings forecast for the third time this year.
Asia’s largest clothing retailer said net profit for the nine months through May slid 46.4 percent to 71 billion yen, or $617.7 million at average exchange for the period. Sales at the Japanese company grew 6.4 percent to 1.43 trillion yen, or $12.48 billion.
While the strong yen bit into the bottom line, operating profit was also down. It fell 23 percent to 145.8 billion yen, or $1.27 billion. It did show a significant improvement in the third quarter from the first part of the year, rising 18.6 percent to 46.4 billion yen, or $403.7 million. The company said Uniqlo’s margins in Japan improved because of a simpler and more consistent pricing strategy and fewer short-term weekend sales.
Meanwhile, the company said third-quarter operating losses at its underperforming Uniqlo USA operations shrank. 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.
Fast Retailing posted a nine-month foreign exchange loss of 6.7 billion yen, or $58.29 million, and an additional 1.5 billion yen, or $13.05 million, loss on store closures in the U.S.
Uniqlo’s business in greater China, its largest market outside of Japan, improved in the third quarter, with profit recovering from the second quarter when the exchange rate was less favorable. The spokeswoman said mainland China is showing strong performance, whereas Hong Kong and Taiwan are facing challenges due to local economic issues.
Fast Retailing said Uniqlo’s sales were boosted by trendy women’s styles like jogger pants and skirt-pants hybrids as well as sports-related advertising campaigns for its stay-dry fabric items. E-commerce also saw strong growth, with online sales growing 40.6 percent year-over-year for the third quarter to represent 5.5 percent of all Uniqlo’s sales in Japan.
Fast Retailing left unchanged its full-year guidance for operating profit and revenue, but lowered its net profit forecast due to a projected foreign exchange loss of 47 billion yen, or $417.84 million. The company now expects net profit for the year ending Aug. 31 to contract by 59.1 percent to 45 billion yen, or $400 million. This is down significantly from its previous forecast of 60 billion yen, or $533.4 million. It already cut its earnings forecast at the first- and second-quarter marks.
In line with its previous forecast, full-year operating profit is expected to fall 27 percent to 120 billion yen, or $1.07 billion. Sales are seen growing 7 percent to 1.8 trillion yen, or $16 billion.
Fast Retailing chairman and president Tadashi Yanai told The Nikkei that Uniqlo would return to its simple pricing regime because price hikes in the past two years have proven to be a mistake.
“Customers didn’t agree that products with new, higher prices reflect fair value,” Yanai told the paper. “The market was in a very tough situation. We made a mistake of raising prices under such circumstances. Consumer sentiment has turned out to be far worse than we thought.”