TOKYO — Fast Retailing reported nine-month net profits dropped 42.9 percent, due largely to the effects of store closures resulting from the coronavirus pandemic. In light of the ongoing outbreak, the company has also revised downward its guidance for the fiscal year ending Aug. 31.
For the nine months ended May 30, Fast Retailing reported a net profit of 90.6 billion yen, or $843 million. The company said Thursday that it recorded 15.2 billion yen in impairment losses on property, plant and equipment for loss-making stores and right-of-use assets.
The retailer’s operating profit for the period fell 46.6 percent to 132.3 billion yen versus the year-ago period. Consolidated sales totaled 1.54 trillion yen, representing a decrease of 15.2 percent.
“The decline was caused primarily by the impact of COVID-19, which led to the temporary closures and shortened hours for many stores and resulted in large reductions in both revenue and profit across all four business segments,” Fast Retailing said in a statement. “As the situation eased in some markets, both Uniqlo Japan and the GU business segments saw sales recover from mid-May onward. Greater China posted gains in both revenue and profit in May as business saw a favorable pace of recovery.”
Uniqlo’s international business suffered sharp declines in both nine-month sales and operating profit. Sales fell by 17.9 percent to 673.5 billion yen, while operating profit for the segment plummeted 58.5 percent to 51.8 billion yen.
“In the final three months of the period, all markets in the [Uniqlo International] segment reported large declines in revenue and many posted operating losses as a result of COVID-19, although online sales expanded strongly,” the company said. “Within various regions for the three-month period, Uniqlo Greater China reported a large decline in revenue and profit, [but] both figures increased year-on-year in May, and the region is now exhibiting a favorable pace of recovery. Uniqlo Vietnam recovered favorably and exceeded expectations after the local government lifted its lockdown relatively quickly compared with other markets.”
Uniqlo’s business in its home market of Japan fared only slightly better. Sales there were down by 14.6 percent, totaling 598.8 billion yen. Operating profit declined by 18.1 percent to 79.1 billion yen. At the height of health concerns stemming from the coronavirus, Uniqlo had temporarily closed 311 stores out of a total of 813 in Japan.
“Third-quarter Uniqlo Japan revenue dropped 35.5 percent year-on-year, and operating profit plummeted by 74.0 percent,” Fast Retailing said. “However, sales subsequently started to recover from mid-May as stores reopened for business. This produced a significant recovery in sales for the month of June, just after the end of the reporting period. Online sales were strong with a healthy expansion of 47.7 percent year on year in the three months to May 31.”
Fast Retailing continues to grow its GU brand, a cut-price and trendier sister label to Uniqlo, particularly in Asian markets. In the nine months ended May 30, sales from that business segment increased by 1.1 percent on the year to total 187.4 billion yen. Operating profit declined by 22.2 percent to 20.4 billion yen.
Given the ongoing global pandemic, the Japanese retailer now expects a 47.7 percent drop in net profit, for a total of 85 billion yen, for its current fiscal year ending Aug. 31. This is down from a previous forecast of 100 billion yen.
Fast Retailing is now predicting its yearly operating profit will decrease by 49.5 percent to 130 billion. Its previous guidance was for 145 billion yen.
The company now forecasts a 13.1 percent drop in yearly sales, for a total of 1.99 trillion yen. An April forecast had predicted revenue of 2.09 trillion yen.