The operator of the Uniqlo global clothing chain reported first quarter results on Thursday that trailed analyst forecasts as a sharp decline in profit in China overshadowed strong sales in its home market of Japan.
Fast Retailing said operating profit rose 7.4 per cent to 157.6 billion yen ($996.84 million) in the three months through November from a year earlier. That was slightly below a LSEG consensus forecast of 160 billion yen drawn from six analysts.
Fast Retailing maintained its full-year operating profit forecast of 530 billion yen, on course for a fourth year of record earnings.
Known for inexpensive, durable fleeces and cotton shirts, Fast Retailing has long been regarded as a bellwether for consumer spending in Japan and more recently China, where it has more than 900 Uniqlo stores on the mainland.
Domestic sales have gotten a boost from a surge in duty-free shopping amid a tourism boom in Japan fuelled by a weak yen.
But sales growth has cooled in China, prompting the company to scale back store openings and adopt a scrap-and-build strategy to turn around underperforming locations with redesigned stores.
Improved profit margins and international brand awareness helped drive the previous year’s record results. But the company remains vulnerable to change in weather and fashion tastes.
Japanese sales were boosted by cold weather in December that increased demand for thermals, but in China, unseasonably warm temperatures resulted in flat sales in October and November, the company said.
Results were also strong in North America and Europe where Fast Retailing is mounting an aggressive expansion strategy to fulfil its aim to become the world’s No. 1 clothing brand. In the southern United States, it opened five Uniqlo stores in Texas in October alone.
In its home market, it has also become a pacesetter for wages in the service industry.
Keen to retain good workers, Fast Retailing said on Wednesday it will institute an aggressive increase in employee pay in Japan – one that follows on from a hike in 2023 that helped shake up the nation’s long moribund wage outlook.
Wages for full-time headquarters and sales staff will rise by as much as 11 per cent from March, while annual salaries for new employees will increase by about 10 per cent, the company said.
