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Amid Renewed COVID-19 Measures, Fast Retailing Lowers FY Guidance

Women's Wear Daily (WWD) logoWomen's Wear Daily (WWD) 7/15/2021 Kelly Wetherille
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TOKYO — Fast Retailing said Thursday that it has lowered its full-year sales and operating profit projections amid new government measures to prevent the spread of COVID-19 in Japan and other markets. Meanwhile, it reported higher revenue and profit for the first nine months of its financial year.

For the nine months ended May 31, the Uniqlo parent company saw net profits surge by 67 percent to 151.3 billion yen, or $1.38 billion. Operating profit gained 72.1 percent to total 227.8 billion yen. The retailer posted revenue of 1.7 trillion yen, up 9.9 percent from the same period a year earlier.

The company saw increased profitability across several of its business segments and regions, which along with increased sales helped to drive the strong profit growth.

“The group achieved strong third-quarter (March to May 2021) rises in both revenue and profit, with performance recovering at all four business segments compared to the heavy impact of COVID-19 in the previous year,” Fast Retailing said in a statement. “However, performance fell far short of our latest plan, primarily on lower-than-expected performances from Uniqlo Japan and GU.”

Based on this, the retailer lowered its guidance for full-year sales and operating profit. It now expects operating profit to increase by 64 percent to 245 billion yen, down from a previous forecast of 255 billion yen.

The company is predicting full-year revenue of 2.15 trillion yen, an increase of 7 percent over the previous fiscal year. Its previous guidance put full-year revenue at 2.21 trillion yen.

Fast Retailing left unchanged its forecast for full-year net profit. It is expecting growth of 82.6 percent over the previous year, totaling 165 billion yen.

Uniqlo Japan reported significant increases in both revenue and profit over the nine-month period. Sales grew by 12.7 percent year-over-year to 675.1 billion yen, while operating profit increased by 51 percent to 119.5 billion yen.

“Building on solid results in the first half, with offerings that fulfilled customer demand for stay-at-home products, there was strong growth in the third quarter, coming off a low base from the year-ago period at the height of the pandemic,” the retailer said. “Within the quarter, revenue increased on the back of strong sales of summer products, including Uniqlo U T-shirts, and Kando pants, as well as popular items such as loungewear and ultra-stretch active pants. Online sales continued to expand. The results were, however, short of company forecasts due to additional government restrictions to contain COVID-19, and product offerings lacking newsworthiness for customers.”

Uniqlo’s international operations moved back into the black during the period, driven by large sales and profit increases in the greater China region, as well as improved profitability in North America, Europe and other regions. Uniqlo International reported a 9.8 percent increase in nine-month revenue, totaling 739.6 billion yen. The segment’s operating profit grew by 88.7 percent to 97.7 billion yen.

While Uniqlo saw strong growth in both sales and profit in the Greater China region, the results still fell short of its own projections.

In [the third] quarter, the mainland China market saw more subdued growth in demand as consumption patterns shifted to other segments, such as domestic travel. In addition, the comparable figures a year earlier had been extremely strong, boosted by 2020 May Labor Day sales as COVID-19 measures were removed,” Fast Retailing said.

In other regions, Uniqlo South Korea and Uniqlo South Asia, South East Asia and Oceania returned to an operating profit. Uniqlo North America and Uniqlo Europe reported strong revenue gains and smaller operating losses as the COVID-19 situation improved during the third quarter. In a separate announcement Tuesday, Fast Retailing said it plans to open a new, 20,500-square-foot Uniqlo and Theory store on London’s Regent Street in spring of 2022.

GU, Fast Retailing’s trend-focused, low-priced fashion brand, saw increases in both sales and profit for the nine months, when compared with the same period a year earlier. The segment’s revenue grew by 7.1 percent to 200.8 billion yen, while operating profit gained 18.9 percent to total 24.3 billion yen. The company said business performance held steady in the first half, but saw considerable increases in the third quarter.

“Popular items such as chef’s pants, airy shirts and colored flared slacks contributed to the rise in GU revenue. However, the results were below expectation, due to the impact of additional measures to control the COVID-19 outbreak in Japan, its largest market,” Fast Retailing said.

Fast Retailing’s global brands segment reported both a decline in revenue and a larger operating loss for the first nine months of its fiscal year. Revenue declined by 3.3 percent to 80.5 billion yen, while the operating loss expanded to 8.9 billion yen from 6 billion yen in the same period a year earlier. The Theory operation, however, reported a significant rise in revenue and a move back into the black during the third quarter. Comptoir des Cotonniers reported a large rise in revenue and a slightly smaller operating loss in the same period.

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