Fast Retailing shares soar in Hong Kong on earnings turnaround

PUBLISHED : Friday, 15 July, 2016, 11:26am
UPDATED : Friday, 15 July, 2016, 11:26am

Fast Retailing, which owns casual clothing store chain Uniqlo, surged as much as 13.49 per cent in Hong Kong on Friday morning, its biggest movement since publicly listing in 2014, after analysts revised upwards their earnings estimates on signs of recovery in its key markets.

Its shares stood at HK$23.40 as of 10:15am, the highest in more than three months, despite the fact that the Japanese clothing store chain on Thursday slashed its full year profit forecast for the third time in 2016 to a projected 59.1 per cent plunge from a year earlier.

The jump in share price followed Fast Retailing announcing improved third quarter figures in Japan and mainland China, bolstered by new pricing strategies and the popularity of its signature T-shirts among Chinese consumers.

Seven out of eight analysts revised upward their earnings forecasts for the clothing giant upon release of its third quarter results, according to data compiled by Reuters, as the market had previously expected dismal sales in Uniqlo’s Japanese and mainland China markets would have continued longer.

The Japanese apparel maker on Thursday cut its net profit estimate for the fiscal year 2016 to ¥45 billion from the ¥60 billion it projected in April, blaming an appreciating Japanese yen for its staggering ¥37 billion in foreign exchange losses.

The move to cut its full year net profit estimate was taken regardless of a pickup in its performance for the third quarter, with its operating profit for the first nine months declining by 23 per cent from the previous year, compared with a 33.8 per cent fall for the first half of the year.

“Performance at both Uniqlo Japan and Uniqlo International started to recover in the third quarter from March to May 2016, with both operations reporting gains in revenue and profit,”the company said in a statement on Thursday.

Stellar sales of Uniqlo’s jogger pants and skants propelled a 2.8 per cent annual growth in the Japanese clothing brand’s same-store sales at home, while cost cuts and a new pricing strategy helped lift its profit growth out of the negative territory seen in the first half of the year.

In mainland China, one of Uniqlo’s biggest markets, the company posted a rise in both revenue and profit thanks to upbeat sales of its popular UT T shirts, but the company’s businesses in Hong Kong, Taiwan and South Korea continued to suffer from an economic slowdown with profit losses.