Uniqlo owner Fast Retailing cuts profit guidance for third time this year

Fast Retailing, which owns global casual clothing store chain Uniqlo, has slashed its full year profit forecast for the third time this year to project a 59.1 per cent plunge from a year earlier, despite improved third quarter figures being bolstered by new pricing strategies.

The Japanese apparel maker on Thursday cut its net profit estimate for the fiscal year 2016 to ¥45.0 billion (HK$3.3 billion) from ¥60.0 billion it projected in April, blaming an appreciating Japanese yen for its staggering ¥37.0 billion foreign exchange losses.

The move 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.

A failure by Abenomics to reinvigorate Japan’s economy, sustained deflation, as well as a strengthening yen that squeezes overseas earnings have all triggered investor concerns over the clothing giant’s bottom line.

“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 propelled a 2.8 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 logged for the first half of the year.

In mainland China, one of Uniqlo’s biggest markets, it posted a rise in both revenue and profits 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.

The Japanese yen has strengthened some 12 per cent against the US dollar this year through mid July taking a toll on the apparel retailer, which generated 40 per cent of its revenues outside of Japan.

That prompted the company to revise its full-year forecast for foreign exchange losses up to ¥37.0 billion from ¥17.5 billion in April.

Fast Retailing’s shares had fallen 24.5 per cent in Hong Kong this year to July 14, hurt by a bleak economic outlook in its key markets Japan and Greater China, a strong yen and dismal sales in its US market.

Tadashi Yanai, billionaire chairman of Fast Retailing, reiterated his aim to enhance the company’s online sales.

“We have set a target to expand e-commerce to 30 per cent of total sales over the medium term, and are currently in the process of aggressively transforming our distribution systems,”said Yanai on Thursday in a statement.