Uniqlo Owner's Profit Falls Short Despite China Gains

11 Jul 2019, 05:17 PM IST

(Bloomberg) -- Fast Retailing Co.’s profit fell short of analyst estimates as weakness in the Uniqlo owner’s home market of Japan overshadowed a strong showing in overseas markets, particularly China.

Operating profit rose to 74.8 billion yen ($692 million) in the three months ended May 31, according to a statement Thursday from Asia’s largest retailer. That compares with analysts’ average estimate of 79.4 billion yen.

Key Insights

The results show Japan’s domestic market still has a huge influence on Fast Retailing’s fortunes. Domestic results were weighed down as the company shifted a sales event to June, causing Uniqlo’s Japan revenue to fall 0.5% for the quarter.
China continues to be one of the main engines driving overseas expansion, with sales in the country rising in the double digits. Uniqlo so far hasn’t been hurt by the trade war between the U.S. and China, and sales there were strong even in the face of a weaker yuan.
GU, Fast Retailing’s lower-price brand, is making a bigger impact on results. Operating profit more than doubled for the quarter, as the company credited new products with mass-fashion appeal. GU, which has been ramping up advertising efforts toward younger shoppers, is speeding up store openings in Japan and overseas.
Uniqlo is at risk from the recent diplomatic feud between South Korea and Japan over exports. The company is seeing an impact from a South Korean boycott of Japanese goods, Chief Financial Officer Takeshi Okazaki said in Tokyo, but he added that any damage will be “short term.”

Market Performance

Fast Retailing shares have been on a tear this year, jumping 20%, compared with a 5.7% increase in the benchmark Topix Index.
The stock rose 1.2% to an all-time high on Thursday in Tokyo before earnings were released.