Fast Retailing suffers on Asia woes, Uniqlo sales hurt by warm weather
Circumstances conspired against Fast Retailing in the latest quarter with the company having cut its full year outlook after Q1 proved tough. It means the year to August is now expected to see operating profit down 5% to ¥245 billion ($2.24 billion).
It’s a bold move to make this early in the year and suggests the firm isn’t expecting some problem areas to start booming any time soon.
So what happened in Q1? The owner of the Uniqlo chain was hurt by the Hong Kong protests in the quarter, but also by a consumer boycott that affected its sales and tipped it into losses in the important South Korean market in the period from September to November.
Any problems in the region can hit Fast Retailing especially hard. Asia, and more specifically China, are hugely important to growth at the Japanese company. And its Uniqlo brand has a major presence there with its product mix appealing both to consumers on a budget and more affluent shoppers looking both for well designed basics and its collaborations, such as the recent one with Marimekko.
And locations like Hong Kong and Korea are also particularly important for it given the fact that it has reached near saturation point in its domestic market. The company opened it first store in Vietnam last month, further underlining its focus on Asia.
So what did all of this mean in terms of numbers? Q1 operating profit dropped to ¥91.7 billion from ¥104.7 billion a year earlier and saw the company missing analyst expectations of a profit increase.
But on the upside, the US business improved (North America should finally tip into profit this year after some struggles there), while the smaller and younger-focused GU brand saw its operating profit rising 44%. New stores in Australia and India also boosted the group’s sales.
Meanwhile, the company has also reported its Uniqlo monthly Japanese sales for December and once again showed that the brand is completely at the mercy of the weather in its domestic market. For much of last year, it reported either higher or lower monthly comparable sales as a direct result of the weather and for December, the climactic impact caused sales to fall.
Same-store sales, including online, were down by 5.3% year-on-year, while total sales, again including online, decreased by 5.5%. The company said this was caused by “persistently high temperatures from the middle of the month onwards [that] resulted in sluggish sales of cold-weather clothing”.
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