Uniqlo Owner’s Profit Misses Estimates on Weak China Sales

Fast Retailing Co. reported third-quarter earnings that missed estimates, as weaker sales in China weighed on the Japanese apparel maker’s performance.

Operating profit was 146.7 billion yen ($1 billion) in the three months ended May, trailing the 150 billion yen average of analyst estimates compiled by Bloomberg. Net income came in at 105.5 yen billion during the period.

Revenue in mainland China declined by approximately 5 percent for the third quarter from a year earlier, while operating profit decreased by around 3 percent, the company said. The apparel maker had in April raised its full-year forecast, counting on demand for its Uniqlo brand of clothing in newer markets beyond the traditional strongholds of Japan and China.

Still, the retailer kept its full-year operating profit forecast of 545 billion yen.

The sales drop in China was due to weaker overall consumer sentiment and continuation of low temperatures through early May, Chief financial officer Takeshi Okazaki said in a post-earnings briefing Thursday. The company, which is overhauling its China operations, is beginning to see the impact, he said.

“We are implementing a scrap and build strategy to improve operational efficiency of each, individual stores,” said Okazaki. “We are tailoring our product assortment and store layouts to suit each region. Some stores are seeing 1.5 times higher sales.”

Operating profit of overseas Uniqlo business rose 1.5 percent to 72.1 yen billion for the three months ended May, while operating profit for the brand in Japan rose 4.7 percent to 52.9 billion yen for the period, it said.

Fast Retailing released its earnings after markets closed in Tokyo. Its stock has dropped around 13 percent this year, partly weighed down by President Donald Trump’s tariffs. Earlier this week, Trump said he will slightly raise across-the-board tariffs on Japan to 25 percent starting on August 1.

The company is closely monitoring the situation and the balance between price and value of products for US consumers to maintain sustainable business, while securing profits, Okazaki said.

In April, Fast Retailing said the impact of US tariffs on the company’s operating profit for the second half of the year will be approximately 2 percent to 3 percent, based on the assumption that they remain the previously announced level.

Fast Retailing Co. reported third-quarter earnings below estimates, primarily due to a 5 percent decline in revenue in mainland China.

By Kanoko Matsuyama

Learn more:

Uniqlo Owner Raises Profit Forecast Amid Expansion Abroad

Fast Retailing Co. raised its full-year forecast after reporting better-than-expected fiscal first-half profit.