Fast Retailing Net Profit Jumps 64% -- Update

By Megumi Fujikawa 

TOKYO--The operator of the Uniqlo casual clothing stores said its net profit surged 64% in the September to November quarter as customers in Japan weren't vexed by a higher sales tax and the yen's weakness boosted its revenue overseas.

Fast Retailing Co., Asia's biggest apparel retailer, said Thursday its net profit increased to Yen68.83 billion ($577.1 million) from Yen42.00 billion in the same period a year earlier. Sales rose 23% to Yen479.54 billion.

As the company based in western Yamaguchi prefecture continues to expand globally to compete against bigger rivals such as Spain's Inditex, Sweden's H&M Hennes & Mauritz AB and U.S.-based Gap Inc., recent falls in the yen could give its earnings a further boost.

Each Yen1 fall in the Japanese currency against the dollar pushes up its profits by about Yen1 billion, Fast Retailing Chief Financial Officer Takeshi Okazaki said at a news conference. Following surprise easing action by the Bank of Japan in late October, the yen fell by as much as Yen6 against in the greenback in November.

Sales at flagship Uniqlo brand stores increased 47.3% outside of Japan during the first quarter thanks to the strength in the Chinese and South Korean markets. In Japan, sales rose 11.6% on the back of robust demand for autumn and winter clothes early on and as products in a higher price range sold well.

As a result, Uniqlo's international operations now make up 35% of the group's business, while Uniqlo Japan's sales ratio has fallen below 50% for the first time ever.

While a weaker yen increases the value of profits earned overseas, it also raises operating and production costs for Fast Retailing's domestic business.

"Rapid falls in the yen pressure initial costs," Mr. Okazaki said. "We will do our best not to raise prices because customers are highly price-sensitive, but we may need to do so gradually."

Meanwhile, Fast Retailing maintained its projections for the current business year ending in August. It expects revenue to rise 16% to Yen1.6 trillion and net profit to increase 34% to Yen100 billion.

The company is considering to revising its earnings forecasts when movements in the foreign exchange market calm down and results of the autumn and winter season become clearer, Mr. Okazaki said.

Write to Megumi Fujikawa at [e-mail]

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