Uniqlo owner Fast Retailing sees China profit dip

Investing.com -- Japan-based Fast Retailing, the operator of the Uniqlo global clothing brand, reported first-quarter results on Thursday, posting a sharp decline in profit in China, which overshadowed strong sales in Japan.

"Greater China reported a decline in revenue and a sharp contraction in profits," the company said in a statement. 

"The Mainland China market reported a decline in revenue and considerable drop in profits after failing to compile sufficient product mixes suited to warm winter weather or develop a sufficiently detailed response to the minute needs of individual regions," the company added. 

The company reported a 7.4% rise in operating profit to 157.5 billion yen for the three months ending in November, compared to the same period last year.

Fast Retailing reaffirmed its full-year operating profit forecast of 530 billion yen, which is on track to achieve its fourth consecutive year of record earnings.

With more than 900 Uniqlo stores in China, Fast Retailing is known for its affordable, durable fleeces and cotton t-shirts.

Sales in Japan have been boosted by a jump in duty-free shopping driven by an influx of international tourists, aided by the weak yen.

However, growth in China has slowed, leading the company to reduce the pace of new store openings and adopt a "scrap-and-build" strategy to revamp underperforming locations with redesigned stores.

While last year’s record results were driven by improved profit margins and growing international brand recognition, the company remains susceptible to fluctuations in weather and consumer preferences.

In Japan, sales received a boost from cold weather in December, which increased demand for thermals, but in China, unusually warm temperatures led to flat sales in October and November.

The company also reported strong performance in North America and Europe, where it is aggressively expanding to achieve its goal of becoming the world’s leading clothing brand. In October, it opened five Uniqlo stores in Texas alone.

Source: Investing.com