By Hiroyuki Kachi
Fast Retailing Co. said Thursday its net profit for the fiscal third quarter edged lower, but it expects earnings growth in Japan at its Uniqlo stores, underscoring the company's resilience after the March 11 disasters.
The operator of the popular clothing chain, typically one of the few vibrant performers in the stagnant Japanese retail sector, said strong demand for summer clothing due to a recent heat wave is likely to give it momentum for the year.
"Uniqlo's business in Japan will end up with gains in both revenue and profits in the latter half," Nobuo Domae, the company's group executive vice president, said at a news conference. "Our same-store sales have entered a growth track."
The company reported net profit of ¥11.7 billion ($148 million) for the three months to May, compared with ¥11.8 billion in the same period a year ago. Revenue rose 3.5% to ¥194.6 billion from ¥188.0 billion a year earlier, partly because of strong overseas sales, while operating profit declined 4.6% to ¥22.5 billion from ¥23.6 billion.
The earthquake, tsunami and subsequent nuclear crisis caused temporary closures at many of the company's stores in the affected regions, leading to a steep 10.5% fall in Uniqlo domestic same-store sales in March. The company also said low temperatures in the quarter forced it to discount its spring clothing, which ate into its margins.
But despite the challenging business environment, the company's quarterly results were still much stronger compared to the first half through February, when it reported a 25% fall in net profit due to unseasonably warm weather.
The improved performance suggests the company's decision to concentrate on more popular product lines is starting to bear fruit.
In addition to already popular quick dry inner products, the company has been supplementing its lineup of polo shirts and chino slacks in anticipation of strong demand associated with the government-led "Super Cool Biz" campaign. Office workers are encouraged to wear casual clothing to reduce electricity use amid expectations of power shortages this summer.
Fast Retailing's net profit for the nine-month period ended May fell 21% from a year earlier to ¥53.40 billion. But the company kept intact its outlook for the full fiscal year ending August, announced three months ago. The company forecast a 2.7% decline in net profit to ¥60 billion, an 8.2% drop in operating profit to ¥121.5 billion and a 2.6% rise in revenue to ¥836 billion.
In another encouraging sign for the rest of the business year, the company said earlier this month that its store sales in June grew 3.9% from a year earlier, as hot weather buoyed demand for summer clothing.
Asked about the yen's recent strength, Mr. Domae said the company expects no immediate impact on its earnings even with the dollar at near record-lows around ¥79, as the company had already signed forward currency contracts for goods transactions.
He also said the company isn't considering speeding up its M&A activities solely due to the yen's strength.
Fast Retailing's earnings are based on Japanese accounting standards.