Uniqlo Parent Cuts Financial Outlook
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Uniqlo parent Fast Retailing has cut its annual operating forecast amid heavy discounting to offload winter clothes.
The apparel company has struggled with a shortage of popular winter items in the past, and overcompensated last winter by ordering too much inventory.
The unseasonably warm weather hit sales of winter clothes which led to the decline of Fast Retailing’s first quarter profit.
The company is undergoing the biggest revamp of its logistics and supply chain network to resolve the challenge it faced over winter.
The Japanese retailer said it now expects an operating profit of ¥260 billion (A$3.2 billion) for the financial year through August, compared to its previous forecast of ¥270 billion in January. The revised outlook would still be a record high and represent a 10 per cent year-on-year rise.
For the quarter ending February, Fast Retailing posted a double-digit increase in sales and profit in China, which has helped the brand turn in a better-than-expected rise in operating profit to ¥68 billion.
The company reported declines in both revenue and profit in the first half of fiscal 2019, with revenue totaling ¥491.3 billion yen, down 5 per cent from the previous corresponding period, and operating profit totaling ¥67.7 billion yen, down 23.7 per cent from the previous year.
First-half same-store sales, including online sales, declined 9 per cent.
Online sales, which now account for 9.9 per cent of Uniqlo sales in Japan and 20 per cent in China, rose 30.3 per cent in the first half.
Questions & Answers
Q.What led to Fast Retailing cutting its annual operating forecast?
What led to Fast Retailing cutting its annual operating forecast?
Heavy discounting was needed to clear excess winter clothing stock. The company overcompensated for previous shortages by ordering too much inventory, which then struggled to sell due to unseasonably warm weather.
Q.How much lower is the revised operating profit forecast compared to the earlier prediction?
How much lower is the revised operating profit forecast compared to the earlier prediction?
The revised forecast is ¥260 billion, down ¥10 billion from the previous forecast of ¥270 billion. This revision was made for the financial year through August.
Q.Despite the revised outlook, what positive financial achievement is Fast Retailing still expecting?
Despite the revised outlook, what positive financial achievement is Fast Retailing still expecting?
The revised outlook of ¥260 billion would still represent a record high operating profit for the company. It is also expected to show a 10 per cent year-on-year rise.
Q.What challenges did Fast Retailing face in the first half of fiscal 2019?
What challenges did Fast Retailing face in the first half of fiscal 2019?
The company reported declines in both revenue and profit, with revenue down 5 per cent and operating profit down 23.7 per cent. First-half same-store sales also fell by 9 per cent.
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