Fast Retailing books record profit, says South Korea boycott curbs outlook

Fast Retailing Co Ltd on Thursday booked record profit for a third consecutive year on strong sales at its Uniqlo stores in China, and forecast further growth in the current year albeit tempered by a boycott of Japanese goods in South Korea.

Operating profit climbed 9% to 257.6 billion yen ($2.40 billion) in the year ended Aug. 31, mostly in line with market expectations and helped by strong performance of its lower-priced brand GU.

While it projected growth in the current business year, the 6.7% rise to 275.0 billion yen was less than half the 15% growth forecast by analysts polled by Refinitiv. The company said it expected a sharp decline in South Korean sales amid a boycott brought about by a diplomatic dispute.

The Nikkei reported earlier that Uniqlo sales in South Korea, which account for around 8% of the chain’s total, declined 40% in July compared with the same month a year earlier, and fell even more in August.

Fast Retailing, without disclosing figures, called the situation “serious”, though Chief Executive Tadashi Yanai said he was not planning any major change to its business there.
“I don’t think it will last forever,” Yanai said at an earnings briefing. “I would like to think optimistically.”

Elsewhere, the company opened its first store in India last week and is expanding in markets such as Malaysia and Indonesia. However, its biggest growth market in recent years has been China, where it opened its first Uniqlo store in 2002 and now has 711 locations.

Uniqlo’s profit in Greater China rose 21% to 89 billion yen, Fast Retailing said. The company has said it expects revenue in the market to grow to 1 trillion yen by fiscal 2022 from 502.5 billion yen last year.

Another strong point in the just-ended year was Uniqlo’s sister brand GU, where operating profit jumped 139% to 28 billion yen. The brand was previously dismissed by some analysts as too similar to Uniqlo, but has proven popular for its more affordable and trendy items such as oversized sweatshirts.