Oct. 8 (Bloomberg) -- Fast Retailing Co., Japan’s biggest clothing retailer, expects a third year of record earnings as its +J brand, overseen by German designer Jil Sander, and other new apparel lines boost sales at its Uniqlo chain.

Net income may rise 25 percent to 62 billion yen ($702 million) in the next fiscal year from the 49.8 billion yen for the 12 months ended August, the company said today. That compares with the 64.6 billion yen average of 18 analyst estimates compiled by Bloomberg.

Cashmere short-sleeve sweaters on sale at $60 this month along with $170 winter overcoats and $23 sneakers are driving sales even as job losses and wage cuts chill Japan’s household spending. Chief Executive Officer Tadashi Yanai, who owns 27 percent of the company, is seeking acquisitions in the U.S. and Europe. Uniqlo opened a flagship store in Paris this month and plans to add stores in Shanghai and Moscow next year.

“Without acquisitions, it’s impossible for us to grow big in the U.S. and Europe,” Yanai said at a press conference in Tokyo today. The company aims to buy a company to use it as a platform to expand Uniqlo or buy a brand that has the potential to be marketed worldwide, he said.

Asia, Yanai added, remains “the biggest opportunity for Uniqlo,” which competes with Hennes & Mauritz AB and Inditex SA’s Zara.

Sales, Operating Profit

The Yamaguchi, western Japan-based retailer forecast sales to grow 17 percent to 798 billion yen this year, with operating profit to increase 11 percent to 120 billion yen.

Fast Retailing fell 2 percent to close at 12,940 yen in Tokyo trading before the earnings results were announced. The stock is down 0.3 percent this year, lagging behind the 11 percent gain of the Nikkei 225 Stock Average.

Uniqlo reported year-on-year domestic same-store sales growth for every month except two over the past year, with revenue surging 32 percent last month. Net income rose 14 percent as sales surged 17 percent to 685 billion yen, Fast Retailing said.

By contrast, Japan’s total retail sales fell for a 12th month in August, extending the longest losing streak since 2003, according to a government report last week.

Fast Retailing dropped 2.2 percent to close at 12,940 yen on the Tokyo Stock Exchange before the earnings were announced.

The company plans to speed up its overseas expansion, especially in Asia. The company aims to increase Uniqlo stores to 4,000 worldwide by 2020. It plans to add 90 outlets this fiscal year for a total of 952, it said today. The number of outlets in Asia excluding Japan may rise to 132 this fiscal year, from 76 in August.

Fast Retailing’s operating profit from overseas sales of the Uniqlo brand may almost triple to 4.5 billion yen, as revenue may surge 72 percent to 65 billion yen.

Fast Retailing plans to have 100 stores in China including Hong Kong in 2011 and 100 outlets in South Korea in 2012, Yanai said. The company aims to build a structure to be able to add 100 outlets in China annually, he said.

The retailer also owns brands including Princesse tam.tam, Theory and Comptoir Des Cotonniers, Zazie and Enracine.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Junko Hayashi in Tokyo at juhayashi@bloomberg.net

Last Updated: October 8, 2009 07:31 EDT