Oct. 7 (Bloomberg) -- While celebrities watched models strut down catwalks during fashion week in Paris, dozens of people queued in the rain to buy 40-euro cashmere sweaters at the newly opened Uniqlo store in the city’s Opera district.

Two days earlier, it was “impossible to get inside” the store, which is across the road from the Galeries Lafayette department store, Guillaume Terne, 24, said. “There has been so much talk about the brand that I simply couldn’t miss it.”

While the global recession has hurt luxury brands, Uniqlo’s owner, Yamaguchi, Japan-based Fast Retailing Co.’s profit for the fiscal year ending August may jump 23 percent to a record on increased demand for the chain’s $45 jeans and $17 camisoles with fitted bra cups. The debut of +J, a brand overseen by German designer Jil Sander, may help sustain sales that jumped 32 percent last month.

“No one else can win like Fast Retailing in the retail industry,” said Ichiro Takamatsu, chief executive officer at Japanese hedge-fund advisory Alphex Investments Co. in Tokyo. “The company stimulates demand with its ability to introduce new items.”

Chief Executive Officer Tadashi Yanai has increased his focus on product development and design, collaborating with Walt Disney Co. to make T-shirts. Products including HeatTech thermal wear and Bra Tops camisoles have helped boost sales at stores open at least a year in Japan by 11 percent last fiscal year.

Tokyo’s Ginza

In Tokyo, hundreds of people waited for hours for the Oct. 2 opening of the expanded Uniqlo store in the Ginza district, where brands including Gucci, Chanel, H&M and Zara compete for shoppers.

Fast Retailing has reported year-on-year sales growth for every month except two since September 2008, when Lehman Brothers Holdings Inc. filed for bankruptcy, plunging markets worldwide into crisis.

Domestic sales at Uniqlo stores open at least a year surged 32 percent last month, while those at Isetan Mitsukoshi Holdings Ltd. and other department stores slipped at least 5 percent.

That growth “is astounding in such economic conditions,” Shigeo Kikuchi, an equity manager at Takagi Securities Co., said in a phone interview.

Fast Retailing rose 1.2 percent to close at 13,230 yen in Tokyo. The stock has risen 1.9 percent this year, lagging behind the 11 percent gain of the Nikkei 225 Stock Average. The retailer was the second-biggest gainer on the benchmark last year, when it doubled in market value.

Record Profit

Net income at Fast Retailing probably rose to a record 53.6 billion yen in the 12 months ended August from 43.5 billion yen a year earlier, according to the average estimate of 18 analysts compiled by Bloomberg. Profit may further rise to 64.6 billion yen in fiscal year ending August 2010, according to the analysts’ estimates.

The company, which competes with Hennes & Mauritz AB and Inditex SA’s Zara brand, is scheduled to report its full-year earnings tomorrow at about 3 p.m. in Tokyo.

In Paris on Oct. 5, four days after the Uniqlo outlet opened, Fréderique Marchand, 29 and Lucie Bloch, 27 waited in the rain for the discounts offered during the store’s first month of operation. “You can get the basics in a hundred different colors, and the prices aren’t bad,” Marchand said.

“The quality for the price is very good, even excellent,” said Willy Riche, 31, who first encountered the brand in China. “But the check-out line is huge, so I might just leave the stuff here and come back.”

Sales may increase 16 percent to 679.2 billion yen this fiscal year, the analysts forecast. Operating profit, or sales minus the cost of goods sold and selling, general and administrative expenses, may reach 109 billion yen, they said.

Luxury Brands

Gianni Versace SpA yesterday said it will close its Japanese stores and review its entire business strategy. LVMH Moet Hennessy Louis Vuitton SA said in December that it scrapped plans to open a 12-story store in Ginza, one of Tokyo’s busiest shopping districts.

PPR SA, the French owner of Gucci, reported first-half profit dropped 76 percent to 189 million euros and Hermes International SCA, maker of Birkin handbags, posted a 7 percent drop in net income in the same period.

“Fast Retailing is one of the stars in the retail industry,” said Koichi Ogawa, who helps oversee $28 billion at Daiwa SB Investments Ltd. in Tokyo. “It’s faring well with its low-price strategy when the whole industry is slumping.”

Fast Retailing Stores

The clothier is expanding even as job losses and wage cuts chill household spending in Japan, where retail sales fell 1.8 percent in August from a year earlier, the 12th straight monthly decline. The company also plans to open more stores in China and other overseas markets.

Fast Retailing had 1,958 stores last year, of which 813 were Uniqlo outlets. There were 54 Uniqlo stores outside Japan last year.

The Uniqlo store in Ginza was expanded 50 percent by taking over three floors in an adjoining building that were abandoned by Brooks Brothers, which relocated to the Marunouchi business district.

Giuliano Bettolini, an Italian teacher who has lived in Japan for 20 years, bought a winter overcoat for 14,900 yen from the Ginza outlet.

“I have seen lots of things going up and down,” said Bettolini. “Uniqlo has got the right formula for the present situation.”

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net.

Last Updated: October 7, 2009 06:53 EDT