Fast Retailing Shares Fall After Uniqlo Operator Forecasts Profit Decline

Fast Retailing Co., Asia’s biggest clothing chain operator, fell the most in six months in Tokyo trading after forecasting a 17 percent drop in profit on slowing sales of its Uniqlo brand.

Fast Retailing declined 9.8 percent, the biggest drop since April 5, to 11,180 yen, at the 3 p.m. close on the Tokyo Stock Exchange. The stock, which has fallen 36 percent this year, is the second-biggest loser among companies in the Nikkei 225 Stock Average.

The retailer faces greater competition from domestic rivals such as Aeon Co., which has introduced products similar to Uniqlo’s Heattech thermal underwear range, and overseas chains like Inditex SA’s Zara and Hennes & Mauritz AB’s H&M brands. Fast Retailing is expanding in China and other markets to reduce its reliance on Japan, where it generated 84 percent of sales last year.

“Fast Retailing’s forecast was disappointing,” Mitsuo Shimizu, a Tokyo-based analyst at Cosmo Securities Co., said by phone. “Overseas operations aren’t big enough to make up for slowing sales in Japan yet.”

Nomura Securities Co. cut its 12-month price target to 13,000 yen from 14,500 yen. Goldman Sachs Group Inc. reduced its target to 11,000 yen from 11,500 yen.

Net income for the 12 months ending in August will probably fall to 51 billion yen ($620 million) from 61.7 billion yen last year, the company said after the close of trading on Oct. 8. Sales may rise 5 percent to 856 billion yen, the slowest pace of growth in eight years. Japanese markets were closed yesterday for a holiday.

Basic Lines

Uniqlo’s same-store sales in Japan may fall 4.7 percent this fiscal year with a 9.8 percent drop in the first half, the company said.

“We will strengthen our basic lines,” Chief Executive Officer Tadashi Yanai said on Oct. 8. “We were driven by ‘surface fashion’ too much,” he said, referring to products that have “a meaningless design such as a shirt with a frill attached in a meaningless part.”

Fast Retailing forecasts sales of Heattech apparel will rise 40 percent to 70 million units in the current fiscal year.

The retailer, which began expanding abroad in 2001 by entering the U.K. market, opened a Uniqlo outlet in New York’s Soho district in 2006 and across the road from the Galeries Lafayette department store in Paris last year. It also plans to add a store on New York’s Fifth Avenue in the second half of 2011, it said.

Yanai, who is also the company’s biggest shareholder, reiterated that he aims to increase Uniqlo stores in China to 1,000 within 10 years, from 54 outlets in August.

To contact the reporter on this story:

Naoko Fujimura in Tokyo at nfujimura@bloomberg.net.

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

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