Fast Retailing Surges on Record Profit Forecast: Tokyo Mover

Fast Retailing Slumps After March Sales Disappoint
Customers browse inside Fast Retailing Co.'s Uniqlo store in the Ginza district of Tokyo. Photographer: Kimimasa Mayama/Bloomberg

Fast Retailing Co., Asia’s biggest clothing retailer, surged the most in a year in Tokyo trading after raising its forecast for annual profit to a record and saying sales outside Japan will drive growth.

Fast Retailing, the biggest gainer on the Nikkei 225 Stock Average in the past five years, rose as much as 6.98 percent to 18,690 yen in Tokyo as of 9:37 a.m. local time, the most on an intraday basis since April 8, 2011. The stock has risen 34 percent this year, compared with a 12 percent gain for the broader Topix index.

Net income will probably be 81.5 billion yen ($1.01 billion) in the year ending August, the company said yesterday. It was higher than the January forecast of 70 billion yen and the 72.5 billion yen average estimate of 22 analysts compiled by Bloomberg. The record earnings will be led by higher sales of the company’s Uniqlo brand apparel in Japan and overseas, President Tadashi Yanai said yesterday.

“Greater China, ASEAN and India are countries with the best opportunities,” Yanai said at a press conference in Tokyo yesterday. “The middle-class population can potentially explode there.” The overseas Uniqlo business will lead the company’s growth from now on, he said.

The casual clothing maker, controlled by Yanai, Japan’s richest man, expanded outside of Japan to cut its dependence on its home market where the economy is little changed. Overseas Uniqlo sales surged 69 percent to 84.8 billion yen for the six months ended February and domestic sales climbed 6.6 percent to 364.5 billion yen.

“People should watch out for their overseas sales even though they account for a smaller proportion of their sales for now,” said Mikihiko Yamato, deputy head of research for JI Asia in Tokyo “They are expanding very quickly and that would boost profit.”

Overseas Expansion

Fast Retailing plans to open as many as 300 outlets every year mainly in Asia and have more than 2,000 outlets in Greater China and other Asian countries in the next 10 years, the 63-year-old Yanai said. Its overseas sales are expected to exceed the domestic market in the 2015 fiscal year, said the executive, the company’s biggest shareholder with a 22 percent stake.

Fast Retailing, which has been trying to revive its image at home, yesterday raised the sales forecast for the fiscal year by 0.5 percent to 941.5 billion yen. It also lifted its domestic Uniqlo sales forecast by 0.7 percent to 633.5 billion yen after sales of core products in Japan, such as heattech and ultra-light down jackets, improved in the second quarter, the billionaire executive said.

World’s Largest Store

The Yamaguchi, western Japan-based company opened the world’s largest Uniqlo brand casual clothing store in Tokyo’s Ginza district last month to change its image to a global company, using English as an official language and hiring international staff. Yanai said then he aimed to make the outlet the biggest revenue generator in the network with annual sales of 10 billion yen.

Fast Retailing’s second-quarter net income climbed 40 percent to 26.6 billion yen, according to Bloomberg calculations based on first-half figures reported by the company yesterday. That topped the average estimate of 17.7 billion yen by three analysts compiled by Bloomberg.

The retailer raised the full-year dividend by 30 yen to 260 yen for the year ending Aug. 31, from the forecast it made in January, it said. The company paid 180 yen in the last fiscal year.

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