Fast Retailing Co. fell the most in more than a year after forecasting annual profit below analyst estimates as a slowdown in global economic growth hurt sales of the retailer’s Uniqlo branded apparel.
The stock dropped as much as 11 percent, the most since March 15, 2011 on an intra-day basis, before trading 9.6 percent lower at 16,100 yen at 10:19 a.m. in Tokyo. The Nikkei 225 stock average rose 0.3 percent.
The apparel company said businesses in China, South Korea, the U.K. and the U.S. missed targets as consumers pulled back. Bank of America Merrill Lynch cuts its earnings estimates for the retailer and UBS AG downgraded the stock to ‘sell’ from ‘neutral.’
“Economic weakness could mean slower growth for now,” UBS said in a note to clients. “In the U.S. and Europe brand awareness is an issue, and its target of halving its losses could be hard.”
The apparel company yesterday forecast net income of 84.5 billion yen ($1.08 billion) for the year ending August 2013, below the 87.5 billion yen average estimate of 21 analysts compiled by Bloomberg.
Overseas sales at its Uniqlo outlets rose 63 percent to 153.1 billion yen, missing the retailer’s own target of 157 billion yen. Domestic sales rose to 620 billion yen, lower than its 621.5 billion yen estimate.
The casual clothing maker, controlled by President Tadashi Yanai, has expanded outside Japan to reduce its reliance on its home market. Fast Retailing said it’s “cautious” about its China and Hong Kong sales because of slowing global economic growth. Fourth-quarter earnings in China and South Korea didn’t meet the company’s target because of the economic slowdown, Chief Financial Officer Takeshi Okazaki said yesterday.
Net income rose 32 percent to 71.7 billion yen for the last fiscal year, below the 78.7 billion yen average estimate of 20 analysts compiled by Bloomberg.
Fast Retailing closed as many as 60 outlets in China temporarily last month amid violent protests over a territorial dispute. The diplomatic spat flared up after Japan’s government said it would buy the islands, known as the Diaoyu in China and the Senkaku in Japanese, from their private Japanese owner.
China claims that it’s owned the islands for centuries, while Japan argues it took administrative control of them in 1895, lost its claim after World War II and had the islands returned to it in 1972.
The Yamaguchi, western Japan-based company forecast sales of 1.06 trillion yen for the current fiscal year, higher than the 1.05 trillion yen average estimate of 21 analysts compiled by Bloomberg.
By 2020, Fast Retailing plans to have 1,000 outlets in Japan, and the same amount in China and the same in North America and Europe combined, Yanai said yesterday. Another 1,000 will be opened in other parts of Asia and the company plans to achieve 5 trillion yen in sales by that year, he said. Its overseas sales are expected to exceed the domestic market in the 2015 fiscal year, he said in April. Yanai is Japan’s richest man with an estimated net worth of $11.6 billion, according to the Bloomberg Billionaires Index.