Fast Retailing Plunges as Profit Forecast Cut to 5-Year Low

  • Stronger yen, unexpectedly warm winter weather hurt earnings
  • Shares take biggest plunge since Japan's March 2011 earthquake

Fast Retailing Co. fell the most in five years in Tokyo trading, wiping about $3.8 billion off the company’s market value, after cutting its profit forecast by a third on a stronger yen and weak demand for the casual clothing maker’s down coats and thermal underwear.

Shares of Asia’s largest clothing retailer slumped 13 percent, the most since Japan’s March 2011 earthquake, to close at 26,610 yen, the lowest since March 2013. Operating profit will probably be 120 billion yen ($1.1 billion) for the year ending August 2016,  down from the 180 billion yen forecast made in January, the company said Thursday after the Tokyo market closed. That lagged behind 168.6 billion yen average analyst estimate compiled by Bloomberg.

Billionaire Chairman Tadashi Yanai has bet on expanding the company’s Uniqlo casual clothing brand outside Japan, opening flagship stores in shopping districts from London to Paris, Shanghai, New York and Seoul. The move, prompted by stagnating economic growth in Japan, has made the company more vulnerable to a strengthening Japanese currency. The yen’s gain led to a 22.8 billion yen foreign-exchange loss in the first half, the retailer reported Thursday.

The Japanese currency has jumped about 10 percent against the dollar this year, the most among the 16 major currencies tracked by Bloomberg. There could be more exchange losses if the yen continues to strengthen, Chief Financial Officer Takeshi Okazaki said Thursday.

Fast Retailing also took a 21 billion yen impairment loss related to its J Brand premium denim label in the U.S. and its domestic and overseas stores, it said Thursday.

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