Photographer: Shiho Fukada/Bloomberg

Fast Retailing Profit Gains as Cost Reductions Raise Margins

Updated on
  • Operating income increases about 80 percent in second quarter
  • Sales at retailer drops 0.4 percent as Japan demand slumps

Uniqlo operator Fast Retailing Co.’s second-quarter profit surged as Asia’s largest clothing chain reined in costs and boosted margins at its overseas operations.

Operating income gained about 80 percent to 42.1 billion yen ($386 million) in the three months through February, based on first-half earnings the Japan-based clothing retailer released Thursday. That compares with the 38.5 billion-yen average of estimates by analysts. Revenue dipped slightly to 489 billion yen from a year earlier.

The company’s flagship Uniqlo chain boosted profitability as the company continued to expand across Asia. Cost cuts by Chairman Tadashi Yanai are allowing the retailer to push margins up despite sluggish domestic demand. While lowering spending for its retail network, Yanai is also investing in better distribution and faster delivery of online orders to fend off rivals.

First-half operating profit rose 66 percent for overseas stores, while sales increased 0.9 percent. Same-store sales in Indonesia, Thailand, the Philippines and Malaysia posted double-digit growth in the first half, the company said. The loss in the U.S. also narrowed in the period.

Overseas Stores

Fast Retailing had 1,029 Uniqlo stores overseas at the end of February, up 139 from a year earlier.

The shares fell 1 percent to 34,860 yen at the close in Tokyo trading before the results were released. They are down 17 percent this year.

In Japan, sales slipped in December and January as warmer-than-expected weather reduced demand for winter clothes, according to the company. Same-store monthly sales, including online purchases, dropped 5 percent from a year earlier at domestic stores in December and 2.5 percent in January. Domestic sales rose 5.2 percent in February.

Stagnant demand in Japan and underperformance at some overseas stores led Yanai to scale back his annual revenue goal last year to 3 trillion yen by fiscal 2020 from an earlier target of 5 trillion yen.

(Updates with sales starting in second paragraph.)
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