Latest Fast Retailing results look bleak but Uniqlo rebound is good news

By

Sandra Halliday

Published
Jul 9, 2020

Fast Retailing had been expected to report a mix of good news and bad on Thursday and the predictions turned out to be broadly accurate as its Uniqlo same-store June sales looked healthy. But its nine-month results reflected the negative impact of the pandemic and Q3 was worse than expected.

First the good news. June comparable and total sales at its Uniqlo stores in Japan and its domestic webstore surged 26.2%.

As always with the chain, the company had the weather to thank as it said it saw “higher demand for Summer ranges as the temperature rose above the previous year's level from the beginning of the month”. 

But a strong result generated by its Uniqlo anniversary sale also played its part, as did the opening of two key stores. Uniqlo Harajuku opened on June 5 and its largest global flagship store in Japan, Uniqlo Tokyo, debuted on June 19. Both these new stores were designed specifically to enable customers to experience its LifeWear clothing concept and products.

It’s also assumed that pent-up demand and sales of the firm’s Airism face masks helped the June sales.

It was all good news given that at the end of June, a total of six stores still remained temporarily closed and 143 stores were operating shorter working hours due to Covid-19.

Now, what about those nine-month results? For the period to May 31, revenue fell 15.2% to ¥1.545 trillion (€12.7bn/£11.4bn/$14.4bn) after having risen 7% a year earlier. Operating profit was down 46.6% to ¥132.38 billion and net profit fell 47.4% to ¥91.4 billion.

For Q3, analysts had expected a 90% operating profits slump but that they would still be positive at around ¥6.26 billion. 

In the event, it was worse than that. The company doesn’t break out quarterly figures separately, but it’s estimated that it saw a net loss for Q3 of a little under ¥10 billion.

It was clear that Q3 had been hurt by the pandemic with Japanese Uniqlo sales during the quarter falling 36% and operating profit diving 74%, and losses in all of its key international regions too.

The company has scaled back its revenue and net-profit forecasts for the year to August 31. It expects revenue to drop 13% to ¥1.99 trillion, worse than an earlier forecast for an 8.8% fall. And net profit should drop 48.8% to ¥85 billion, worse than the 39% decrease previously expected.

Yet the picture painted is still one of a company that (in normal times) can prosper both at home, and abroad and we should expect it to get back on track once those normal times return.