Asia’s biggest fashion retailer, Fast Retailing Co., reduced its full-year net profit goal on Thursday from 88 billion yen ($865 million) to 78 billion yen ($768 million) after suffering losses at its J Brand Jeans unit in the U.S., according to its fiscal year 2014 third-quarter report.
Fast Retailing, which owns 80 percent of J Brand, recorded a special loss of 10 billion yen ($98 million) for U.S.-based denim label and may post an impairment charge for the year as the loss-making business failed to meet its target in the third quarter. “We weren’t effective enough in competing in the increasingly tough premium denim market,” chief financial officer Takeshi Okazaki told a news conference in Tokyo. However, the company expects the segment to generate gains in both sales and income for the full business year to August 31, 2014.
This is the second year Fast Retailing lowered its annual profit forecast in the current fiscal year. Last year it cut its forecast in April to 88 billion yen ($865 million) from 92 billion yen ($905 million) set in October 2013.
Despite declining profits, owed in part to expansion costs, the Japanese company’s Unilqo brand saw sales grow. Domestic Uniqlo sales rose 5.1% to 569.4 billion yen ($5.6 billion) in the first nine months of the year, however, sales slowed in April after Japan raised its consumption tax. Internationally, sales grew 71 percent to 327.7 billion yen ($3.2 billion), generating 30 percent of the group’s sales.
Uniqlo USA’s prominent New York City stores continued to see double-digit growth in combined sales, however, the segment is still operating at a loss due to the cost of opening new U.S. stores. Fast Retailing has revealed plans to open 200 to 300 outlets overseas annually, including 20 to 30 new stores in the U.S.