Lower sales at Fast Retailing Co. Ltd.‘s Uniqlo Japan business hurt the company’s third-quarter results, but it still reported a profit thanks to healthy growth at its Uniqlo business overseas.
In a Nutshell: Uniqlo’s overseas business was the stronger performer for the quarter, while the domestic component saw sales slip, but that was due in part to Fast Retailing’s decision to shift the anniversary sale to June from May. In its other businesses, the smaller GU segment also saw revenue gains, but the Global Brands division saw a decline. The latter includes the Theory operation, which posted performance results that were flat for the quarter, and the U.S.-based J Brand premium denim business, which Fast Retailing said generated a similar year-ago loss.
Net Sales: For the three months ended May 31, the company said revenues rose 7.3 percent to 555.1 billion yen, or $5.13 billion. Operating profits were up 9.3 percent to 74.7 billion yen, or $688.8 million. All conversions to the U.S. dollar are at current exchange.
By group segment, Uniqlo Japan revenues fell 0.5 percent to 209.7 billion yen, or $1.94 billion. Uniqlo International saw a revenue gain of 15.3 percent to 240.5 billion yen, or $2.22 billion. That gain was helped by strong performance in the quarter in Greater China and in Southeast Asia and Oceania. However, Uniqlo South Korea saw a decline in same-store sales.
Uniqlo USA reduced its losses in the quarter, but overall performance was weaker than expected as “unseasonal weather” hurt sales of spring and summer merchandise. Uniqlo Europe posted a profit decline, but saw its business in Russia grow both revenues and profits.
Fast Retailing said profit at its GU business was higher than expected, expanding 12.1 percent to 68.1 billion yen, or $628.9 million. The company said strong sales was due to product mixes that focused on mass fashion trends.
Revenues at Global Brands fell 1.1 percent to 35.9 billion yen, or $331.5 million. The Theory operation posted flat year-on-year performance in the third quarter. PLST saw profits rise slightly, but losses expanded at the Comptoir des Cotonniers and Princesse tam.tam businesses in France. The U.S.-based J Brand premium denim label didn’t see an improvement as it generated a loss similar to the previous year.
Earnings: For the quarter, net profits rose 1 percent to 44.6 billion yen, or $411.9 million, on a 7.3 percent increase in revenues to 555.1 billion yen, or $5.13 billion. For the nine months, net profits rose 7 percent to 158.6 billion yen, or $1.46 billion, on a 7 percent rise in revenues to 1.823 trillion yen, or $16.83 billion.
For the third quarter, Fast Retailing posted a 9 percent gain in operating profit to 75 billion yen, or $692.6 million. That was lower than the consensus estimate of 79 billion yen, or $729.6 million.
For fiscal year 2019, the company left forecasts unchanged from its guidance in April. Consolidated revenues are expected to be up 8 percent to 2.300 trillion yen, or $21.24 billion, with profits up 6.6 percent to 165.0 billion yen, or $1.52 billion.
Strong performance at Uniqlo International is expected to generate continued gains in revenues and profits for the year, mostly due to growth in Greater China and in Southeast Asia and Oceania. GU sales are expected to continue to rise, but the Global Brands business is expected to achieve flat full-year sales.