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Full Year Profit Falls Nearly 23% at Fast Retailing

Revenues may have been up a touch for the full fiscal 2016 at Fast Retailing, but profits took a hit thank to currency effects and J Brand.

The Japanese parent company of Uniqlo and denim line J Brand said Thursday that revenue for the year ended Aug. 31 was up 6.2% to 1.78 trillion yen ($17 billion), but operating profit was down nearly 23 percent to 127.2 billion yen ($1.22 billion).

Profits attributable to Fast Retailing owners, however, were more than halved, falling 56.3% to 48 billion yen ($459 million), just slightly higher than the 45 billion yen forecast the company revised down back in July.

Fast Retailing is blaming the sizeable profit decline on an 11 billion yen ($105 million) foreign exchange loss, less than stellar growth across, more or less, all of its brands and losses from store closures. On top of the 11 billion yen forex loss, the Japanese currency’s appreciation against the dollar and the euro brought about an additional 37 billion yen loss ($354 million) because it reduced the value of the company’s long-term foreign currency holdings in yen terms.

Turning a positive slant, Fast Retailing said in a statement, “While full-year operating profit declined, Fast Retailing recorded a 94.3% year-on-year rebound in profit in the second half from March to August, thanks to a nascent recovery in sales at UNIQLO Japan and UNIQLO International and concerted cost-cutting efforts in the second half.” The company didn’t detail what exactly those cost-cutting efforts were.

At Uniqlo Japan, same-store sales were up 4.9% in the second half, compared to a near 2 percent dip in the first. Revenue was up 2.5% year on year and operating profit fell 12.6% to 102 billion yen ($976 million).

Gross profit margin improved, according to Fast Retailing, because customers appreciate its “new reasonable prices and instantly recognizable set-price strategy.”

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Things were fairly similar for Uniqlo International, where revenue was up 8.6%, and profits were down nearly 14 percent to 37.4 billion yen ($358 million). The profit plunge would have been bigger if it weren’t for a rebound in the second half that saw profits 15 times the previous year’s levels, which Fast Retailing owed to sharp gains in Greater China.

In the company’s Global Brands segment (which includes J Brand and low-price GU), revenue was up 11 percent but profits took a 34 percent dive to 9.5 billion yen ($91 million), mostly owed to a nearly 14 billion yen loss at J Brand as both profits and revenue were up for GU.

Looking ahead to 2017, Fast Retailing said it expects revenues to inch up 3.6% and operating profit to jump 37.5% to 175 billion yen ($1.67 million).

“All three Fast Retailing business segments [Uniqlo Japan, Uniqlo International, Global Brands] are expected to generate increases in both revenue and profit in fiscal 2017,” the company noted.