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Soft Sales at Uniqlo Hurt Fast Retailing Profit

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Uniqlo has its sights set on getting half the world’s population into its Heattech gear, but there’s one big obstacle standing in its way: climate change.

A warm winter, weak sales and heavy discounting delivered a perfect storm for Uniqlo’s parent company, Fast Retailing Group.

According to a statement released Thursday, revenue rose 6.5% year-on-year to 1.01 trillion Japanese yen ($9.4 billion) in the six months ended Feb. 29, but profit dropped by more than a third (33.8%) to 99.3 billion Japanese yen ($920 million). Poor sales at Uniqlo stores in Japan, Greater China, South Korea and the U.S. had a lot to do with that.

Uniqlo Japan fell short in the high-volume months of November and December to record a 1.9% decline in same-store sales, while stronger discounting in January and February contributed to a 3.5% fall in gross margin and 28.3% decrease in operating profit.

“With hindsight, we didn’t conduct enough marketing to effectively convey the fresh appeal and exciting new elements in our products to customers,” the company said. “In addition, while winter clothing constituted a large portion of our product lineup, we didn’t have an adequate strategy in place to deal with warm winter weather.”

A similar explanation was offered for poor performance in Greater China, South Korea and the U.S. that led to Uniqlo’s international profits falling 31.4%, despite revenue rising 12.7% to 389.2 billion Japanese yen ($3.56 billion).

“All these operations were adversely affected by warm winter weather but sales were hit especially hard in Hong Kong, Taiwan and South Korea due to sluggish economic conditions,” the company added.

With that being said, Uniqlo Southeast Asia and Oceania (Singapore, Malaysia, Thailand, the Philippines, Indonesia and Australia) and Uniqlo Europe (U.K., France, Russia, Germany and Belgium) reported gains in both revenue and profit that Fast Retailing noted were broadly in line with its forecasts.

Despite the Global Brands division posting gains in both revenue and profit, thanks to double-digit growth in same-store sales at its lower-priced GU chain, Fast Retailing’s outlook for the full year is muted.

In fiscal 2016, the company now expects revenue to increase 7 percent to 1.8 trillion Japanese yen ($16.7 billion), but projects that operating profit will decline by 27 percent to 120 billion Japanese yen ($1.1 billion).

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