Facebook Pinterest Search Icon SourcingJournal_horiz Tumbler Twitter Shape photo-camera graph-trend Shape latest-news icon / user

Fast Retailing Forecasts Lower Profits and Revenue in Fiscal 2016

Missed Sourcing Journal’s Virtual Sourcing Summit? It's not too late to view all keynotes and panels from the two days. Watch on demand now.

Fast Retailing Uniqlo

Uniqlo’s American invasion isn’t going so great.

Despite the Japanese retailer’s army of U.S. stores now numbering 43, with six more on the way, sales continue to fall short of expectations and have helped contribute to a year-on-year increase in operating losses—the one dull spot in the brand’s otherwise booming global business.

Parent company Fast Retailing, which also owns Theory and Comptoir des Cotonniers, on Thursday reported that Uniqlo’s international division recorded a 45.9 percent increase in revenue to 603.6 billion yen (or $5.03 billion) in fiscal 2015, while operating profit rose 31.6 percent to 43.3 billion yen ($361.1 million).

Mainland China, Hong Kong, Taiwan and South Korea were the key drivers of this growth.

Same-store sales on the retailer’s home turf, meanwhile, climbed 6.2 percent, resulting in a 9 percent upswing in revenue to 780.1 billion yen ($6.5 billion) and an increase of 10.3 percent in operating profit to 117.2 billion ($977.4 million).

Fast Retailing revealed in a statement that core winter styles sold “extremely well” over the course of the year, followed by a “favorable” launch of new spring ranges. But the business stuttered slightly in the summer, owing to “an unseasonal cold, rainy season.”

While the retail holding company’s consolidated revenue grew 21.6 percent in the 12 months from September 2014 to August 2015 to 1.6817 trillion yen ($14.28 billion), and operating profit increased 26.1 percent to 164.4 billion yen ($1.04 billion), it also recorded a 16.1 billion yen impairment loss ($134.3 million) relating to Los Angeles-based denim label J Brand, its systems and some stores. An additional 1.8 billion yen ($15.01 million) loss was logged on the “retirement of property, plant and equipment relating to the refurbishment of global flagship stores in London and Shanghai.”

GU registered record sales

Fast Retailing’s global brands segment (meaning every brand that’s not Uniqlo) had a record year, with operating profit totaling 14.4 billion yen ($120.1 million), compared to an operating loss of 4.1 billion yen ($34.2 million) in fiscal 2014.

This jump was fueled mainly by “extremely strong results” from the lower-priced line, GU, which generated revenue of 141.5 billion yen ($1.2 billion), an increase of 31.6 percent, and operating profit of 16.4 billion yen ($136.8 million), up a whopping 174.9 percent.

It wasn’t all good news, however.

The company’s Theory brand reported a drop in profits due to “the lackluster U.S. market for luxury fashion,” while Comptoir des Cotonniers and Princesse Tam Tam stumbled, too.

J Brand also recorded a 5.1 billion yen impairment loss ($42.5 million) as a result of persistently sluggish sales. A statement cited that the brand was “hit hard by the downturn in the U.S. premium denim market.”

To that end, Fast Retailing has forecast lower profit for fiscal 2016. It expects its net income to rise just 4.5 percent to 115 billion yen ($960 million)—that’s less than the 141.6 billion yen average of 14 analyst estimates compiled by Bloomberg.

Consolidated revenue growth, meanwhile, will likely slow to 13 percent to 1.9 trillion yen ($15.82 billion) and the company predicts that operating profit will rise 21.6 percent to 200 billion yen ($1.64 billion).

It also expects to expand its global store network by 195 to 3,173 locations by the end of August 2016. That figure includes 160 new Uniqlo storefronts internationally and five more in Japan as well as a further 30 stores for its global brands segment.

Related Articles

More from our brands

Access exclusive content Become a Member Today!