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Fast Retailing Q1 Profit Plummets 17% as Warm Weather Cools Winter Sales

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Uniqlo

Fast Retailing has joined the chorus of companies blaming mild temperatures for poor sales of cold-weather goods.

The Japanese conglomerate, which operates Uniqlo, Theory and J Brand, reported Thursday that operating profit fell 16.9% to 75.9 billion yen (around $643.2 million) in the first quarter of fiscal 2016, while consolidated revenue rose 8.5% year-on-year to 520.3 billion yen ($4.4 billion).

Uniqlo’s business in the U.S., mainland China, Hong Kong, Taiwan and South Korea was particularly impacted by the unusually warm weather, resulting in lower-than-expected performance and declining profits in the three months ended Nov. 30. And while fall/winter items such as cashmere and merino sweaters, gauchos and wide pants got off to a strong start in September and October, sales slowed significantly in November and revenue dropped accordingly.

Fast Retailing has 1,708 Uniqlo shops worldwide.

Global brands, meanwhile, surpassed expectations in the first quarter, reporting a 17.4% year-on-year growth in revenue to 91.8 billion yen (roughly $777.9 million) and a 29.7% gain in operating profit to 12.4 billion yen (or $105.1 million), driven by double-digit growth in same-store sales at GU. The company said that wide pants, baggy sweaters and knitted bottoms all did well for the lower-priced line.

Theory, however, reported a dip in profit, while operating loss widened at J Brand, as both suffered from a lack of consumer demand for luxury goods in the U.S. In addition, the temporary closure of some stores following the terrorist attacks in Paris in November adversely impacted Comptoir des Cotonniers and Princesse Tam Tam.

To that end, Fast Retailing has reduced its operating profit forecast for fiscal 2016 from 200 billion yen ($1.7 billion) to 180 billion yen ($1.5 billion).

“Our latest estimates take into account the lower-than-expected performance in the first quarter from September to November 2015 and a predicted year-on-year decline in gross margins at both Uniqlo Japan and International in the second quarter from December 2015 through February 2016,” the company said.

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