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Uniqlo Lowers Full Year Estimates as Protests in South Korea and Hong Kong Hurt Q1 Profits

The Japanese fast-fashion firm Uniqlo revised fiscal year 2020 estimates downward, following its first-quarter report indicating that profits for the three months ended Nov. 30 fell 3.5 percent.

In a Nutshell: While sales on its home turf in Japan saw declines that impacted profits, results elsewhere on a global front were mixed as profits were down in most areas.

Second-half estimates for Uniqlo International were revised lower due to decreased profits in South Korea and Hong Kong in the first quarter, and the month of December. Warmer weather and ongoing protests hurt the company’s profits. While the pro-democracy protests in Hong Kong dampened retail sales at the city’s key shopping districts, a boycott of Japanese products that began last July spurred the sales decline in South Korea.

Net Sales: Total revenues for the quarter fell 3.3 percent to 623.4 billion yen ($5.70 billion).

By segment, Uniqlo Japan revenue was down 5.3 percent to 233.0 billion yen ($2.13 billion), while same-store sales fell 4.1 percent. Sales of new pant styles, souffle yarn sweaters and trendy sweat shirts did well, but couldn’t offset the weaker demand for thermal apparel. The retailer said sales of cold-weather goods were sluggish due to “persistently warm weather during the September to November quarter.” The company’s “inability” to garner customer attention on new merchandise offerings also affected the quarter’s sales.

At Uniqlo International, revenue was down 3.6 percent to 280.7 billion yen ($2.56 billion). Results from South Korea and Hong Kong ended in “sharply lower revenue and profit figures.” The business at Uniqlo Greater China–Mainland China, Hong Kong and Taiwan–saw revenue up, but profit down in the period. Uniqlo South Korea ended the quarter with an operating loss. However, excluding Hong Kong and South Korea, the balance of Uniqlo International markets saw an increase in both revenue and profit.

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The bit of good news for the Asia region was Uniqlo South, Southeast Asia and Oceania, which the company said saw strong results “characterized by double-digit rises in both revenue and profit.”

Elsewhere on the international front, Uniqlo North America posted rising revenue and profit, buoyed by increases from Canada. While Uniqlo Europe reported a double-digit revenue growth, profits fell due to the impact of foreign-exchange rates.

At Uniqlo’s GU business, revenue gained 11.4 percent to 72.9 billion yen ($666.0 million), while same-store sales were strong due to consumer purchases of lightweight outerwear and knitwear.

The Global Brands business–including Theory and PLST brands–saw revenue fall 11.4 percent to 36.1 billion yen ($329.8 million) as sales of winter merchandise struggled as temperatures remained above seasonal averages.

Earnings: Profit for the quarter was down 3.5 percent to 70.9 billion yen ($647.7 million).

The company estimates that consolidated revenue will be up 2.2 percent to 2.340 trillion yen ($21.4 billion), with earnings up 1.5 percent to 165.0 billion yen ($1.51 billion) for the year ending Aug. 31, 2020. The previous guidance was 175 billion yen ($1.60 billion).

“Our second-half forecasts for Uniqlo Japan, GU and Global Brands remain unchanged,” the company said.