Uniqlo owner Fast Retailing Q1 profit soars on strong overseas sales

Japan's Fast Retailing Co, owner of clothing brand Uniqlo, posted a 25 per cent jump in first-quarter operating profit on Thursday fuelled by strong overseas sales as it charts a third-straight year of record earnings. Profit was 146.7 billion yen ($1.01 billion) in the three months through November compared with 117.1 billion yen a year earlier.

The consensus forecast was for 137.9 billion yen, according to the average estimate of five analysts surveyed by LSEG.

Fast Retailing held its full-year operating profit forecast of 450 billion yen, following record earnings of 381.1 billion yen in fiscal 2023.

Among individual regions, Uniqlo's business in mainland China reported a large increase in revenue and profit in the first quarter, the company said in a statement.

The company, founded and run by Japan's richest man, Tadashi Yanai, booked successive record earnings in the past two years as it pressed an aggressive growth strategy overseas.

Business in mainland China, its biggest foreign market, came back to life in fiscal 2023 after more than two years of slowdown caused by stringent zero-COVID policy involving city-wide lockdowns.

Chinese consumers are becoming more selective when it comes to products and price, CFO Takeshi Okazaki told reporters. Even so, he is "not at all pessimistic" about prospects for the region, where the company is forecasting strong growth in sales and profit.

While China was in the doldrums, the company made a renewed push in North America, where operating income nearly doubled last year. Fast Retailing plans to open 20 new stores in the United States and Canada in 2024, adding to 72 at the end of December.

Fast Retailing projects another record profit for 2024, but climate change may pose a stumbling block for a company known for its quick rollout of seasonal items such as fleece jackets and thermal wear.

"In China, and the same in Japan, there's been a pattern of dramatic fluctuations in temperatures this year, so a fundamental question is how to structure the product line-up," Okazaki said.

Last year was the hottest on record, and unusually warm conditions from September through December augur for a "sluggish beginning to the fiscal year," analyst Mark Chadwick wrote in a report on the Smartkarma platform before results were announced.

Fast Retailing said in October it plans to open 80 new stores a year in Greater China which includes Hong Kong and Taiwan. It already has 931 Uniqlo outlets in mainland China - more than in Japan - making it a bellwether for retailers operating in the world's second-biggest economy.

Shares of Fast Retailing soared 32 per cent in 2023, outpacing a 30 per cent advance in the benchmark Nikkei (.N225) index.