Fast Retailing lowers full year outlook, sees around 50 percent profit decline

The Fast Retailing Group’s consolidated revenue for the first nine months, totalled 1.5449 trillion yen, down 15.2 percent and operating profit totalled 132.3 billion yen, down 46.6 percent caused primarily by the impact of Covid-19, which the company said, spurred its decision to either temporarily close or introduce shorter opening hours for many stores and resulted in large reductions in both revenue and profit across all four business segments. The company’s pre-tax profit declined to 142.4 billion yen, down 42.4 percent and profit attributable to owners of the parent declined to 90.6 billion yen or 42.9 percent in the nine months to May 31, 2020.

Lowering its outlook, Fast Retailing group predicts full-year consolidated revenue for the year ending August 31, 2020 will total 1.9900 trillion yen, down 13.1 percent and operating profit will total 130 billion yen, down 49.5 percent, while operating profit attributable to owners of the parent is expected to be 85 billion yen, down 47.7 percent. The company continues to expect full-year business profit at 150 billion yen, down 43.4 percent year-on-year. The company said, business profit is on track to achieve this latest estimate thanks to efforts to restrict extremely aggressive global discounting to attract customers, stronger cost-cutting measures, and a faster-than-predicted pace of recovery in performance at Uniqlo Japan, GU, and Uniqlo Greater China operations.

Uniqlo Japan sales recover post stores re-opening May onwards

The company added that Uniqlo Japan reported large declines in both revenue and profit, with revenue declining to 598.8 billion yen or by 14.6 percent and operating profit contracting to 79.1 billion yen or by 18.1 percent. This decline in performance was due to a considerable worsening in Uniqlo Japan results caused by the Covid-19 impact for the three months from March to May 2020, when revenue declined by 35.5 percent and operating profit plummeted by 74 percent. In March to May 2020, Uniqlo Japan same-store sales including e-commerce sales declined by 34 percent following the temporary closure of a maximum 311 out of a total 813 stores during the period from late March through to early May.

However, Uniqlo Japan’s sales subsequently started to recover from the middle of May onwards once stores reopened for business, resulting in a significant recovery in sales for the month of June. Meanwhile, e-commerce sales reecorded a 47.7 percent rise in the third quarter as digital advertising and TV commercials drew more customers to our online store. The gross profit margin improved 3.3 points year-on-year in the third quarter. Uniqlo Japan opened the Uniqlo Park Yokohama Bayside Store in April 2020, followed by Uniqlo Harajuku in early June, and Uniqlo Tokyo in Marronnier Gate Ginza, the company’s biggest global flagship store in Japan, later in June.

Revenue at Uniqlo International fell to 673.5 billion yen, down 17.9 percent and operating profit contracted to 51.8 billion yen, down 58.5 percent. In the three months from March to May 2020, all markets reported large declines in revenue and profit as a result of Covid-19, but e-commerce sales expanded strongly. The company said, breaking down the third-quarter performance into individual regions, while Greater China reported a large decline in revenue and profit for the quarter, both revenue and profit actually increased in May and the region is now exhibiting a favourable pace of recovery.

In South Korea, same-store sales declined sharply as Japan-Korean tensions and Covid-19, resulting in an overall operating loss for the quarter. Uniqlo South, Southeast Asia & Oceania, which includes Southeast Asian nations, Australia, and India, reported a sharp decline in revenue and an operating loss for the quarter, however, performance recovered favourably in Vietnam after that nation lifted its lockdown. Nearly all the company’s stores in North America remained closed from the middle of March through end of May, resulting in a large decline in revenue and a wider operating loss for the quarter. Uniqlo Europe also reported a sharp fall in revenue and an expanding operating loss as stores in the region’s larger markets of the UK, France, and Russia remained closed for business from the middle of March through to the end of May.

Other brands under Fast Retailing suffer in Q3 due to Covid-19 impact

Fast Retailing’s GU operation reported a rise in revenue but a significant decline in operating profit in the nine months, with revenue climbing to 187.4 billion yen, up 1.1 percent but operating profit declining to 20.4 billion yen, down 22.2 percent. While GU managed to maintain a strong performance and generate double-digit growth in both revenue and profit in the first half, revenue subsequently declined by 19 percent and operating profit declined by 61.8 percent in the third quarter, owing to the Covid-19 impact. In the March-to-May quarter, same-store sales declined by 27 percent but recovered to previous year levels in May as stores reopened for business. GU’s gross profit margin declined 3.3 points.

Global Brands revenue declined to 83.3 billion yen, down 26.7 percent and the segment posted an operating loss of 6 billion yen compared to an operating profit of 4.6 billion in the first nine months of fiscal 2019. In the March-to-May quarter, Global Brands revenue declined 63.2 percent and the segment posted an operating loss of 6.7 billion yen compared to an operating profit of 1.4 billion yen in the third quarter of fiscal 2019.

With nearly all stores in Japan closed temporarily from the latter part of April through to the middle of May and all stores in the United States closed from the middle of March through to the end of May, Theory fashion label reported falling revenue and an operating loss for the third quarter. PLST operation also reported a fall in revenue and an operating loss for the third quarter as a maximum 102 stores out of a total 104 stores were temporarily closed for business in the month of April. Finally, our France-based Comptoir des Cotonniers brand recorded a wider loss in the third quarter as nearly all stores in Europe were temporarily closed from the middle of March through to the middle of May.

Picture:Facebook/Uniqlo USA