By Aaron Morrison -
Losses at Uniqlo and J Brand stores in the U.S. have prompted Japan’s Fast Retailing Co. to lower its profit forecast for this fiscal year. Bloomberg analysts had estimated the company, based in Yamaguchi, Japan, would see net income of 141.6 billion yen ($1.1 billion).
But income will probably rise 4.5 percent to 115 billion yen ($960 million) in the fiscal year ending August 2016, the company announced in a statement Thursday. Company leaders blamed the forecast on “relatively low recognition” of the Uniqlo brand in the U.S. and sustained losses at its American stores.
Tadashi Yanai, the billionaire chairman of Fast Retailing, set a goal for Asia’s biggest clothing company to rake in sales of 5 trillion yen by 2020. But that goal has been dogged by Uniqlo and J Brand operation losses in the U.S. and by price increases in its Japan market because of a weaker yen.
“Last year’s result missed the market consensus by a large degree,” Dairo Murata, an analyst at JPMorgan (NYSE:JPM) Securities Japan Co, told Bloomberg News. “That’s a negative surprise and lowered the base for this year’s projection.”
In the fiscal year that ended last August, operating profit and net income lagged behind analyst projections. But Yanai said the company would move ahead with plans to open 100 stores in the Chinese market, bringing the total number of worldwide outlets to 3,173 by the end of August 2016.
Uniqlo sales in mainland China, Hong Kong and Taiwan expanded 46 percent, according to Bloomberg News. Fast Retailing called it a “standout” development, despite widening losses at Uniqlo stores in the U.S.
Price increases on products in Japan are necessary, Yanai added. “We can’t avoid minimum price increases for our products to maintain quality, and Japanese consumers are in money-saving mode,” the chairman said Thursday. “Consumption is far from strong, but rather stagnant or even shrinking.”