UPDATE 2-Fast Retailing sees record profit on Uniqlo boom

* Sees operating profit rising 10.5% to Y120 bln in 2009/10

* Posts 24% rise in year ended in August to record Y108.6 bln

* Uniqlo stands out in struggling retail sector

* Shares close down 2.2 pct ahead of earnings announcement (Adds analyst comment, background)

By Taiga Uranaka

TOKYO, Oct 8 (Reuters) - Japan's Fast Retailing (9983.T) forecast a 10.5 percent rise in operating profit this financial year as its Uniqlo casual clothing chain continues to draw cost-conscious consumers away from rivals.

While most of Japan's retail industry is still reeling from a a slump in consumer spending that shows little sign of abating amid rising job losses, Uniqlo has attracted customers with hit products such as underwear using heat-trapping fabric.

Seven & I Holdings, Japan's largest retailer, posted a sharp drop in its first-half earnings last week, while second-ranked Aeon Co Ltd (8267.T) fell into the red. [ID:nT176719] [ID:nT68K3OBS9]

Fast Retailing is looking to expand rapidly in China and other overseas markets, a move that will mean tougher competition for Gap Inc (GPS.N) of the United States, Spain's Inditex (ITX.MC) and Sweden's Hennes & Mauritz (HMb.ST).