TOKYO (Reuters) - Uniqlo owner Fast Retailing cut its full-year profit forecast after an unseasonably warm weather forced it to slash prices for winter clothes, but the number will still be a record high as its business in China continues to be strong.
Uniqlo, known for its simple and affordable clothes such as lightweight down jackets, has been battling saturation in its main home market of Japan, but has managed to offset that by logging strong growth in China.
For the quarter ended February, the brand posted a double-digit jump in sales and profit in China, helping Fast Retailing turn in a better-than-expected around 19 percent rise in operating profit to 68 billion yen ($611.84 million).
Six analysts on an average were expecting 64 billion yen, Refinitiv data shows.
The promising numbers come on the heels of a surprise drop in profit in the previous three months, when the retailer started seeing the effects of a mild winter on its sales.
Amid heavy discounting to offload winter inventory, the retailer now expects an operating profit of 260 billion yen for the financial year through August, versus its previous estimate of 270 billion yen. That would still be a record high and a 10 percent year-on-year rise.
Business in China remains a bright spot for the retailer despite concerns that a slowdown in growth in the world’s second-largest economy would eventually take a toll.
Uniqlo’s sales and profit in China rose around 20 percent year-on-year in the first half. It expanded to 633 locations in the country in the last fiscal year, up 78 stores from a year earlier, while in Japan it went down 4 stores to 827.
(For an interactive graphic on Uniqlo's Chinese expansion, click tmsnrt.rs/2RKQxje)
Uniqlo is also growing online, with domestic e-commerce sales growing 30 percent year-on-year.
However, Fast Retailing continues to struggle with the tepid performance of overseas brands such as Comptoir des Cotonniers that it acquired in an attempt to expand its reach abroad.
Reporting by Ritsuko Ando; Editing by Himani Sarkar