Apr 11, 2013
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Uniqlo operator keeps annual operating profit outlook unchanged

Apr 11, 2013

TOKYO - Fast Retailing, Asia's biggest apparel company, left its full-year operating profit forecast unchanged despite a jump in sales in March at its flagship Uniqlo stores in Japan, as doubts linger whether aggressive economic policies will thaw a decades-long freeze in Japanese consumer sentiment.

Celia Birtwell for Uniqlo

The company on Thursday kept its operating profit outlook for the year ending in August at 147.5 billion yen ($1.48 billion), which would mark a record profit and a 17 percent increase on the year.

It reported a 7.6 percent drop in operating profit for the December-February quarter to 40 billion yen. Three analysts surveyed by Thomson Reuters had forecast a 46 billion yen profit.

Analysts are expecting an operating profit of 149.9 billion yen for the current financial year, according to Thomson Reuters Starmine smart estimates, which give more weight to top-rated analysts.

Some analysts raised their full-year forecasts for the company after last week's news of a 23 percent surge in Uniqlo's Japan March sales, spurred in large part by a new brand of heat-dispersing underwear - a warm-weather answer to its hot-selling "Heattech" thermal underwear.

The March sales figures had sparked a 14 percent surge in Fast Retailing shares on Wednesday of last week. The stock has more than doubled since mid-November, outpacing a 56 percent rise in Tokyo's benchmark Nikkei average, as expectations mounted for bold new policies promised by the new government of Prime Minister Shinzo Abe, swept to power in a landslide election in December.

Fast Retailing, with a nearly 10 percent weighting in the Nikkei due to its prominence in the retail sector, is also a magnet for investor buying when Japan's stock market rallies.

But analysts widely doubted that Uniqlo's sales rise was spurred by a broad improvement in consumer sentiment, even as signs emerge that the wealth effect of rising share prices is spurring purchases of more expensive items such as kimonos.

Economic data shows that Japanese wages declined 0.7 percent in February while deflation persisted with a drop of 0.3 percent in core prices. Fast Retailing said average spending per customer fell by 5.4 percent in March despite the overall rise in sales.

Japan's dull economy has also spurred Fast Retailing, run by Japan's richest man, Tadashi Yanai, to pursue ambitious expansion abroad, especially in Asia. It has set a target to boost its sales by five times to 5 trillion yen by 2020 and overtake global leader Inditex S.A., operator of Zara, as well as Hennes & Mauritz AB and Gap Inc.

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