Fast Retailing, the parent company of Uniqlo, has impressed investors with a strong performance in the third quarter of the fiscal year. Despite facing difficulties in China due to Covid-19 restrictions, the company experienced growth in North America and Europe, leading to a record quarterly profit and a surge in its shares.
While Fast Retailing’s largest international market, China, saw a decline in sales and profit during the quarter, the performance in other regions, particularly the US and Europe, made up for this setback. Analysts praised the company’s impressive performance outside of China, as both the US and European regions became profitable.
In the three months ending in May, Fast Retailing reported a 37% increase in operating profit compared to the same period last year, reaching a record high of ¥81.8 billion. This strong performance prompted the company to raise its dividend and increase its full-year operating profit guidance by 17% to ¥290 billion.
Looking at Fast Retailing’s various divisions, Uniqlo Japan faced challenges in the fiscal year, but showed resilience in the third quarter. Its revenue increased by 8.7% year-on-year, and operating profit grew by 76.2%.
Uniqlo International, which encompasses Southeast Asia & Oceania, North America, and Europe (excluding Russia), maintained its strong performance, despite disappointing sales in Greater China. The division managed to sustain a steady year-on-year operating profit, with the gross profit margin improving by 1.5 points due to reduced discounts.
Under its Global Brands umbrella, Fast Retailing experienced a significant increase in revenue, leading to the segment turning a profit in the first nine months of the fiscal year. The segment’s revenue rose by 11.8% to ¥90 billion, compared to an operating loss of ¥8.9 billion in the previous fiscal year. In the third quarter alone, the Global Brands division reported higher revenue, although profit declined. This was mainly due to a decrease in revenue and profit from the Theory label in Asia, particularly in mainland China, following lockdown measures in Shanghai.
The PLST operation, focusing on women’s fashion, faced challenges in production and distribution, resulting in product shortages and limited sales expansion. As a result, PLST’s sales remained flat, with only a slight increase in operating profit.
Fast Retailing’s France-based Comptoir des Cotonniers division saw an increase in revenue and a significant reduction in operating loss. The division achieved this by closing unprofitable stores and implementing other structural reforms to improve cost efficiencies.
Overall, Fast Retailing’s impressive performance in the third quarter, driven by success in regions outside of China and favorable exchange rates, is a promising indication for the company’s future. Despite the challenges posed by the pandemic, the company is on track to meet its full-year operating profit target.
Useful links:
– Uniqlo Official Website
– Fast Retailing Investor Relations
