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Jul 8, 2010
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Fast Retailing cuts outlook on Uniqlo sales drop

By
Reuters
Published
Jul 8, 2010

TOKYO, July 8 (Reuters) - Japan's Fast Retailing (9983.T) on Thursday cut its annual outlook for the first time in three years after the breakneck pace of growth at its Uniqlo budget fashion chain came screeching to a halt in recent months.

Fast Retailing, Uniqlo
Uniqlo bratop collection S/S 2010


Fast Retailing enjoyed strong sales last year even as other retailers were hit by weak consumer spending, attracting thrifty shoppers with hit products like heat-trapping underwear and savvy marketing.

But Uniqlo's same-store sales have been on the decline in the second half of the current financial year to Aug. 31, which some analysts see as a sign that the recent round of robust growth has run its course.

The company runs about 800 Uniqlo stores in Japan and 130 overseas, including China and South Korea. Last month, the firm said it was planning to open a store in Malaysia this year as part of its drive to expand in growing Asian markets.

For the year ending Aug. 31, Fast Retailing cut its operating profit forecast to 133 billion yen ($1.5 billion) from 140.5 billion yen. That was below a mean estimate of 136.7 billion yen in a poll of 16 analysts by Thomson Reuters I/B/E/S.

The company's operating profit clocked in at 123.5 billion yen for the September-May period, up from 97.2 billion yen a year earlier.

The nine-month profit growth was driven by a sharp rise in sales in the first six months, when Uniqlo stores in Japan logged a 13 percent year-on-year increase in same-store sales.

But in the March-May quarter, same-store sales fell 7.9 percent, short of the company's second-half forecast for flat growth.

While Uniqlo's sharp sales growth last year makes for a tough comparison, some analysts said the recent slowdown was worse than expected.

Shares of Fast Retailing have lost 27 percent so far this year, underperforming a 10 percent fall in the benchmark Nikkei average .N225.

The stock closed nearly flat before the results were announced, underperforming the Nikkei's 2.8 percent rise. ($1=87.75 Yen) (Reporting by Taiga Uranaka; Editing by Chris Gallagher)

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