Uniqlo owner reports strong growth in Japan and Western markets

Uniqlo owner Fast Retailing reported strong growth in revenue and operating profit for the three months through November, as robust demand across Japan, North America and Europe helped offset sustained slowdown in China.

Operating profit rose 7% to ¥157.6 billion for the three months ended November from a year earlier, with sales increasing to an all-time high of ¥895.2 billion, largely in line with analysts estimate.

Cooler winter weather in Japan boosted clothing sales and stronger brand recognition pushed up overseas sales, Fast Retailing said. The results shows the company is on track to establish strong footholds for sales growth in new markets, in addition to Japan and China where it currently makes the majority of its revenue.

For China, where sales and profit declines extended into the latest quarter, the company is closing under-performing stores and revamping bigger and better-located outlets to drive sales.

The company kept its full-year forecast unchanged. Higher sales in North America, Europe and the Asia-Pacific region are expected to drive a 5.8% increase in the company’s operating profit to ¥530 billion for the fiscal year ending August from a year earlier, it said in October.

The stock jumped 54% last year while the benchmark Topix index rose 18%.

Fast Retailing plans to raise salaries for new hires by 10% to ¥330,000 a month and those of new store managers by 5.1% to ¥410,000 a month, it said earlier this week.

The stronger-than-expected sales growth in Japan in the first quarter may persist through the second quarter due to cooler winter weather and offset potential revenue shortfalls from dampened buying sentiment in mainland China, according to Bloomberg Intelligence analysts Catherine Lim and Trini Tan.

The main challenges are China sales, the company’s limited ability to reduce discounts and address stock shortages across all regions, said Chelsey Tam, an equities analyst at Morningstar.