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Business

Focus on daily necessities shields Uniqlo from China's market volatility

TOKYO -- Fast Retailing, the Japanese operator of the popular Uniqlo clothing brand and store chain, announced Thursday that its net profit jumped 52% on the year to a record 132.3 billion yen ($1.08 billion) for the nine months through May.

     Aggressive store openings in China supported the growth. At home, Uniqlo performed well, and warmer-than-usual May weather pushed up sales of its AIRism line of functional underwear and other summer items.

     In a recent interview with The Nikkei, Chief Financial Officer Takeshi Okazaki said the Chinese stock market volatility is unlikely to have a direct impact on the company's earnings.

Fast Retailing Chief Financial Officer Takeshi Okazaki speaks at a July 9 earnings briefing at the Tokyo Stock Exchange.

Q: The Shanghai Composite Index is fluctuating wildly these days. What impact do you think it will have on your earnings?

A: I don't think the volatility of Chinese stocks will affect our earnings directly. In China, we are marketing our products under the concept of "LifeWear," which is more like daily necessities. Therefore, weather will have more impact on our earnings than economic conditions. Although stock market volatility could have some impact, I don't expect our earnings to be affected by economic ups and downs.

Q: Domestic same-store sales at Uniqlo tumbled 11.7% on a year-on-year basis in June. What is your take on that?

A: The biggest factor for sluggish June sales was weather. Because Uniqlo's products are more like daily necessities, customers are hesitant to shop on cold days. I think that was what happened in June.

     Although we have already hiked the prices of some autumn and winter items, we have seen no impact so far. There are still some concerns about weather, but I think earnings will pick up once the weather gets better. We expect sales to recover in the long run despite the slump in June sales. We plan to raise prices of autumn and winter items as scheduled.

Q: Your company posted a net profit of 132.3 billion yen in the nine months through May. Although that is already above your full-year plan of 120 billion yen, you have maintained your full-year earnings forecast. Why is that?

A: Although we have revised our earnings forecast on a quarterly basis before, we have found our earnings forecast not very accurate. Therefore, we have decided to reduce the frequency of our earnings forecast. It is difficult to make earnings forecasts because they are largely affected by weather. It is also unclear what impact volatile foreign exchange will have on earnings. We have maintained our earnings forecast because of uncertainties over the outlook. There are no specific concerns.

Q: Rising stock prices have pushed up the minimum investment amount to more than 5 million yen. Do you plan a stock split? 

A: Our stock is liquid enough and we haven't thought about any specific measure for that. I know the current stock price is high for retail investors, and we think we should do something about it. However, there are no specific plans for a stock split at the moment. 

(Nikkei)

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