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Uniqlo owner Fast Retailing sees Japan shopping recovery

Fashion operator expects continued gloom in Southeast Asia

A Uniqlo store in Tokyo in June. Sales in Japan jumped 26% that month compared with the same period a year ago. (Photo by Kento Awashima)

TOKYO -- Uniqlo owner Fast Retailing expects diverging regional fortunes as its fashion business recovers from the coronavirus pandemic, with strong growth in Japan but gloom in Southeast Asia and western markets for the rest of its financial year.

The company, which has had a recent sales hit in Japan with a new face mask to combat the coronavirus, said local Uniqlo sales should grow up to 25% year-on-year in the June-August quarter as the country bounces back from a state of emergency.

But Fast Retailing downgraded its net profit forecast for the fiscal year ending in August to 85 billion yen ($792 million), sharply down by 47.7% from the 162.5 billion yen posted the previous year, in part due to possible impairment costs in the fourth quarter. Fast Retailing had forecast in April that earnings would fall to 100 billion yen.

According to the earnings results for the September-May period announced on Thursday, sales declined by 15.2% from the previous year to 1.5 trillion yen. Net profit declined by 42.9% to 90 billion yen, reflecting the impact of stores being shuttered in many markets due to the pandemic.

As many countries reopen their economies, Fast Retailing expects recovery in its biggest markets, Japan and China. However, the outlook is less optimistic for countries including Singapore, the Philippines and Indonesia.

In Japan, the company's single biggest market, Uniqlo's same-store sales declined by 34% in the March-May quarter. Monthly same-store sales declined by as much as 56.5% in April as a result of the country's coronavirus state of emergency.

However, June sales rose by 26% year-on-year, driven by demand for summer clothing. Fast Retailing also said it was optimistic for the greater China region, where 90% of its Uniqlo stores were in operation by March.

"The pace of the recovery is better than the expectations in April," said Takeshi Okazaki, director of Fast Retailing. The impact of the pandemic was also limited in countries like Vietnam, where Uniqlo recently opened its third and fourth stores.

However, for South Korea, India, Southeast Asia and Oceania, Uniqlo's business is expected to decline by up to 40% in the fourth quarter. The estimate includes a forecast of a 50% decline in Singapore, the Philippines and Indonesia in the same period.

For Europe and North America, Uniqlo expects business to decline by up to 50%.

While most of Uniqlo's stores are now open, the forecasts are based on an assumption of continued conservative customer behavior and low tourist numbers, Okazaki said.

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