TOKYO -- Industry watchers may have been caught off guard by Fast Retailing's drastic downgrade of its sales target last week, but investors appeared unfazed, snapping up even more shares in the operator of Japan's Uniqlo casual clothing chain.
Back in 2009, when Fast Retailing logged sales of 685 billion yen ($6.6 billion at current rates), its Chairman and President Tadashi Yanai set a lofty target for 2020: 5 trillion yen. He trotted out that number again on Oct. 13 when announcing the company's group business results for the year ended in August, but acknowledged that it was out of reach -- for now.
"We need 5 trillion yen in sales to become the world's No. 1 (apparel maker and retailer) and hoped to achieve it in the 2020 business year," he said. "[But in light of actual sales,] 3 trillion yen is realistic."
Yanai is known for setting lofty growth targets, but he also has a proven knack for hitting them. So the decision by such a confident captain to scrap the ambitious goal surprised many observers.
The day after Yanai met the press to announce Fast Retailing's business results -- which included sharp profit declines -- newspapers ran a flurry of stories about the gloomier numbers.
But stock market players responded that day by sending Fast Retailing shares 1,650 yen higher to a closing price of 34,800 yen.
One investor cited the company's strong showing in recent months, saying he welcomed the "sharp improvement in sales and profit in the current business year."
In the first half of the business year just ended, strategy missteps caused Fast Retailing's operating profit to tumble 34% on the year to 99.3 billion yen. But second-half operating profit surged 94% on the year to 27.9 billion yen.
Resilient and resourceful
The second-half recovery contrasts with the difficulties seen in the same period among many department stores and supermarkets, which close their books in February. With the exception of clothing chain Shimamura and a few others, they all reported profit falls, blaming unseasonable weather and limp consumer sentiment.
Fast Retailing's solid performance when so many of its industry peers struggled highlighted its resourcefulness.
During the March-August period, the company scored hits with some trendy new products, including women's "skants" -- which combine skirts and pants -- and jogging pants with ribbed or elastic cuffs.
Also helping were the company's continued efforts to cut costs wherever it can, from copier paper to travel expenses for executives.
Although there was buzz that Fast Retailing's domestic Uniqlo business had hit a growth ceiling, Fast Retailing Chief Financial Officer Takeshi Okazaki said the company's second-half profit was "much larger than planned."
As for the decision to lower the sales target from 5 trillion yen to 3 trillion yen, a retired Fast Retailing official acknowledged that the initial goal was "optimistic" when it was set in 2009. Over the years, the figure had come to be seen as immutable due to the sheer frequency with which it was cited by both Yanai and the media.
Yanai, whose forward-thinking views often buck conventional wisdom, expects the traditional lines separating industrial sectors to blur. In an interview carried in the Oct. 3 edition of the Nikkei Business magazine, he said Fast Retailing will "compete with Google sooner or later." But Yanai is not so proud as to stubbornly stick to an unrealistic target. It is possible he lowered the figure so drastically because social changes were not happening as quickly as he had envisioned.
His comments these days often touch on near-term trends, such as his belief that "we are in the midst of not a logistics revolution but a new Industrial Revolution."
While a sales outlook downgrade would probably take the wind out of many companies' sails, it may have an invigorating effect at Fast Retailing. That is because it means the goal is within closer reach than ever.
That sense of vigor can already be seen in the company's drastic second-half recovery and record profit forecast for the current year.