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Investment Guru India 2019-01-10 13:18:38

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TOKYO - Uniqlo operator Fast Retailing Co Ltd reported an unexpected decline in quarterly profit on Thursday, blaming warm weather for hurting winter clothing sales even as its Chinese business shrugged off concerns of a decelerating economy.

Uniqlo has become Asia's biggest clothing retailer, helped in part by the popularity of its basic items such as ultra-light down coats and Heattech thermal underwear.

However, stores in Japan struggled to sell such items in October and November due to unseasonably warm weather, the company said.

Overall operating profit fell 8 percent to 104.7 billion yen ($970.16 million) in September-November. That compared with a 118 billion yen average of four analyst estimates compiled by Refinitiv Eikon.

Fast Retailing's Uniqlo business in Japan performed particularly badly, with operating profit down 30 percent from a the same period year earlier.

Analysts have recently been concerned that Uniqlo faces two major risks: saturation in Japan, still its main market, and possible slowdown in China, where the company currently logs an increasing proportion of growth.

The results showed the latter, at least, was not yet happening.

"Greater China reported higher revenue and profit despite the mild winter weather. Operating profit in mainland China continued to be strong, with double-digit growth," the firm said.

(For an interactive graphic on Uniqlo's Chinese expansion, click https://tmsnrt.rs/2RKQxje)

The firm opened a net 78 stores in China in the last fiscal year, expanding to 633 locations there, while it closed a net 4 stores in Japan, ending the year with 827 stores. But analysts have been concerned how long growth momentum in China would last.

Economic growth in China is widely expected to slow due in part to the impact of a trade war with the United States. On Tuesday, state television CCTV reported that the government plans to introduce policies to boost domestic spending.

Fast Retailing kept its operating profit forecast for the full year through August 2019 unchanged at 270 billion yen.

($1 = 107.9200 yen)

(Reporting by Ritsuko Ando; Editing by Christopher Cushing)