Uniqlo owner sees return to pre-pandemic profit

Bloomberg

Asia’s largest retailer Fast Retailing Co sees profits growing slightly beyond analysts’ expectations this fiscal year, driven by a robust recovery from the Covid-19 pandemic in the Uniqlo owner’s key China and Japan markets.
Operating profit will probably be 245 billion yen ($2.3 billion) for the year through August 2021, the Japanese company said in a statement. That compares with the average analyst estimate of 242.4 billion yen compiled by Bloomberg. Sales are seen at 2.2 trillion yen, roughly in line with average analyst expectations of 2.28 trillion.
While operating profit for the year just ended fell 42% and revenue declined 12%, Fast Retailing’s projections for 2021 represent a return to pre-pandemic levels. The company said revenue will continue to decline in the first half due to the pandemic, with a recovery kicking in after that.
Retailers have been reeling as Covid-19 upends shopping habits. Fewer people are venturing outside amid lockdowns and fear of crowds, while shoppers are tightening purse strings amid job losses and economic upheaval. Apparel retailers from Brooks Brothers to J Crew have filed for bankruptcy protection, though some brands are weathering the storm better thanks to heavy e-commerce traffic.
Analysts say Fast Retailing is in a position to recover faster compared with its global peers, with its geographic focus on Asia, where coronavirus cases are more subdued at present, and its emphasis on affordable, basic clothing suitable for working from home.
Investors are already betting on Fast Retailing’s ability to recover. The company’s stock has bounced back from a March low, closing at a record high before earnings were announced. Hennes & Mauritz AB and Zara operator Inditex’s shares are both down more than 15% for the year.
During the spring and summer, Fast Retailing shuttered Uniqlo stores in China, followed by Japan and then Western nations, as part of efforts to contain the spread of coronavirus.
Fast Retailing is seeing business improve in China at a faster pace than expected, as the economy reopens and coronavirus outbreaks remain largely
under control.
The company said Uniqlo’s revenue in China, where it has almost 800 stores, will be strong in 2021, including double-digit growth in e-commerce.
Uniqlo’s merchandising focus on casual and functional basic wear continues to draw customers. The brand also scored a win as it adapted its AIRism breathable fabric to make face masks, creating a buzz and drawing customers back to stores in Japan after a state of emergency was lifted.
Uniqlo Japan’s operating profit rose for the year, while same-store sales have increased every month since June compared to a year ago.