* Forecasts 2017 op profit up 38 pct at a record 175 bln yen
* Plans to open around 100 new stores in Greater China
* 2016 op profit falls 23 pct, slightly better than firm’s f‘cast (Adds CEO’s comments, results details)
By Naomi Tajitsu
TOKYO, Oct 13 (Reuters) - Japan’s Fast Retailing Co Ltd , the owner of the Uniqlo casual wear brand, is deepening a push into overseas markets that it expects will help offset tepid retail demand at home and rake in a record operating profit in this financial year.
As two decades of a struggling economy have slashed consumer demand in Japan, Asia’s biggest clothing retailer by sales is expanding its market share in China and Southeast Asia, as well as trying to crack the North American market.
Fast Retailing said on Thursday it planned to increase the number of overseas Uniqlo stores to 1,104 by the end of August next year, focusing on Greater China and other Asian countries, from 958 in the year just ended, while keeping the number of its Japan stores unchanged.
The company, which began as a casual wear store in Hiroshima in 1984, has been expanding aggressively in Asia, and saw the number of overseas Uniqlo stores exceed domestic ones for the first time last year.
After sales at overseas stores grew at a faster pace than at home last year, the company plans to open around 100 new stores in Greater China in the coming year and expects a further pick-up in profit at its stores in China, Southeast Asia and Oceania.
Chief Executive Officer Tadashi Yanai, the richest person in Japan with a net worth of over $16 billion, according to Forbes’ 2016 ranking, said that with growth prospects limited at home, the company was focusing on increasing operating profit internationally in the coming year.
“A big increase in domestic profit is unlikely given the domestic macroeconomic situation, with negative rates, the current financing situation and consumer trends,” Yanai told reporters at a results briefing.
“Overseas, we’re going to see a bigger move towards a global economy, where global players will compete. The ones that succeed globally will succeed in Japan.”
Revenues from overseas Uniqlo stores comprised around 37 percent of the company’s total revenues in the year just ended, compared with around 45 percent from domestic stores. The company also owns global brands, including the higher-end Theory and the lower priced GU.
Uniqlo, Japan’s answer to cheap and cheerful fashion, competes with H&M, Zara and Gap Inc, among others. The brand focuses on affordable everyday staples, enlisting fashion designers including Jil Sander and, most recently Christophe Lemaire, to design collections.
Fast Retailing said it expected operating profit to jump 38 percent to a record high 175.0 billion yen ($1.70 billion) for the year ending in August 2017, a touch above the average estimate of 174.2 billion yen from 19 analysts polled by Thomson Reuters I/B/E/S/.
Operating profit fell 23 percent to 127.3 billion yen in the year just ended, compared with the firm’s forecast for 120 billion yen. Its first slide in full-year operating profit in five years was caused by currency related losses, while impairment losses linked to its J Brand denim brand and store closures at home and in the United States also weighed, the company said.
Having struggled for years to make a profit in the United States, the company has said it will continue to shutter unprofitable stores located in suburban malls and focus on opening more flagship stores in urban centres, It is also making a push into Canada, opening its first store there last month.
To expand its global presence, better control its supply chain and generate more sales at home, Fast Retailing is investing in a distribution centre on the outskirts of Tokyo which will serve as a distribution centre for its shops and what executives have referred to as a “virtual flagship store”. ($1 = 102.9000 yen) (Reporting by Naomi Tajitsu and Ritsuko Shimizu; Editing by Muralikumar Anantharaman)