* Q1 operating profit up 16.7 pct y/y at 88.6 bln
* Boosted by cost-cutting drive and foreign exchange gain
* Domestic revenue up 3.4 pct y/y on winter sales
* Maintains operating profit forecast of 175 bln yen for FY17 (Adds CFO comments)
By Thomas Wilson
TOKYO, Jan 12 (Reuters) - Japan’s Fast Retailing Co Ltd , the owner of cheap-and-cheerful clothing chain Uniqlo, reported its biggest quarterly operating profit in two years as a cost-cutting drive and gains from a weaker yen helped offset tepid demand at home.
A persistent economic malaise and a lack of wage growth have eaten away at consumer confidence in Japan, prompting retailers to offer better products for less and cut expenses. Fast Retailing has also opted to expand overseas, including China, Southeast Asia and the United States, to ride out the gloom.
With Japan’s consumer prices and household spending both slumping in November for the ninth straight month, the retailer said it did not plan to raise prices, highlighting the challenges faced by the country as it strives to banish deflation.
“Consumers are becoming cautious when it comes to shopping,” said Chief Financial Officer Takeshi Okazaki at an earnings briefing. “They’re highly price-conscious.”
Fast Retailing’s operating profit for the three months ended Nov. 30 was 88.59 billion yen ($774.3 million), up 16.7 percent from a year ago and the highest since the same period in 2014.
This was mostly in line with average analysts’ expectations for an operating profit of 88.84 billion yen for the quarter, Thomson Reuters data shows.
The retailer’s revenue in Japan rose 3.4 percent to 239 billion yen as cold weather in November boosted sales of winter clothing such as cashmere sweaters and outerwear.
A weaker yen helped the company book a foreign exchange gain of 15.6 billion yen on foreign currency-denominated assets over the quarter. The yen averaged 13 percent less against the dollar between September-November compared to the same period a year earlier.
At the end of the last business year, overseas stores contributed 37 percent of the retailer’s overall revenue.
Fast Retailing reiterated its operating profit forecast for the year to August at a record high of 175 billion yen. That compares with an average of 177.3 billion yen predicted by 18 analysts surveyed by Thomson Reuters.
$1 = 114.4100 yen Reporting by Thomas Wilson and Tim Kelly; Additional reporting by Ritsuko Shimizu; Editing by Himani Sarkar