April 9, 2020 / 6:20 AM / 2 months ago

Uniqlo owner slashes profit outlook, global ambitions hit by pandemic

TOKYO (Reuters) - Japan’s Fast Retailing, owner of casual clothing chain Uniqlo, forecast a 44% fall in full-year (September-August) profit after the coronavirus outbreak hit sales in China and dealt a setback to its ambitions of conquering the U.S. and European markets.

The pandemic briefly disrupted Uniqlo’s supply chain throughout China and forced it to shut over half of its 750 stores in the country, the company’s biggest growth market in recent years.

“This is the biggest crisis for humanity since the end of the war,” CEO Tadashi Yanai told a news conference on Thursday.

Fast Retailing has come to depend on its Asian growth, especially in China, where Uniqlo’s mix of affordable basics and occasionally trendy items proved a massive hit among the burgeoning middle class.

Most stores in China have reopened and business has started to recover, the company said.

But as the pandemic has expanded to more markets, it said it was hard to accurately predict the full impact on its business, warning further revisions may be necessary.

Uniqlo shut around 170 stores in its home market this week after the Japanese government declared a state of emergency. It has also temporarily shuttered stores throughout the United States and Europe, markets where it is trying to catch up with bigger rivals such as Sweden’s H&M.

The company forecast an operating profit of 145 billion yen ($1.33 billion) in the full year through end-August, down from a previous forecast of 245 billion yen and 44 percent lower than a year earlier.

Its operating profit in the six months through end-February fell 21% from the same period a year earlier to 136.7 billion yen.

Yanai, however, said the company had enough funds to keep operating and had not abandoned plans to open more stores. The company, already Asia’s biggest fashion retailer, has said it wants to become the world’s No.1 by beating out rivals Inditex, the Spanish giant that owns Zara, as well as H&M.

Yanai said he believed Uniqlo’s focus on simple but high-quality clothes, rather than runway trends, gave it an advantage in these times.

“With the coronavirus outbreak, I think people will buy clothes that are close to real life,” he said. “People are gong to spend more time with family.”

For the current fiscal year, however, it forecast losses in both the North American and European markets as stores remained shut.

The company also cut its full year dividend outlook to 480 yen per share from a previous 500 yen forecast.

($1 = 108.7500 yen)

Reporting by Ritsuko Ando; Editing by Muralikumar Anantharaman and Raju Gopalakrishnan

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