Uniqlo’s operator cuts earnings outlook by 11%

Investing.com – Japan’s fast fashion retail giant Fast Retailing Co., widely known as Uniqlo’s operator, said it lowered its full-year outlook for operating profit by 11%.

The company’s shares dropped 3.12% in Tokyo on Friday morning following the news.

Fast Retailing Co.’s overseas momentum was hurt by the months-long protests in Hong Kong that sometimes turned violent and the trade spat between Japan and South Korea that turned into boycott of Japanese goods.

The company reported a 3.6% drop in first-quarter sales for Uniqlo’s international segment. Operating profit for the international business also fell 28%, its first quarterly decline in earnings since 2016.

Korea has the second-largest number of Uniqlo stores after China. Takeshi Okazaki, Chief Financial Officer of Fast Retailing, said the Korean business has continued to decline and there has been a bigger impact on sales.

“Korea is a very important segment for us, and it’s not clear how long this situation will continue,” he added.

Fast Retailing has been relying on its strong overseas sales to support its growth, as the Japanese market alone is too weak to support so.

“The overseas growth comes with higher risk,” Jefferies analyst Mike Allen wrote in a note to investors. “But risk is always difficult to weigh until it hits you in the face.”