4/10/2024

Uniqlo reports profit growth of 11%

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Key points:

  • Fast Retailing’s operating profit is expected to grow by 11% to $114.3 billion yen.
  • There is a recovery in business in China and South Korea, and impressive sales in the United States.
  • The weakening yen is beneficial for Fast Retailing because the company generates more than half of its revenue outside Japan.

It is predicted that the Japanese company Uniqlo, one of the leaders in the global clothing market, will report on Thursday its quarterly profit growth. It is expected that this growth will be driven by the successful performance of the company’s overseas operations, which will be able to compensate for the slowdown in the Japanese domestic market.

Optimistic forecasts

Fast Retailing’s operating profit for the three months ended February is expected to rise 11% year-on-year. This figure could amount to $114.3 billion yen (753.4 million).

It is worth noting that this growth occurs in the first quarter, in which Fast Retailing has already recorded a 25% increase in profits. This was facilitated by the company’s successful performance in the Chinese market, which is its largest foreign market.

Analysts believe that, despite such impressive performance, the company maintains a conservative forecast without changing it. In this regard, second quarter results may exceed analysts’ consensus forecasts.

Uniqlo success

Uniqlo is showing optimism about its prospects, supported by a number of factors. First, the company’s business in China and South Korea has seen a strong recovery, with store sales in the Asia, India and Oceania regions performing well. Additionally, the US recorded impressive apparel sales in December 2023.

The company, founded and run by Tadashi Yanai, has broken records over the past two years and is forecasting further profit growth this year, driven by its aggressive expansion into overseas markets. Yanai, who is Japan’s richest man, will speak at a Fast Retailing briefing on Thursday.

It is worth noting that Fast Retailing, with 922 stores in mainland China, is the leader among global retailers operating in this country. Last year, sales in the region showed a sharp recovery from a slump caused by COVID-19 lockdowns.

National currency factor

The yen’s depreciation to a 34-year low also plays into Fast Retailing’s hands, as the company generates more than half of its revenue outside Japan. As a result, the company’s shares showed growth of 28% in 2024, outpacing the 19% growth of the benchmark Nikkei index.

The US dollar is stable on Wednesday ahead of the release of a key inflation report. Wednesday’s consumer price index data is expected to be a “big test for Japanese authorities.” However, Bank of Japan Governor Kazuo Ueda rejected market speculation that the sharp fall in the yen could push the central bank to raise interest rates.

Currently, the Japanese currency remains relatively stable at 151.785 per dollar.

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