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Sales & operating income fall in Q1 of fiscal 2011 - Fast Retailing
17
Jan '11
Fast Retailing Co Ltd experienced a dip in both sales and operating income in the three months through November 2010, the first quarter of fiscal 2011.

Consolidated sales contracted 4.7% year on year to ¥ 250.9bln, operating income fell 18.4% year on year to ¥ 49.8bln and net income fell 34.9% year on year to ¥ 22.7bln. The primary cause of the overall contraction was a fall in sales and operating income at UNIQLO Japan.

UNIQLO Japan same-store sales suffered a double-digit contraction of 12.3% year on year in the first quarter resulting in large part from lingering summer weather and results overshadowed in comparison with the extremely strong sales of the previous year.

Nevertheless, operating income came in ¥ 5.0bln higher than our initial business forecast, buoyed by sales that exceeded our initial estimates for the quarter by ¥ 5.0bln and SG&A expenses finishing ¥ 2.0bln lower than initially forecast. In addition, the opening of our first global flagship store in Japan, the UNIQLO Shinsaibashi Store, in October proved a great success.

UNIQLO International performed to plan, generating an impressive 52.5% increase in operating income as UNIQLO operations expanded favorably in Asia, as well as in Europe and the United States. Our first UNIQLO stores opened in Taiwan, in October, and in Malaysia, in November, both of which also enjoyed strong sales. The Global Brands segment fulfilled initial targets thanks to a strong performance by our Theory operation.

We estimate profits at UNIQLO Japan will expand in the second half of the business year from March to August 2011. Same-store sales are seen improving to record an increase of 3.0% year on year with various business cost-cutting initiatives also anticipated to boost profitability further. UNIQLO International's contribution to the overall Fast Retailing Group increases each year, with the segment forecast to attain sales of ¥ 100bln (up 37.4% year on year) for the business year ending August 2011.

We have revised downward ¥ 10.0bln our estimate for UNIQLO Japan sales, bringing our estimate for consolidated sales to ¥ 846.0bln (up 3.8% year on year). However, we expect cost-cutting benefits to bolster profitability, and therefore we have made no changes to our profit forecasts.

The fiscal 2011 forecast remains unchanged with operating income expected to total ¥ 113.5bln (down 14.3% year on year), ordinary income ¥ 108.5bln (down 12.3%), and net income ¥ 51.0bln (down 17.3%). We predict profit per share of 501.06 yen, and an annual dividend per share of 170 yen: an interim dividend of 85 yen and a year-end dividend of 85 yen.

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Fast Retailing Co Ltd

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