Jan 11, 2010
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Fast Retailing shines, other retailers suffer

Jan 11, 2010

By Taiga Uranaka

TOKYO, Jan 8 (Reuters) - Fast Retailing (9983.T) on Friday 8 January raised its full-year outlook boosted by robust sales at its Uniqlo budget clothing stores, defying a consumer spending slump that has battered profits at other Japanese retailers.

Photo: www.uniqlo.co.uk

J.Front Retailing (3086.T), Japan's second-largest department store chain, said its operating profit plunged 57 percent in the nine months to November, as penny-pinching shoppers shunned designer clothes and other luxury-brand items.

Department stores and supermarkets have been among the hardest hit by the prolonged retail slump, losing customers to specialty chains like Uniqlo. Seven & I (3382.T), Japan's largest retailing group, also reported a sharp fall in profit this week.

Convenience stores, which had been weathering the economic downturn better than others, have also started to feel the pain of deflation, with No. 3 chain FamilyMart Co Ltd (8028.T) posting a 7.6 percent decline in operating profit for the nine months to November.


Fast Retailing said operating profit jumped 49 percent to 61.1 billion yen ($655 million) for the three months ended in November, as Uniqlo attracted thrifty consumers with imitation leather jackets and its "Heattech" line of basic garments made of heat-trapping fabric.

After posting 11.3 percent growth in same-store sales for the year ended in August last year, Uniqlo stores in Japan started another year strong, booking a 20.8 percent increase for the three months ended in November.

The company, which runs about 790 Uniqlo stores in Japan and 120 more overseas including China and the United Kingdom, had in October forecast a modest 3 percent increase for the current financial year.

"We had a good start, introducing new items in the autumn and increasing the supply of Heattech (from a year earlier)," Toshihisa Tokunaga, a company director, told reporters.

While Uniqlo stores in Japan still account for nearly 80 percent of the group's total revenue, the firm has been aggressively opening stores overseas, mainly in China and other Asian markets, as it sets its sights on global powerhouses like Gap (GPS.N), Spain's Inditex's (ITX.MC) Zara and Sweden's Hennes & Mauritz (HMb.ST).

Fast Retailing raised its full-year forecast to 130.5 billion yen in operating profit, up from 120 billion yen previously and below a mean estimate of 132.1 billion yen in a poll of 17 analysts by Thomson Reuters I/B/E/S.

Shares of Fast Retailing gained 36 percent in the past 12 months, outperforming a 20 percent rise in the benchmark Nikkei average .N225. The stock closed up 1.4 percent on Friday 8 January before the results were announced.


J.Front Retailing, operator of the Daimaru and Matsuzakaya department store chains, said its March-November operating profit tumbled 57 percent to 9 billion yen, hit by a sharp slide in sales.

It cut its sales forecast for the full year to February but kept its operating profit forecast of 14.7 billion yen, down 48 percent from a year earlier, saying it would make deeper cost cuts to make up for the sales shortfall.

FamilyMart said its operating profit for the nine months to November totalled 28.5 billion yen, down from 30.9 billion yen a year ago.

FamilyMart and rival convenience store chains had enjoyed relatively solid sales even after consumer spending was hit by the economic downturn in late 2008.

But deflation has started to impact convenience stores since around the summer of last year.

"We had expected sales to recover after we were hit by bad weather last summer, but they did not. We started to see the effect of weak consumer spending," Takehiko Kigure, FamilyMart executive officer, told Reuters.

"Prices are also falling. Two years ago, the popular price range of boxed meals was 450-500 yen. But since around autumn last year it has moved to 350-400 yen," he said. ($1=93.25 Yen)

(Reporting by Taiga Uranaka; Editing by Chris Gallagher)

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