(Bloomberg) -- Uniqlo owner Fast Retailing Co. rose the most in three months after the company issued an outlook for profit and sales for the current fiscal year ahead of analysts’ projections.
The stock rose as much as 6.9% in early trading in Tokyo Friday, the largest intraday gain since July 15.
Asia’s largest retailer is forecasting a record profit for the year ending August 2023, thanks to improving demand for its cheap casual apparel in Japan and a weaker yen bolstering profits brought back home from overseas.
Operating profit for the year is seen reaching ¥350 billion ($2.4 billion), ahead of the ¥332 billion average projected by analysts, the clothing retailer said in a statement Thursday. Net sales are seen at ¥2.65 trillion, compared with analysts’ prediction for ¥2.48 trillion.
Asia’s largest apparel maker is shifting its focus to markets such as North America and Europe where the outlook is relatively stable, as the Russia-Ukraine war and a Covid resurgence in China is still fueling uncertainty about clothing sales globally. The retailer is in the middle of a push to expand its footprint in North America, where it reported annual profit for the first time.
“Fast surprised with bullish guidance,” analyst Mark Chadwick wrote in a note posted on Smartkarma. “We expected cautious guidance reflecting a harsh macro environment.”
Store numbers in North America and Europe still lag well behind China. About 57% of 1,585 stores outside of Japan are based in China, Hong Kong and Taiwan as of August, while North America and Europe make up about 11%, according to the company.
The retailer said earlier this year that it would redouble efforts in North America, where it has struggled to reach the same scale of success seen in Japan and China since opening its first store in New Jersey in 2005. It is targeting 200 Uniqlo stores in five years from about 60 now.
“We will step up the pace of opening of new stores in North America and Europe, to eventually equal China’s,” Chief Executive Officer Tadashi Yanai told reporters and analysts in a briefing in Tokyo. “We now have a base to be a true global brand.”
Read more: Uniqlo Owner Gets Serious About Conquering North American Market
Fast Retailing’s shares have climbed more than 28% this year as Japan’s weak currency helps to lift reported profits and the impact of the pandemic and war in Ukraine recede.
For the year ended August, operating profit rose to ¥297 billion on net sales of ¥2.3 trillion, the company said, exceeding projections. The weak yen boosted the value of foreign assets by ¥114.3 billion, it said. Asia continued to be the growth driver while Europe and the US are becoming pillars for revenue and profit, said Chief Financial Officer Takeshi Okazaki.
Business operations in Russia remain closed, resulting in a large decline in revenue and an operating loss for the year following the recording of impairment losses, said Okazaki, adding that the impact on consolidated results was limited.
In March, Fast Retailing joined a growing list of companies suspending operations in Russia. Other fashion retailers, including rivals Hennes & Mauritz AB and Zara’s Inditex SA, have previously stopped selling there.
Revenue in Japan is likely to climb in the coming year as domestic consumption picks up and overseas tourists return after travel curbs were eased, the company said. The island nation began letting in vaccinated visitors from 68 countries without visas this week, ending more than two years of tighter border controls that kept foreign tourists out.
As one of the last rich economies to reopen for tourism, there’s anticipation of an economic lift that could eclipse the pre-pandemic travel boom. Inbound spending could rise 32% to 6.6 trillion yen annually after a full reopening, compared with 2019, according to a recent report by Goldman Sachs Group Inc. economists.
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Fast Retailing Rises After Profit Outlook Tops Projections - BNN Bloomberg
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