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Fast Retailing FY'19 net profit falls short of guidance, analysts' expectations

Japanese fast-fashion giant Fast Retailing Co. Ltd. on Oct. 10 posted profit and revenue for fiscal full year 2019 that missed its guidance and analysts' estimates after a weaker second-half performance.

For the fiscal year ended Aug. 31, profit attributable to owners of the parent came in at ¥162.58 billion, up 5% from ¥154.81 billion in the year-ago period, but missing Fast Retailing's target of ¥165.0 billion and analysts' mean consensus net income estimate of ¥166.17 billion, compiled by S&P Global Market Intelligence.

For the second half, profit attributable to owners of the parent fell 4.2% from the same period in fiscal 2018 to ¥48.5 billion as finance costs came in at ¥6.4 billion compared to finance income of ¥1.2 billion in the first half. This offset the 9.5% year-over-year increase in profit reported for the first half of fiscal 2019.

Basic EPS for the full year was ¥1,593.20, up from ¥1,517.71 a year ago, but shy of the Market Intelligence estimate of ¥1,616.99.

Fast Retailing's revenue for fiscal 2019 climbed 7.5% year over year to ¥2.291 trillion from ¥2.130 trillion, slightly missing the company's projection of ¥2.3 trillion and analysts' estimates of ¥2.292 trillion.

The retailer provided its outlook for fiscal 2020, projecting a 7.6% year-over-year rise in attributable profit to ¥175.0 billion, or ¥1,714.65 per share, a 6.7% increase in operating profit to ¥275.0 billion and a 4.8% revenue growth to ¥2.4 trillion. The current Market Intelligence estimates for the year are for GAAP net income of ¥188.99 billion, operating profit of ¥294.90 billion and revenue of ¥2.478 trillion.

Despite missing its targets for fiscal 2019, Fast Retailing said it posted record levels of revenue and profit, which the company attributed to the strong results of Uniqlo International, particularly in China, as well as the performance of the GU casual fashion brand.

GU's operating profit surged 139.2% year over year to ¥28.16 billion from ¥11.77 billion as revenue jumped 12.7% to ¥238.74 billion from ¥211.83 billion.

Uniqlo Greater China, which includes mainland China, Hong Kong and Taiwan, saw revenue grow 14.3% year over year to ¥502.5 billion and operating profit rise 20.8% to ¥89.0 billion. The strong performance in Greater China helped Uniqlo International boost its revenue by 14.5% to ¥1.026 trillion from ¥896.32 billion and its operating profit by 16.8% to ¥138.90 billion from ¥118.90 billion. It is the first time Uniqlo International exceeded ¥1 trillion in sales, the company said.

Meanwhile, Uniqlo suffered a slump in revenue and profit in South Korea. Fast Retailing said the drop was due to "sluggish sales of spring ranges during cool season and boycotts in July [and] August."

In its home market, Uniqlo saw revenue inch up 0.9% year over year to ¥872.96 billion from ¥864.78 billion. However, operating profit plunged 13.9% to ¥102.47 billion from ¥119.04 billion due to an early rundown of excess spring and summer inventories that hit the winter segment.

In the global brands segment, revenue dropped 2.9% year over year to ¥149.94 billion, but the segment bounced back from the ¥4.12 billion in operating losses reported a year ago to ¥3.69 billion in operating profit in fiscal 2019. The Theory brand posted profit and revenue growth, but other brands in the segment including Comptoir des Cotonniers, Princesse Tam.Tam and J Brand all continued to see losses.

The company said it expects all of its four business segments to see growth in fiscal 2020. It is also forecasting a full-year dividend of ¥500, to be split evenly between the end of the first half and the end of the second half.

As of Oct. 9, US$1 was equivalent to ¥107.38.