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Fast Retailing cuts FY'20 outlook as Hong Kong, South Korea weigh on Q1 sales

Uniqlo-parent Fast Retailing Co. Ltd. on Jan. 9 slashed its financial targets for the fiscal year ending Aug. 31 after its fiscal first-quarter earnings fell short of analysts' estimates due to the ongoing boycott of Japanese products in South Korea and unrest in Hong Kong.

For the fiscal year ending Aug. 31, Fast Retailing now expects profit attributable to owners of the parent of ¥165.0 billion, a 1.5% year over year rise, compared with the ¥175.0 billion, or a 7.6% increase, it projected Oct. 10, 2019. The company also reduced its EPS target to ¥1,616.54 from ¥1,714.65. The current S&P Global Market Intelligence mean consensus estimates for fiscal 2020 are ¥184.10 billion for GAAP net income and ¥1,805.53 for GAAP EPS.

Revenue growth for the fiscal year is also expected to fall to 2.2% year over year at ¥2.34 trillion from previously expected 4.8% at ¥2.4 trillion.

The group also slashed its fiscal second-half outlook for Uniqlo International as revenue and profit fell in the fiscal first quarter due to the effect of South Korea and Hong Kong. The company expects Uniqlo International to generate higher revenue but lower profit in the fiscal full-year.

Fast Retailing said it revised its outlook for the full fiscal year to reflect its performance in the fiscal first quarter and in December 2019. The group's Uniqlo brand in December 2019 suffered a 5.3% year over year drop in same-store-sales in its home market.

For the three-month period ended Nov. 30, 2019, the Japanese fast-fashion group recorded a 3.5% year-over-year drop in profit attributable to owners of the parent to ¥70.91 billion from ¥73.48 billion, missing the S&P Global Market Intelligence consensus net income estimate of ¥75.53 billion, with three analysts reporting. Basic EPS came in at ¥694.73, also down from ¥720.16 a year prior and from the Market Intelligence estimate of ¥751.77, also with three analysts reporting.

Fast Retailing's revenue for the fiscal first quarter slipped 3.3% year over year to ¥623.48 billion from ¥644.47 billion, with its entire brand segments, excluding casualwear brand GU, recording sales declines for the first three months of the fiscal year.

GU, which has seen lower cost of sales and reduced discounting during the fiscal first quarter, saw revenue grow 11.4% year over year to ¥72.95 billion from ¥65.49 billion. However, it was not enough to offset the slow performance of Fast Retailing's flagship brand Uniqlo and the group's other global brands.

Uniqlo's international business experienced a 3.6% drop in revenue during the fiscal first quarter to ¥280.75 billion from ¥291.38 billion in the year-ago period. The company said the Uniqlo International segment would have seen rising first-quarter revenue and profit if the brand's performance in South Korea and Hong Kong were to be excluded. Fast Retailing said it has experienced an early rundown of excess inventories at its operations in both countries.

In its domestic market, Uniqlo Japan suffered a 5.3% decline in revenue to ¥233.03 billion from ¥246.14 billion a year ago. Revenue for global brands segment plummeted 11.4% year over year to ¥36.11 billion from ¥40.78 billion as the Theory and PLST brands witnessed slow sales of winter clothes due to the persistently warm weather.

As of Jan. 8, US$1 was equivalent to ¥108.87.