Fast Retailing cuts outlook over virus despite Uniqlo rebound

Customers wait in a queue outside a Uniqlo store in Tokyo’s Ginza shopping district. Same-store sales are up 26 percent from June 2019. (AFP)
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Updated 10 July 2020

Fast Retailing cuts outlook over virus despite Uniqlo rebound

  • Coronavirus pandemic has decimated global fashion industry, despite China market picking up faster than expected

TOKYO: Japan’s Fast Retailing, owner of casual clothing brand Uniqlo, lowered its outlook for the year as the coronavirus disease pandemic wrought havoc on its global fashion business.

But it also reported a strong rebound in Uniqlo’s domestic same-store sales for June and said business in China was recovering faster than previously expected, suggesting it may weather the crisis better than many global peers.

Store closures and weak consumer spending around the world has brought a halt to years of growth at the company, now Asia’s biggest fashion retailer and the world’s third largest after Zara-owner Inditex and H&M.

It forecast operating profit of 130 billion yen ($1.21 billion) for the year through August, down 50 percent from a year earlier rather than a previously expected 44 percent, following a surprise loss of 4 billion yen in the March-May quarter.

It also forecast annual sales to fall 13 percent to 1.99 billion yen, ending 16 straight years of growth.

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Uniqlo operates 2,260 stores globally, including 51 in the US.

“We have seen a large decline in both revenue and profit across the business,” CFO Takeshi Okazaki told reporters.

The company said markets such as South Korea, the US and several others including Indonesia had been particularly hard-hit, while adding that its two key markets, Japan and China, were recovering faster than expected.

Uniqlo’s domestic same-store sales, including online purchases, rose 26 percent in June from a year earlier, after falling 57 percent in April and 18 percent in May.

Okazaki said items such as stretchy jogging pants and oversized t-shirts proved popular in the past quarter in Japan.

Analysts have said Uniqlo’s focus on practical, everyday clothing rather than more trendy styles may work to its advantage as more consumers are spending time at home.

Fast Retailing also depends heavily on Asian economies, especially China, where Uniqlo’s mix of affordable basics and occasionally trendy items proved a massive hit among the burgeoning middle class.

Its struggle to gain market share in the US, previously considered a major weakness, has spared it from a bigger hit from the virus outbreak.

Of Uniqlo’s 2,260 stores globally, just 51 are in the US, which has reported the highest number of coronavirus infections in the world.

Okazaki said the company was not retreating from the US market, although it would step up its “scrap and build” strategy of concentrating on profitable locations and shutting down low-performing stores.

He declined to comment when asked whether it would consider buying Brooks Brothers, which on Wednesday joined a list of US brands that have filed for bankruptcy. 


S&P 500 inches closer to record high

Updated 12 August 2020

S&P 500 inches closer to record high

  • US stock market index returns to levels last seen before the onset of coronavirus crisis

NEW YORK: The S&P 500 on Tuesday closed in on its February record high, returning to levels last seen before the onset of the coronavirus crisis that caused one of Wall Street’s most dramatic crashes in history.

The benchmark index was about half a percent below its peak hit on Feb. 19, when investors started dumping shares in anticipation of what proved to be the biggest slump in the US economy since the Great Depression.

Ultra-low interest rates, trillions of dollars in stimulus and, more recently, a better-than-feared second quarter earnings season have allowed all three of Wall Street’s main indexes to recover.

The tech-heavy Nasdaq has led the charge, boosted by “stay-at-home winners” Amazon.com Inc., Netflix Inc. and Apple Inc. The index was down about 0.4 percent.

The blue chip Dow surged 1.2 percent, coming within 5 percent of its February peak.

“You’ve got to admit that this is a market that wants to go up, despite tensions between US-China, despite news of the coronavirus not being particularly encouraging,” said Andrea Cicione, a strategist at TS Lombard.

“We’re facing an emergency from the health, economy and employment point of view — the outlook is a lot less rosy. There’s a disconnect between valuation and the actual outlook even though lower rates to some degree justify high valuation.”

Aiding sentiment, President Vladimir Putin claimed Russia had become the first country in the world to grant regulatory approval to a COVID-19 vaccine. But the approval’s speed has concerned some experts as the vaccine still must complete final trials.

Investors are now hoping Republicans and Democrats will resolve their differences and agree on another relief program to support about 30 million unemployed Americans, as the battle with the virus outbreak was far from over with US cases surpassing 5 million last week.

Also in focus are Sino-US tensions ahead of high-stakes trade talks in the coming weekend.

“Certainly the rhetoric from Washington has been negative with regards to China ... there’s plenty of things to worry about, but markets are really focused more on the very easy fiscal and monetary policies at this point,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

Financials, energy and industrial sectors, that have lagged the benchmark index this year, provided the biggest boost to the S&P 500 on Tuesday.

The S&P 500 was set to rise for the eighth straight session, its longest streak of gains since April 2019.

The S&P 500 was up 15.39 points, or 0.46 percent, at 3,375.86, about 18 points shy of its high of 3,393.52. The Dow Jones Industrial Average was up 341.41 points, or 1.23 percent, at 28,132.85, and the Nasdaq Composite was down 48.37 points, or 0.44 percent, at 10,919.99.

Royal Caribbean Group jumped 4.6 percent after it hinted at new safety measures aimed at getting sailing going again after months of cancellations. Peers Norwegian Cruise Line Holdings Ltd. and Carnival Corp. also rose.

US mall owner Simon Property Group Inc. gained 4.1 percent despite posting a disappointing second quarter profit, as its CEO expressed some hope over a recovery in retail as lockdown measures in some regions eased.

Advancing issues outnumbered decliners 3.44-to-1 on the NYSE and 1.44-to-1 on the Nasdaq.

The S&P index recorded 35 new 52-week highs and no new low, while the Nasdaq recorded 50 new highs and four new lows.