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Fast slows down
Feature: 3/1/2002



While UK clothing retailers have enjoyed their best Christmas sales period for five years, one of Japan's star performers, Fast Retailing, has unexpectedly run into difficulties.

While UK clothing retailers have enjoyed their best Christmas sales period for five years, one of Japan's star performers, Fast Retailing, has unexpectedly run into difficulties.While UK clothing retailers have enjoyed their best Christmas sales period for five years, one of Japan's star performers, Fast Retailing, has unexpectedly run into difficulties.
While UK clothing retailers have enjoyed their best Christmas sales period for five years, one of Japan's star performers, Fast Retailing, has unexpectedly run into difficulties.


Shares in Fast Retailing, the Japanese firm behind the Uniqlo casual clothing brand, fell dramatically after the company issued a profit warning. The slump was triggered after the company said its profits would fall for the first time in 14 years (see director-e News, Wednesday 9 January).

Fast Retailing saw its shares fall on Wednesday by their daily limit of 2,000 yen (£10.50) to 10,550 yen (£55.36) - a drop of nearly 16 percent - and traders say they could fall further. "The market has been hit over the head again by the realisation that this is not a growth stock anymore", said Takehiko Takachio at Kokusai Asset Management.

In a statement, Fast Retailing said: "Sales are projected to fall below our earlier estimate because a Uniqlo boom has calmed down with a reduced amount of purchases per person. Our customers' inclination for low prices is increasing".

Consumer spending in Japan has stalled as the world's second biggest economy grapples with recession. Unemployment is at its highest level since World War Two.

Falling sales at Uniqlo are expected to reduce profits by 24 percent in the 12 months to August 2002, the company said. In the past, Fast Retailing's growth has lived up to its name: Its shares rocketed upwards by 2,000 percent over a two year period, peaking last May.

Cheap and cheerful

Uniqlo has become known for cheap, good-quality, casual clothing - such as fleeces - with a preference for primary colours that has given it a cheap and cheerful image. It has often been compared to the GAP brand.

And the company insists it wants to sell to all age groups - its TV adverts promote the brand as active-wear for 50-year olds as well as twenty-somethings.

During 2001, Uniqlo opened its first overseas stores, targeting Britain as part of what it wants to become a chain of 50 UK shops by the end of next year.

"I want to make Uniqlo a global casual clothing brand, like Britain's Marks & Spencer and Gap of the United States", said company president Tadashi Yanai when he unveiled the expansion.

But with a handful of stores in London, overseas sales are still a long way from being able to buffer Fast Retailing against the slowdown in its home market.

Outlook no better

So impressive has Fast's past growth been, that news it was about to issue a trading update sent its shares higher on the Tokyo Stock Exchange. But when it came, the news spelt out the end to 13 years of expansion.

"Having had a dreadful previous few months, they're basically saying the next few months are going to be no better", said Jeremy Tonkin of Commerzbank Securities in Tokyo.

With eight months of its financial year still to go, Fast cut its sales estimates by 18.8 percent from its October guide lines. Sales are now expected to be 6.8 percent lower than the previous financial year, at 390 billion yen (£2.05 billion).

Annual profits are seen at 45 billion yen (£236 million), down 24 percent on the previous year and 33.8 percent from what was hoped for in August. Fast said it plans to enter the food business in the autumn, selling mostly fruit and vegetables in specialist stores and via the internet. Could this be a case of the company using the M&S model again?

And in a bid to support its share-price, Fast will buy back up to 12 billion yen (£63 million) of its own shares. Then, in April, it will increase the number of its shares, which is likely to make them more readily available to private investors.
Author: John Gibbon
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