Uniqlo parent’s profit seen soaring to a Q3 record on China recovery

By Rocky Swift

TOKYO (Reuters) – The Japanese operator of apparel retailer Uniqlo is expected by analysts to post a 25% jump in profit to a third-quarter record on Thursday, when the focus will be on whether its sales recovery in China is on track.

Fast Retailing’s operating profit in the three months through May likely reached 102.4 billion yen ($733.37 million), according to the average of forecasts from seven analysts surveyed by Refinitiv. That’s compared to 81.8 billion yen posted last year, a company record for the third quarter.

The company, known for its fleece jackets and inexpensive basics, has 925 Uniqlo outlets in mainland China, more than in Japan and making it a bellwether for a retail market that was hammered by strict COVID-19 restrictions in recent years.

Business in China started to turn around in January, resulting in sharp increases in sales and profit from the region in the second quarter, the company said in April.

Fast Retailing’s shares have soared 30% so far this year, helping founder Tadashi Yanai cement his place as Japan’s richest person. The shares have outpaced a 23% advance in the benchmark that has been one of the hottest equity markets worldwide.

“The recovery in China has been weaker than expected, but Uniqlo is well positioned,” said Jamie Halse, who manages $500 million in Japan strategies at Platinum Asset Management in Sydney but does not currently own Fast Retailing shares. “We have a positive view on the business, but are apprehensive of the elevated expectations represented in a premium valuation.”

While China languished under lengthy pandemic curbs, Fast Retailing put more focus on its North American and European operations.

Uniqlo had 61 locations in North America as of February, and is adding four stores in the U.S. and two in Canada this summer as part of a plan to reach 200 by 2027.

($1 = 139.6300 yen)