* Cuts forecast to 145.5 bln from 156 bln; Q2 profit down
* CEO says no drop in spending after consumption tax hike
* Lower spending than expected in price-conscious Japan
weighs on bottom line
(Adds Q2 earnings, context)
TOKYO, April 10 Japan's Fast Retailing Co
cut its full-year operating profit forecast as sales at
domestic stores of its Uniqlo casual wear brand fell below
expectations, outweighing brisk growth in China and elsewhere
Asia's biggest fashion retailer is pushing abroad to wrest
custom from fast-fashion rivals Hennes & Mauritz AB (H&M) and
Zara-owner Inditex SA as sales slow at home where the
population is ageing and declining.
Fast Retailing's reliance on Uniqlo Japan for sales declined
to 53 percent of revenue in the first half, down nearly 10
percentage points on year, but Japan's cost-conscious shoppers
are depressing margins.
Their fondness for discounted goods led to a revenue
slowdown in the first half of the business year to Aug. 31,
prompting Fast Retailing to cut its operating profit forecast to
145.5 billion yen from a 156 billion yen. The new forecast
represents a 9.5 percent increase on the year.
Fast Retailing also cut Uniqlo Japan's profit outlook for
the full year by 12.7 percent, reflecting a lower than expected
result for its recent strategy of offering luxurious items such
as cashmere sweaters that still fit a lower-cost bracket.
While spending per customer rose 1.7 percent, that was short
of expectations, showing Japanese shoppers' preference for
discounts in the face of efforts by Prime Minister Shinzo Abe to
encourage higher spending with his brand of economic policy
known as Abenomics.
Some retailers fear encouraging higher spending among
price-conscious shoppers will be a tougher challenge after the
consumption tax rose by 3 percent on April 1, but Chief
Executive Tadashi Yanai reported little impact from the hike at
"There was no rush in spending (before the hike) and no
drop-off afterwards," Yanai said at a news briefing on Thursday.
THE MARCH ABROAD
Fast Retailing will hold an opening ceremony at its first
store in Germany on Thursday as it marches towards its goal of
the world's top-selling apparel brand by 2020, climbing from its
current fourth place.
That ambition involves opening 20-30 stores every year for
the next few years in the United States, where Yanai has said he
expects to make one-fifth of sales by 2020.
Fast Retailing aims to break even on its Uniqlo U.S.
operations in the next one or two years, Chief Financial Officer
Takeshi Okazaki said at the briefing.
Store rollouts for Uniqlo have been most aggressive in
Greater China, where the company is targeting a 30 percent-plus
jump in revenue and improved profit margins this business year.
Jiji Press reported on Thursday that Yanai said he wanted 3,000
stores across China in the future.
During the fiscal year to Aug. 31, Fast Retailing aims to
have added 186 overseas stores for a total of 632. That compared
with 831 in Japan as at the end of February.
In the quarter to Feb. 28, Fast Retailing's operating profit
fell 2.2 percent to 39.2 billion yen, well below the 47.16
billion yen consensus forecast of 4 analysts polled by Thomson
Shares of Fast Retailing, the most heavily weighted stock in
the Nikkei 225 index, ended down 1.5 percent before the
earnings release. The benchmark closed flat.
($1 = 101.8500 Japanese Yen)
(Reporting by Sophie Knight; Editing by Edmund Klamann and