January 11, 2018 / 6:40 AM / a month ago

UPDATE 2-Record profits for Fast Retailing as Uniqlo shines brightest abroad

* Overseas Uniqlo sales beat domestic sales for first time

* Sales at 7-Eleven Japan fall after 62-month winning spree

* Seven & i, Fast Retailing look overseas for growth (Recasts with sales figures, adds Seven & i Holdings results)

By Sam Nussey

TOKYO, Jan 11 (Reuters) - A push for overseas growth drove up earnings for two of Japan’s top retailers, with Fast Retailing Co Ltd raking in an all-time high quarterly profit after sales at Uniqlo clothing stores abroad outshone those from home for the first time ever.

Seven & i Holdings Co Ltd also saw earnings climb in the three months to November, but a slow down in its domestic convenience store sales after years of non-stop growth spurred worries about the retailer, which has long depended on 7-Eleven stores in Japan to shore up its bottom line.

Hit hard by a chequered recovery in local consumer spending, retailers in Japan have been increasingly focusing on overseas markets - a trend that is expected to continue amid concerns wage gains at home may not be enough to keep pace with cost pressures of a tight labour market.

The Japanese economy seems to be doing better, but “we cannot be optimistic that demand is returning to the apparel sector”, Fast Retailing’s CFO Takeshi Okazaki said.

“We aim to make Japan one country in a global business,” Okazaki added at an earnings briefing on Thursday.

Earlier, the company posted a 28.6 percent jump in operating profit to 113.9 billion yen ($1 billion) for its first quarter.

Sales at overseas Uniqlo outlets came in at 258 billion yen, a billion more than sales in Japan. Profits rose about 55 percent and 19 percent, respectively, over the quarter.

UNIQLO EXPANSION: INDIA NEXT?

Famous for HeatTech thermal innerwear and ultra-lightweight down jackets, Uniqlo has grown through decades of deflation and weak consumption in Japan and is expanding steadily abroad.

In China, the retailer is moving into second- and third-tier cities with a target of hitting 1,000 stores in the Greater China region by 2021 from under 600 at end-2017.

The retailer would like to enter India in the near future, Okazaki said, as it tries to fulfil founder Tadashi Yanai’s ambition to overtake H&M and Zara parent Inditex as the world’s top apparel retailer.

It is already Asia’s biggest.

In Japan, the number of Uniqlo stores is likely to remain steady this year, as the retailer looks to improve profits by overhauling its distribution network and driving online traffic.

7-ELEVEN SALES SLOW DOWN AT HOME

But Japanese retailers could be running out of room to grow at home as indicated by lacklustre sales at 7-Eleven.

Same-store sales at 7-Eleven in Japan fell year-on-year in October and November after 62 months of growth, while quarterly operating profit fell around 6 percent.

In addition to its nearly 20,000 local convenience stores, Seven & i has expanded to hold 8,500 convenience stores in the United States as it looks for growth avenues outside Japan.

It was strong sales abroad that helped Seven & i post a 9.5 percent rise in operating profit to 101.33 billion yen in the third quarter ended November.

$1 = 111.6800 yen Reporting by Sam Nussey, Ritsuko Ando and Taiga Uranaka; Editing by Himani Sarkar

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