South Korea boycott drags down Japan’s Uniqlo sales

TOKYO: A South Korean boycott of Japanese goods is seen dragging down sales at Fast Retailing Co Ltd’s Uniqlo stores, denting otherwise strong financial results due to be announced on Thursday by Asia’s biggest fashion group, analysts said.
But another focus will be on succession plans after founder Tadashi Yanai, Japan’s richest person according to Forbes, turned 70 earlier this year.
Analysts on average expect operating profit of 258.6 billion yen ($2.41 billion) for the year ended August, up 9.5 per cent from a year prior, Thomson Reuters data showed. They see a 14 per cent rise in the current year, helped by strength in China and new markets.
Some have been marking down forecasts since Uniqlo and other Japanese businesses were targeted by South Korean boycotts amid a diplomatic spat – a reminder of risks that come with overseas expansion. The company opened its first store in India last week and is also expanding in markets such as Malaysia and Indonesia.
Sales in South Korea, which account for around 8 per cent of sales in Fast Retailing’s flagship Uniqlo business, fell 40 per cent year-on-year in July and more in August, the Nikkei reported.
JPMorgan analyst Dairo Murata recently lowered his Fast Retailing earnings forecast for the current year by 4.6 per cent and cut his price target on the shares to 68,000 yen from 70,000 yen.
The shares last traded at around 61,300 yen, up 15 per cent in the year to date.
“We foresee a double-digit decline in sales and a roughly 40 per cent fall in operating profit for the South Korea business,” Murata said in a client note, adding that the yen’s appreciation against China’s yuan was another near-term negative factor.
Fast Retailing’s biggest growth market in recent years has been China, where it opened its first Uniqlo store in 2002 and now has over 700 locations.
The company has said it expects Greater China revenue to grow to 1 trillion yen in fiscal 2022. — Reuters