Uniqlo's Profits Continue to Slide

Though sales were up, net profit declined almost 50 percent over the past nine months.
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Photo: Neil P. Mockford/Getty Images for UNIQLO

Photo: Neil P. Mockford/Getty Images for UNIQLO

Uniqlo sold a solid amount of clothes over the past nine months, but the amount of money it pocketed from those sales was a bummer by comparison.

Despite a 6.4 percent rise in revenue to ¥1.4346 trillion (about $13 billion) for the first three quarters of fiscal 2016, Uniqlo parent company Fast Retailing saw a 46.9 percent decline in net profits to ¥71 billion (about $673 million). This trend of increasing sales and declining profits was seen across both Uniqlo's Japanese and international businesses, while Fast Retailing's "global brands" segment — which includes Theory, J Brand and Comptoir des Cottoniers — saw a rise in both revenue and profit. 

So, what hurt Uniqlo's bottom line over the past nine months? The Japanese company blamed currency exchange losses resulting from the appreciation of the Yen, but said that new pricing strategies and cost-cutting measures were already starting to improve those margins. Indeed, operating profits increased 18.6 percent in the three months from March 1 to May 31.

Things are starting to look up in one of the areas in which Uniqlo has struggled the most — growing within the United States — as well. The company said that operating losses stateside — the result of an awareness problem and store closures — shrank in the third quarter.

Still, for the third time this year, the company warned investors that full-year earnings would be lower than previously forecast. It now expects net profit for the year to be ¥45.0 billion (about $430 million), down 59.1 percent from last year and quite a bit less than the ¥60 billion it previously expected to bring in.

If you were wondering, Uniqlo still plans to become the world's number one apparel manufacturer and retailer in the "medium term," and will continue opening stores and expanding e-commerce, as well as rolling out more locations of its lower-priced GU brand, which has not yet hit the U.S.

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