Clothing brand Uniqlo’s Japanese owner said on Thursday its China operation would report a large profit decline in the current fiscal year owing to the country’s Covid-19 restrictions.
Fast Retailing < is a bellwether for how major global retailers are being impacted by Covid-related shutdowns in China, one of the biggest growth markets for many Western brands.
China is Fast Retailing’s biggest foreign market, with 863 stores on the mainland and almost 90 outlets in Shanghai, where stringent lockdown measures, introduced in late March, remain in place to contain the country’s worst outbreak of the pandemic.
The fast fashion retailer said it expects revenue declines and a large drop in profit in its Greater China segment in the second half and for the whole of fiscal 2022 due to Covid restrictions.
Sales in Greater China region which includes Hong Kong and Taiwan struggled in March, as up to 133 stores were temporarily shut down.
Fast Retailing has more Uniqlo stores in China than in its home market of Japan. It opened a flagship store in Beijing in November, its third megastore in mainland China, and plans to open 100 locations in the country each year going forward.
The weakening yen and higher costs for raw materials and shipping have forced Fast Retailing to consider price hikes, a major shift for a company that has long competed on the inexpensiveness of basic items like socks and underwear.
The company reported a record half-year profit on Thursday, buoyed by sales growth in North America, Europe, and other parts of Asia, while revenue and profit declined in China.
Operating profit climbed 18 per cent to 189 billion yen ($1.51 billion) in the six months through February from a year earlier.
The company maintained its full-year profit forecast at 270 billion yen. That compares with a consensus forecast for annual profit to total 278 billion yen, according to a Refinitiv poll of 11 analysts.
- Reporting by Rocky Swift; Editing by Muralikumar Anantharaman and David Evans, of Reuters.