Uniqlo's Owner Defies Headwinds: Fast Retailing Reports Strong Profit Growth Amid Tariff Concerns

Tokyo, Japan – Fast Retailing, the Japanese retail giant behind the globally recognized Uniqlo clothing brand, announced on Thursday a profit increase of more than 12% for the nine months ending May 31. The company's operating profit reached 451 billion yen (approximately $3.08 billion) for the period. This figure, however, was slightly below the 458 billion yen consensus forecast from an LSEG poll of five analysts.

Despite the quarterly performance missing some estimates, particularly due to reduced sales in mainland China, Fast Retailing has maintained its full-year operating profit forecast at 545 billion yen. For the three months concluding in May, operating profit stood at 146.7 billion yen ($1 billion), trailing the 150 billion yen analyst average compiled by Bloomberg. Net income for the same period was 105.5 billion yen.

Revenue in mainland China saw a decrease of around 5% year-over-year in the third quarter, with operating profit declining by approximately 3%. This comes as the apparel maker has been increasingly looking to markets beyond Japan and China, such as North America and Europe, for growth opportunities.

A key factor in the market's focus remains the potential impact of new U.S. tariffs. Fast Retailing indicated that the effect of these tariffs on its earnings for the current fiscal year, ending in August, is expected to be limited. This is largely attributed to the company's strategy of front-loading a substantial volume of products to the North American market. In April, Chief Financial Officer Takeshi Okazaki noted that the impact on operating profit for the second half of the year would be roughly 2% to 3%, assuming tariffs remain at previously announced levels.

Shares of Fast Retailing have seen a decline of about 13% this year, partly influenced by President Donald Trump's tariff policies. Earlier this week, Trump announced an increase in across-the-board tariffs on Japan to 25% starting on August 1. Analysts from UBS suggested that Uniqlo products shipped to North America are sourced from outside China, estimating the company's tariff costs at 34.3 billion yen for the next fiscal year, potentially reducing business profit by around 6%.

Other financial figures for the third quarter include net sales of 826.51 billion yen, slightly above the estimated 823.98 billion yen. Inventories increased by more than 10% year-on-year to 448.93 billion yen. The gross profit margin was 54.9%, compared to 56.5% in the prior year, aligning with an estimate of 54.7%.

From its humble beginnings with a single store 40 years ago, Uniqlo has expanded to over 2,500 locations globally, selling affordable apparel primarily manufactured in China and other Asian hubs. This business model is now adapting to evolving trade dynamics.