* Sees operating profit rising 10.5% to Y120 bln in 2009/10
* 2008/09 annual profit rises 24% to record Y108.6 bln
* Uniqlo stands out in struggling retail sector
* Shares close down 2.2 pct ahead of earnings announcement (Updates with company comment, adds analyst comment)
By Taiga Uranaka
TOKYO, Oct 8 (Reuters) - Japan’s Fast Retailing (9983.T) forecast a 10.5 percent rise in operating profit this financial year as its Uniqlo casual clothing chain draws cost-conscious consumers away from local and international rivals.
While most of Japan’s retail industry is still reeling from a slump in consumer spending that shows little sign of abating amid rising job losses, Uniqlo has attracted customers with hit products such as underwear using heat-trapping fabric.
Seven & I Holdings (3382.T), Japan’s largest retailer, posted a sharp drop in its first-half earnings last week, while second-ranked Aeon Co Ltd (8267.T) fell into the red. [ID:nT176719] [ID:nT68K3OBS9]
Fast Retailing is looking to expand rapidly in China and other overseas markets, a move that will mean tougher competition for Gap Inc (GPS.N) of the United States, Spain’s Inditex (ITX.MC) and Sweden’s Hennes & Mauritz (HMb.ST).
“The reason for our strong performance is that we have won recognition globally as a new Japan-born brand, different from H&M, Zara and Gap,” the company CEO Tadashi Yanai told a news briefing.
The company said Uniqlo stores overseas have also been posting strong sales growth, both in Asia and Europe, where it opened a large-scale store in Paris this month.
Analysts said Uniqlo has successfully attracted customers with a bevy of popular products including a camisole with built-in bras.
“Fabrics like heat-tech will remain a very niche strength to compete with those Western players who focus only on fast fashion and don’t really care about the quality of the fabric as much,” said Jeanie Chen, retail analyst at CLSA, referring to Fast Retailing’s fabric that helps keeps users warm.
Fast Retailing forecast a record operating profit of 120 billion yen ($1.36 billion) for the year to August 2010, in line with the average estimate of 119.4 billion yen in a poll of 18 analysts by Thomson Reuters I/B/E/S.
That would follow a 24 percent rise in operating profit to 108.6 billion yen for the past financial year, in line with its own forecast of 108 billion yen. Same-store sales at Uniqlo stores in Japan rose 11.3 percent during the period.
Shares in Fast Retailing, which runs about 780 Uniqlo stores in Japan and 90 overseas, rose 2 percent in the year to Wednesday, underperforming an 11 percent gain in the benchmark Nikkei average .N225.
The company, which also operates shoe stores and other chains, has said it will aim to lift sales to 5 trillion yen by the financial year to August 2020, more than seven times its forecast for this year. ($1=88.36 Yen) (Additional reporting by Colin Parrott; Editing by Michael Watson and Lincoln Feast)