Fast Retailing has cut its annual operating profit forecast by 3.7 per cent as the Uniqlo owner carried out heavy discounts to address sluggish sales of winter products in Japan.
The results on Thursday came as Asia’s largest retailer is undergoing its biggest revamp of its logistics and supply chain network to resolve the challenge that led to its guidance cut: an unexpectedly warm winter that created a costly pileup of inventory.
With a shift towards automated warehouses and the use of machine-learning technology, Fast Retailing said it will be better able to predict consumer demand and a more flexible supply chain to adjust to unpredictable weather conditions.
For the fiscal year ending in August, the company said it now expects an operating profit of ¥260bn ($2.3bn) compared with its previous forecast in January of ¥270bn, as the cost of upgrading its warehouses also hit.
But it remains on track to achieve a net profit of ¥165bn — a record for the third consecutive year — on strong Uniqlo sales in Asia, particularly in China.
Last year, Fast Retailing transformed its flagship warehouse in Tokyo into a 24-hour operation by replacing 90 per cent of its workers with robots. The group, which also owns Theory, J Brand and Comptoir des Cotonniers, plans to spend $900m to automate other warehouses worldwide within the next few years to address labour shortages, storage costs and lags in delivery.
The world’s third-largest seller of casual fashion — behind Zara, owned by Inditex of Spain, and H&M of Sweden — also turned to Google last year for machine-learning and image-recognition technologies to analyse product trends and predict consumer demand.
The downgrade came even as it reported better than expected results for the fiscal second quarter where its operating profit increased 19 per cent from a year earlier to ¥68bn.
In addition to strong Uniqlo performance in Asia, the company saw e-commerce sales in Japan and China increase 30 per cent from a year earlier during the fiscal first half period.
Online sales now account for 9.9 per cent of Uniqlo sales in Japan and 20 per cent in China. Tadashi Yanai, the founder and chief executive of Fast Retailing, has said he wants to increase that ratio to 30 per cent globally over the next few years.
Get alerts on Fast Retailing Co Ltd when a new story is published