Fast Retailing fell the most in three months after the Japanese apparel maker’s third-quarter earnings missed estimates due to weak sales in China.
The stock dropped as much as 6.33% in Tokyo trading Friday, the biggest intra-day decline since April 7.
Operating profit was JPY146.7 billion ($1.28 billion) in the three months ended May, trailing the JPY150 billion average of analyst estimates compiled by Bloomberg. Gross profit margin was 54.9%, down from 56.5% a year ago.
Revenue in mainland China declined by approximately 5% on-year for the quarter, while operating profit decreased by around 3%, the company said. The apparel-maker had in April raised its full-year forecast, counting on demand for its Uniqlo brand of clothing in newer markets beyond the traditional strongholds of Japan and China.
Although the retailer kept its full-year operating profit forecast of JPY545 billion, investors probably came away with a negative impression of the company’s quarterly performance.
Results are somewhat negative as margins got squeezed by earlier-than usual discounts, according to Citigroup Global Markets analyst Mitsuru Takayanagi.
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Fast Retailing’s CFO Takeshi Okazaki on Thursday attributed the sales drop in China to weaker overall consumer sentiment and unusually cooler temperatures through early May. The company is overhauling its China stores and said it’s beginning to see the impact.
