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Uniqlo Owner Expected to Post 30% Profit Rise, as Investors Eye China Results

A shopper looks on, inside a Fast Retailing's Uniqlo casual clothing store in Tokyo, Japan January 11, 2023. REUTERS/Issei Kato/File Photo
A shopper looks on, inside a Fast Retailing's Uniqlo casual clothing store in Tokyo, Japan January 11, 2023. REUTERS/Issei Kato/File Photo
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Uniqlo Owner Expected to Post 30% Profit Rise, as Investors Eye China Results

A shopper looks on, inside a Fast Retailing's Uniqlo casual clothing store in Tokyo, Japan January 11, 2023. REUTERS/Issei Kato/File Photo
A shopper looks on, inside a Fast Retailing's Uniqlo casual clothing store in Tokyo, Japan January 11, 2023. REUTERS/Issei Kato/File Photo

Second-quarter results from Japan's Fast Retailing Co (9983.T), owner of clothing brand Uniqlo, will on Thursday offer a window into how rapidly demand in China is recovering after the lifting of pandemic curbs.

The company, Japan's biggest retailer, reported a 2% dip in operating profit in the first quarter, partly due to lingering effects of COVID-19 restrictions in China, its biggest overseas market. China scrapped most of its COVID curbs at the end of last year and reopened to tourists last month, Reuters reported.

Investors will also be looking at how significant wage increases announced in January are impacting the company's bottom line.

Fast Retailing's operating profit for the three months ended in February is expected to rise 30% to 91 billion yen ($682 million), according to an average of seven analyst estimates from Refinitiv.

For the full year, analysts are expecting profit to reach 347 billion yen, 17% higher than the record earnings achieved last year.

The company, founded by Japan's richest man, Tadashi Yanai, has nearly 900 Uniqlo stores in China, making it a bellwether for global retailers in the world's second-biggest economy.

As COVID curbs dampened Chinese operations over the past few years, Fast Retailing put increased focus on its North American and European businesses.

"We see significant risks to the company's valuation, especially with the China rebound taking longer than expected," LightStream Research analyst Oshadhi Kumarasiri wrote in a report on the Smartkarma platform.

"In addition, Uniqlo's revenue growth seems to have plateaued in North America and Europe and there is also margin pressure from wage hikes and inventory growth."

Fast Retailing said it would raise wages by as much as 40%, sending shockwaves throughout corporate Japan. The company estimated at the time that overall personnel costs in Japan would rise about 15% from the previous year.

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Sources: Shein Weighs Sale of Less Than 10% of Company in London IPO

A mannequin with a Shein sign stands in an office of a lingerie maker at WeMet Industrial Park, in Guanyun county of Lianyungang, Jiangsu province, China November 25, 2024. REUTERS/Florence Lo
A mannequin with a Shein sign stands in an office of a lingerie maker at WeMet Industrial Park, in Guanyun county of Lianyungang, Jiangsu province, China November 25, 2024. REUTERS/Florence Lo
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Sources: Shein Weighs Sale of Less Than 10% of Company in London IPO

A mannequin with a Shein sign stands in an office of a lingerie maker at WeMet Industrial Park, in Guanyun county of Lianyungang, Jiangsu province, China November 25, 2024. REUTERS/Florence Lo
A mannequin with a Shein sign stands in an office of a lingerie maker at WeMet Industrial Park, in Guanyun county of Lianyungang, Jiangsu province, China November 25, 2024. REUTERS/Florence Lo

Fast fashion retailer Shein is considering asking UK regulators to waive listing rules that require at least 10% of its shares to be sold to the public in its planned London flotation, two people with knowledge of the matter said.
The company is exploring this option to facilitate its IPO, one of the people said, according to Reuters.
If granted, it would likely be the first time that a company in London has been allowed to list below the recent 10% rule.
Singapore-headquartered Shein, which sells $5 tops and $10 dresses mostly made in China, in June filed confidentially with the Financial Conduct Authority (FCA) for a London listing.
However, Britain's financial regulator is taking longer than usual to approve its application, Reuters reported last week.
The people declined to be identified as they were not authorized to speak to the media.
Shein declined to comment.
Shein was valued at $66 billion in a fundraising round last year. A 10% flotation at that valuation would make the IPO worth $6.6 billion. The biggest European IPO this year was perfume and fashion company Puig's $2.9 billion deal, according to Dealogic.
The current valuation of Shein and how much it is looking to raise via the London listing was not immediately known.
London changed its listing rules in 2021 to boost the attractiveness of the venue for companies. It cut the proportion of shares an issuer is required to float to 10% from 25%, reducing potential barriers for large IPOs, the FCA said at the time.
In July, Britain ushered in the biggest reform of company listing rules in more than three decades to help it compete more effectively with New York and the European Union for new issuers.
Shein began to explore a listing on the London Stock Exchange early this year, Reuters reported in May, citing sources. The China-founded company's original plan to list in New York was derailed after opposition from US lawmakers.
Shein is also waiting for China's securities regulator to approve its plans for a London IPO, Reuters previously reported. Its revenues are expected to hit $50 billion this year, up 55% from 2023, according to Coresight Research.