Shares in Japan's Fast Retailing, operator of the Uniqlo chain of casual-clothing stores, leapt 11 percent on Wednesday, boosted by strong sales in May and a newspaper report that it is
likely to post a better profit than analysts expect this year.
Fast Retailing, which has been called the Gap of Japan, may report a group operating profit of 83 billion yen ($790 million) for the year ending August, up 28 percent from a year earlier and about 3 billion yen higher than the company's forecast, the Nikkei business daily said on Wednesday.
The market consensus projection is for an operating profit of 81.3 billion yen in a poll of 15 analysts by Reuters Estimates.
Fast Retailing said on Tuesday that its same-store sales gained 7.9 percent in May, supported by brisk sales in the "Golden Week" holidays. Sales are up 2.3 percent so far this business year.
"We think earnings in Uniqlo's domestic business are now even more likely to come in ahead of company projections," Nomura Securities analyst Masafumi Shoda said in a report to clients.
"With the company working to recapture momentum in its domestic Uniqlo business, we think investors will soon come to appreciate Fast Retailing's growth strategy, which includes its expansion in Asia aimed at creating a global brand over the medium term," he said.
Aiming to double group revenue to 1 trillion yen by 2010, Fast Retailing has aggressively pursued acquisitions at home and overseas, and has said it is particularly keen on buying U.S. or European brands.
It has not had much luck so far, however. Last year it lost a bidding war for upscale retailer Barney's New York, and the year before it gave up on a bid for Hong Kong apparel firm Giordano.
It has also opened lavish flagship stores in places like New York and Shanghai to boost brand awareness, but investors are still just as keen to see a recovery in Uniqlo's domestic operations, which account for 80 percent of group sales.
The Nikkei said the firm's 2007/08 sales would likely rise 12 percent to around 590 billion yen, slightly beating its own forecast, as it has enjoyed strong demand despite food and fuel price hikes that have hurt consumer demand and hit other retailers.
Robust sales have also improved the firm's profit margins as it has not had to mark down prices much to sell goods, the paper said.
Fast Retailing spokesman Terunobu Aono said the report was based on the newspaper's own speculation and the company would report its nine-month earnings results in July. The company's stock rose 10.7 percent to 9,810 yen by midday, outpacing a 1.2 percent gain in the benchmark Nikkei average.