First Quarterly Report 2019/20 2019.9.1–2019.11.30 Stock Code: 6288 858638 (Fast Retailing 210X297) 中英分開排 \ 08/01/2020 \ X11 \ IFC
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FAST RETAILING CO., LTD. 迅銷有限公司 First Quarterly Report 2019/20 2019.9.1–2019.11.30 Stock Code: 6288 858638 (Fast Retailing_210x297) 中英分開排 \ 08/01/2020 \ X11 \ IFC Contents 1. Corporate Profile 2 2. Financial Highlights 3 3. Management Discussion and Analysis 5 4. Information about the Reporting Entity 9 5. Financial Section 15 1. Interim Condensed Consolidated Financial Statements (1) Interim Condensed Consolidated Statement of 16 Financial Position (2) Interim Condensed Consolidated Statement of 17 Profit or Loss and Interim Condensed Consolidated Statement of Comprehensive Income Interim Condensed Consolidated Statement of 17 Profit or Loss Interim Condensed Consolidated Statement of 18 Comprehensive Income (3) Interim Condensed Consolidated Statement of 19 Changes in Equity (4) Interim Condensed Consolidated Statement of 21 Cash Flows 2. Others 34 Independent Accountant’s Review Report 35 858638 (Fast Retailing_210x297) 中英分開排 \ 08/01/2020 \ X11 \ P.2 1. Corporate Profile Board of Directors Principal Place of Business in Japan Executive Director Midtown Tower 9-7-1 Tadashi Yanai (Chairman of the Board of Directors, Akasaka, Minato-ku President and Chief Executive Officer) Tokyo 107-6231 Japan Directors Takeshi Okazaki Principal Place of Business in Hong Kong Kazumi Yanai 702–706, 7th Floor, Mira Place Tower A Koji Yanai No. 132 Nathan Road Tsim Sha Tsui Independent Directors Kowloon Toru Hambayashi (External) Hong Kong Nobumichi Hattori (External) Masaaki Shintaku (External) HDR Registrar and HDR Transfer Office Takashi Nawa (External) Computershare Hong Kong Investor Services Limited Naotake Ohno (External) Shops 1712–1716 17th Floor, Hopewell Centre Board of Statutory Auditors 183 Queen’s Road East Akira Tanaka Wanchai Masaaki Shinjo Hong Kong Masumi Mizusawa Takaharu Yasumoto (External) Stock Code Keiko Kaneko (External) Hong Kong: 6288 Takao Kashitani (External) Japan: 9983 Company Secretary Website Address Shea Yee Man https://www.fastretailing.com External Independent Accountants Deloitte Touche Tohmatsu LLC Principal Banks Sumitomo Mitsui Banking Corporation MUFG Bank, Ltd. Mizuho Bank, Ltd. The Hong Kong and Shanghai Banking Corporation Limited Registered Office and Headquarters 717-1 Sayama Yamaguchi City Yamaguchi 754-0894 Japan — 2 — 858638 (Fast Retailing_210x297) 中英分開排 \ 08/01/2020 \ X11 \ P.3 2. Financial Highlights Consolidated Financial Summary First Quarter First Quarter Term of of 58th Fiscal Year 58th Fiscal Year 59th Fiscal Year Three months Three months Year ended ended ended Accounting period 31 August 30 November 30 November 2019 2018 2019 Revenue (Millions of yen) 644,466 623,484 2,290,548 Operating profit (Millions of yen) 104,665 91,690 257,636 Profit before income taxes (Millions of yen) 111,086 102,015 252,447 Profit for the period attributable to owners of the Parent 73,476 70,907 162,578 (Millions of yen) Comprehensive income attributable to owners 96,072 107,628 140,900 of the Parent (Millions of yen) Equity attributable to owners of the Parent (Millions of yen) 936,745 988,554 938,621 Total assets (Millions of yen) 2,031,729 2,528,281 2,010,558 Basic earnings per share (Yen) 720.16 694.73 1,593.20 Diluted earnings per share (Yen) 719.01 693.59 1,590.55 Ratio of equity attributable to owners of 46.1 39.1 46.7 the Parent to total assets (%) Net cash generated by operating activities (Millions of yen) 30,136 97,650 300,505 Net cash used in investing activities (Millions of yen) (31,195) (33,267) (78,756) Net cash used in financing activities (Millions of yen) (27,144) (56,640) (102,429) Cash and cash equivalents at end of the period (year) 979,087 1,115,031 1,086,519 (Millions of yen) (Notes) 1. FAST RETAILING CO., LTD. (the “Company”, “Parent” or “reporting entity”) prepared interim condensed consolidated financial statements, and therefore has not included the non-consolidated financial summary of the reporting entity. 2. Revenue does not include consumption taxes, etc. 3. The financial figures are quoted from the interim condensed consolidated financial statements or consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”). — 3 — 858638 (Fast Retailing_210x297) 中英分開排 \ 08/01/2020 \ X11 \ P.4 Business Description There were no significant changes in the nature of the business engaged in by the Company and its subsidiaries (collectively, the “Group”) during the three months ended 30 November 2019. In addition, there were no significant changes in the organizational structure of the Group, including the major subsidiaries, during the three months ended 30 November 2019. — 4 — 858638 (Fast Retailing_210x297) 中英分開排 \ 08/01/2020 \ X11 \ P.5 3. Management Discussion and Analysis Business Review 1. Business and Operational Risks No new business-related risks have arisen during the three months ended 30 November 2019. There have been no significant changes concerning business-related risks as stated in the annual report for the preceding fiscal year. 2. Financial Analysis (1) Financial Position and Results of Operations (i) Results of Operations Business Results for the three months to 30 November 2019 The Fast Retailing Group revenue and profit both declined in the first quarter of fiscal 2020, or the three months from 1 September 2019 to 30 November 2019. Consolidated revenue totaled 623.4 billion yen (-3.3% year-on-year) and operating profit totaled 91.6 billion yen (-12.4% year-on-year). This weaker performance was due primarily to significant reductions in profit from both UNIQLO South Korea and UNIQLO Hong Kong and a lower-than-expected improvement in profits from UNIQLO Japan. The first-quarter consolidated gross profit margin declined 0.2 point year-on-year to 50.2% and the first-quarter selling, general and administrative expense ratio increased by 1.5 points to 35.9%. In addition, we recorded 10.3 billion yen under finance income net of costs after reporting a net 9.2 billion yen of foreign-exchange gain on our long-term holdings of foreign-currency denominated assets. As a result, first-quarter profit before income taxes declined to 102.0 billion yen (-8.2% year-on-year) and profit attributable to owners of the Parent declined to 70.9 billion yen (-3.5% year-on-year). The Group’s medium-term vision is to become the world’s number one apparel retailer. In pursuit of this aim, we are focusing our efforts on expanding UNIQLO International, as well as our GU brand and our global e-commerce operation. We continue to increase UNIQLO store numbers in each markets and areas in which we operate, and open global flagship stores and large-format stores in major cities around the world to instill deeper and more widespread empathy for UNIQLO’s LifeWear concept. Within the UNIQLO International segment, Greater China (Mainland China, Hong Kong and Taiwan) and Southeast Asia are serving as the key pillars of our Group business and growth. In terms of our GU segment, in addition to expanding the GU store network primarily in Japan, we are working to establish GU’s position as the brand that offers fun fashion at amazingly low prices. UNIQLO Japan UNIQLO Japan segment reported a decline in revenue but a rise in profit in the first quarter of fiscal 2020, with revenue totaling 233.0 billion yen (-5.3% year-on-year) and operating profit totaling 38.5 billion yen (+1.6% year-on-year). First- quarter same-store sales, including online sales, declined by 4.1% year-on-year. Despite multiple strong-selling items, including new curved pants, souffle yarn sweaters, trendy sweat shirts and pants, and leggings, the decline in same-store sales was caused by weaker demand for thermal clothing during the warm weather and our inability to sufficiently convey the attractiveness of in-focus, newsworthy products to our customers. E-commerce sales growth also slowed for the same reasons as for our physical stores, with online sales totaling 24.7 billion yen (+4.1% year-on-year) in the first quarter. UNIQLO Japan’s gross profit margin improved by 2.3 points on the back of an appreciation in the yen exchange rate for merchandise purchasing. The selling, general and administrative expense ratio increased 1.0 point to 33.3%, but declined in monetary terms as expected. UNIQLO International UNIQLO International segment reported a decline in revenue and profit in the first quarter of fiscal 2020, with revenue falling to 280.7 billion yen (-3.6% year-on-year) and operating profit declining to 37.8 billion yen (-28.0% year-on-year). However, if we strip out the significant declines in revenue and profit from South Korea and Hong Kong, the remaining UNIQLO International markets generated rising first-quarter revenue and profit. Furthermore, following an early rundown of excess inventories at each operation, UNIQLO International’s overall gross profit margin contracted by 3.0 points year-on-year, while the selling, general and administrative expense ratio increased 1.4 points on the back of lower-than- expected total sales. Looking at individual regions, if we strip out the exchange rate effect, both revenue and profit from UNIQLO Greater China increased. However, if we include the yuan depreciation effect and the decline in Hong Kong profit, UNIQLO Greater China operating profit declined in the three months ended 30 November 2019. Revenue and profit from Mainland China increased on strong sales of Fall Winter ranges such as sweat shirts and pants, fleece, and flannel items. Mainland China e-commerce sales also continued to be strong, expanding by approximately 30% year-on-year. Meanwhile, UNIQLO South — 5 — 858638 (Fast Retailing_210x297) 中英分開排 \ 08/01/2020 \ X11 \ P.6 Korea same-store sales declined sharply on the back of a move to boycott Japanese products that began in July 2019, resulting in an operating loss in the first quarter.