Fast Retailing, the owner of popular clothing brand Uniqlo, is preparing to release its Q3 earnings report. While a growth of 11% in overall profit is anticipated, investors are particularly interested in the recovery of the Chinese market and the effects of inflation and the weak yen on domestic consumers.

Previously, Fast Retailing had expected a significant decline in profit from its nearly 900 stores in China. However, due to strong demand in North America and Europe, the company has since revised its sales and profit forecasts, leading to increased expectations.

For the fiscal third quarter through May, analysts predict that Fast Retailing will report an operating profit of 66.72 billion yen ($487 million). The company also expects its earnings to rise by 8.4% to 270 billion yen for the fiscal year ending in August.

Although facing allegations of forced labor in the Xinjiang region, Uniqlo has remained popular in China. Unlike competitors like H&M, Uniqlo has not distanced itself from the use of Xinjiang cotton.

According to Mark Chadwick, an analyst from Smartkarma, the worst is behind Fast Retailing in China, and the current quarter represents the lowest point. Additionally, Chadwick predicts that the U.S. market will generate a profit for the company, potentially for the first time.

The earnings reports of other major Japanese retail giants, Ryohin Keikaku (parent company of Muji) and Seven & i Holdings (owner of 7-Eleven convenience stores), have shown varying trends in major overseas markets. Ryohin Keikaku lowered its full-year forecasts due to uncertainties in mainland China, while Seven & i increased its annual earnings estimates due to the decline of the yen against the dollar, boosting sales in Japan.

In Japan, the drop in the value of the yen has contributed to rising production costs and inflation. Fast Retailing CEO Tadashi Yanai has expressed his dissatisfaction with the weak yen, stating that it has no advantages whatsoever. Consequently, the company announced last month that it will be increasing prices for its popular fleeces this autumn and warned of potential future price hikes.

Fast Retailing’s Q3 earnings report will provide valuable insights into the recovery of the Chinese market, the impact of inflation on domestic consumers, and the effectiveness of the company’s strategies in different regions.

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Fast Retailing Q3 earnings report
Uniqlo’s popularity in China despite Xinjiang cotton controversy