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Consolidated Business Performance

Fiscal 2012 Business Estimates by Group Operation

【Summary】　UNIQLO International and Global Brands Contribute Strongly in the Three Months to November 2011

In the first quarter of fiscal 2012, or the three months to November 2011, Fast Retailing generated consolidated sales of ¥ 272.6bln (up 8.6% year on year), operating income of ¥ 48.4bln (down 2.8%), ordinary income of ¥ 48.4bln (up 0.5%) and net income of ¥ 31.1bln (up 37.2%). Breaking the income figures down into operational segments, operating income at UNIQLO Japan contracted 10.3% year on year in the first quarter, while UNIQLO International and Global Brands both generated year-on-year gains in operating income of 13.3% and 35.2% respectively. A respite in the strengthening of the yen reduced our foreign exchange losses considerably compared to the previous year and this, in turn, helped generate a year-on-year gain in consolidated ordinary income. In addition, net income rose significantly compared to the previous year when we accounted extra-ordinary losses of ¥ 9.6bln related to changes in accounting practices.

At UNIQLO Japan, operating income levels fell year on year as the gross profit margin dipped lower and same-store sales contracted 4.0% due to the September heat wave and persistent warm temperatures in October through November. On the other hand, performance continued to expand favorably at UNIQLO International. UNIQLO International has successfully strengthened its operational base by expanding store networks particularly in the Asian nations of China, Hong Kong, South Korea, Singapore, Taiwan, Malaysia, and Thailand, and also through the opening of successful global flagship stores on New York Fifth Avenue, in Taipei and in Seoul. Within our Global Brands segment, the Theory women's fashion label maintained a strong performance in both the U.S. and Japan. In addition, our low-priced g.u. casualwear brand generated significant gains in profit on the back of multiple new store openings and a rise in same-store sales in excess of 20% year on year.

In terms of our consolidated forecasts for the full business year to end August 2012, a downward revision to our estimates for performance at UNIQLO Japan means that we are now forecasting consolidated sales will rise 14.2% year on year to ¥ 937.0bln, operating income will rise 12.1% to ¥ 130.5bln, ordinary income will rise 17.2% to ¥ 125.5bln and net income will rise 28.8% to ¥ 70.0bln. Thanks to the lull in the strengthening of the yen, we have revised down our initial estimated foreign exchange loss for fiscal 2012 by ¥ 3.0bln. For the fiscal year 2012, we expect earnings per share of 687.49 yen, and so we are planning to pay an annual dividend per share of 230 yen, including an interim dividend of 115 yen.

■　UNIQLO Japan

Our mainstay UNIQLO Japan operation constitutes 69.7% of total consolidated sales. In the three months to November 2011, the UNIQLO Japan segment generated a gain in sales but a fall in income. Sales rose 0.2% year on year to ¥ 190.0bln and operating income contracted 10.3% to ¥ 37.6bln. Both these figures fell short our or initial estimate with sales underperforming by ¥ 17.9bln and operating income by ¥ 5.3bln. The weather was unseasonably hot in the first quarter. The heat wave in September and the persistent warm temperatures in October and November stifled sales of fall/winter items and this led to a contraction of 4.0% year on year in same-store sales over the quarter as a whole. However, our total number of stores had expanded by 28 year on year to 853 stores, including 22 franchise stores, by the end of November 2011.

The gross profit margin at UNIQLO Japan dipped 2.4 points year on year in the September to November quarter. However, the margin came in 0.3 point higher than we had initially forecast thanks to our decision to focus on sales of core items which facilitated a more efficient control over discounting, and to offer only marginal discounts on our strong-selling Ultra Light Down garments. The year-on-year fall in the gross profit margin was due to an increase in the cost of sales as the price of cotton fiber and other raw materials prices rose and the cost of manufacturing goods in China also nudged higher. Our decision to attract customers with more limited-period sales on our HEATTECH functional innerwear also dampened the gross profit margin in the first quarter. However, UNIQLO Japan did manage to cut SG&A expenses by ¥ 2.7bln more than initially expected.

We are working to strengthen our product development system with materials manufacturers in order to ensure we can closely respond to and fulfill our customers' needs. Our Ultra Light Down range, developed jointly between UNIQLO and Toray Industries, has been selling extremely well as a revolutionary product that is light in weight but very warm. In this fall/winter season we have expanded the amount of Ultra Light Down garments produced 2.5 times compared to the last year. We have also expanded production of our HEATTECH functional innerwear from last year's 80 million units to 100 million units for retail in UNIQLO Japan and UNIQLO International stores.

We have revised our business estimates for UNIQLO Japan for the first half of fiscal 2012, or the six months from September 2010 through February 2012. We now expect sales of ¥ 360.0bln (up 5.2% year on year) and operating income of ¥ 68.0bln (down 3.4%). We have also revised down our forecast for same-store sales growth from 5.0% to 1.3% year on year for the second half from March through August 2012. As a result, we have revised down some of our initial estimates for the full business year through end August 2012. We now expect sales to come in ¥ 28.0bln lower than initially forecast at ¥ 629.0bln (up 4.8% year on year), SG&A expenses ¥ 8.5bln lower, and operating income ¥ 5.0bln lower at ¥ 106.5bln (up 0.3%).

■　UNIQLO International

UNIQLO International generated significant gains, as forecast, in both sales and income in the first quarter with sales expanding an impressive 59.1% year on year to ¥ 42.6bln and operating income rising 13.3% to ¥ 5.4bln. The pace of new store openings was particularly strong in the Asian region with 37 new stores coming on line in the first quarter, boosting the total number of UNIQLO International stores to 223 at the end of November 2011.

Our UNIQLO operations in China and Hong Kong exceeded our forecasts in the first quarter. The operations generated significant increases in both sales and income as 25 new stores came on line and same-store sales continued to enjoy double-digit gains. Our Taiwan operation performed well too with six new stores coming on line in the first quarter and continued strong sales from our global flagship store which opened in Taipei's Mingyao department store in September 2011. Our operation in South Korea continued to generate double-digit growth in same-store sales and overall performance exceeded our initial plan there. Sales are proving strong at our Myeongdong Central global flagship store which was opened in November 2011. UNIQLO operations in Singapore and Malaysia are proceeding well and to plan. We also achieved a great success with the opening of our first store in Thailand in September 2011.

The visibility of the UNIQLO brand improved dramatically with the opening of our New York Fifth Avenue global flagship store and New York 34th Street megastore in October 2011. The New York Fifth Avenue store has become a UNIQLO showcase to the world and sales there have been favorable. Sales at the New York 34th Street megastore are currently slightly below target. In France, we reopened the bigger, better La Defense store and the overall operation is proceeding as planned. In the U.K., income contracted as both sales and profit fell short of target. In Russia, profitability is improving with both sales and income slightly exceeding our target.

Our full-year estimates for UNIQLO International remain unchanged with sales expected to increase by an impressive 70.7% year on year to ¥ 160.0bln and operating income to expand 89.9% to ¥ 17.0bln. We had initially expected our UNIQLO operation in the U.S. to turn a profit in fiscal 2012 but, with the New York 34th Street store currently underperforming on sales, we now predict the operation will post a small loss. On the other hand, operations are exceeding expectations in the Asian nations of China, Hong Kong, South Korea and Taiwan. However, we have decided not to revise our full-year forecasts for the UNIQLO International segment overall.

■　Global Brands

Our Global Brands segment fulfilled expectations to generate gains in both sales and income in the first quarter from September to November 2011. Sales rose 16.3% year on year to ¥ 39.2bln and operating income expanded 35.2% to ¥ 5.3bln. Our Theory women's fashion label exceeded our expectations by generating a significant profit gain as same-store sales growth continued to rise in the U.S. and Japan too. Profit also increased considerably at our low-priced g.u. casualwear brand. The g.u. brand generated same-store sales growth in excess of 20%, and measures to improve management efficiency helped boost the operating income margin. Our French women's fashion label, Comptoir des Cotonniers and our French lingerie brand, Princesse tam.tam, both produced a flat performance as expected.

We have made no revisions to our initial estimates for the Global Brands segment for fiscal 2012. We still expect sales to increase 16.9% year on year to ¥ 145.0bln and operating income to rise 53.6% to ¥ 13.5bln.

■　Fiscal 2012 Consolidated Estimates: Increased Downward Revisions for UNIQLO Japan

In terms of our consolidated business forecasts for the year to end August 2012, a further downward revision to our estimates for performance at UNIQLO Japan means that we are now forecasting consolidated sales will rise 14.2% year on year to ¥ 937.0bln, operating income will rise 12.1% to ¥ 130.5bln, ordinary income will rise 17.2% to ¥ 125.5bln and net income will rise 28.8% to ¥ 70.0bln. Thanks to the lull in the strengthening of the yen, we have revised down our initial estimated foreign exchange loss for fiscal 2012 by ¥ 3.0bln. In addition, net income is expected to rise significantly compared to last year when we accounted a special loss of ¥ 9.6bln relating to changes in accounting practices. For the fiscal year 2012, we expect earnings per share of 687.49 yen, and so we are planning an annual dividend per share of 230 yen, including an interim dividend of 115 yen.

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FAST RETAILING believes that the reduction in stock investment units is a useful measure that will encourage the participation of individual investors and increase overall liquidity in the share market. Looking at our own share price, trading volume, number of shareholders and shareholder structure from this perspective, we believe that current conditions are sufficient to ensure necessary liquidity, and so we judge our investment units to be appropriate at this current point in time.

We shall revisit the issue of reducing investment units at timely intervals in the future based on an overall consideration of current trends in the stock market and the market indicators mentioned above.

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At its executive board meeting held on November 24, 2011, Fast Retailing Co., Ltd. decided to increase capital at its consolidated regional subsidiary FAST RETAILING (SINGAPORE) PTE. LTD. The details of the capital injection are listed below:

1. Purpose of capital increase

As the company overseeing Southeast Asian operations, FAST RETAILING (SINGAPORE) PTE. LTD. (a subsidiary of Fast Retailing Co., Ltd.) is tasked with improving overall operational efficiency and improving business performance in the region. We decided to increase capital of FAST RETAILING（SINGAPORE）PTE. LTD. at this time because it is starting to see more opportunities for growth of the business. This capital increase will be used to acquire stock in the three affiliates operating in the Southeast Asian Region; UNIQLO (SINGAPORE) PTE.LTD., UNIQLO (MALAYSIA) SDN BHD, and UNIQLO (THAILAND) COMPANY LIMITED. In addition, the provisionally-named FAST RETAILING PHILIPPINES, INC. is expected to be jointly owned by FAST RETAILING (SINGAPORE) PTE. LTD. and SM Retail of the Philippines.

2. Overview of FAST RETAILING（SINGAPORE）PTE. LTD.

(1) Company name: FAST RETAILING（SINGAPORE）PTE. LTD.

(2) Location: 107 Tampines Road, Wing Tai Building, Singapore 535129

(3) Representative: Naoki Otoma

(4) Paid-in capital: 1 Singapore dollar

(5) Investment stake: Fast Retailing Co., Ltd. 100%

(6) Type of operation: The management of subsidiaries operating mainly in Southeast Asia

3. Details of capital injection

(1) Amount : Approximately 32mln Singapore dollars (equivalent to \2bln)

(2) Investment stake following the capital injection: Fast Retailing Co., Ltd. 100%

(3) Completion date : Scheduled for end November 2011

4. Impact on overall business performance

This capital injection will have no impact on the FR Group's consolidated business performance for the fiscal year ending August 2012.

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At its executive board meeting held on November 7, 2011, FAST RETAILING CO., LTD. decided to conduct its retained earnings dividend base date August 31, 2011 The details of this dividend payout are laid out below.

Dividend breakdown

(Reference) Breakdown of annual dividend

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Fast Retailing Co., Ltd. has been informed of a personal decision by the company's president, chairman and CEO and the company's largest single shareholder, Tadashi Yanai, to assign his stake holding to TTY Management B.V.

We have been informed that TTY Management B.V. is an asset management company fully-owned by Fast Retailing President, Chairman and CEO, Tadashi Yanai. The aim of the stock assignment is to enable TTY Management B.V., as the ongoing holder of the Fast Retailing stock, to use the dividend resources to implement consistent, far-reaching global social action programs.

1. TTY Management B.V. Overview

• (1) Business name: TTY Management B.V.
• (2) Business location: Amsterdam, Kingdom of the Netherlands
• (3) Business representative: Tadashi Yanai, Director
• (4) Main operation: Asset holding and management

2. Shares to be assigned

• (1) Number of shares: 5,310,000 shares (5.2% of overall voting rights)
• (2) Transaction date: October 18, 2011

3. Future outlook

We have been informed that the stock has been assigned as a long-term holding, with TTY Management B.V. as a stable shareholder, in order to facilitate the management of Tadashi Yanai's assets and the implementation of social action programs. This assignment will not affect the management structure of the Fast Retailing Group or its business performance.

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Consolidated results

【Summary】　Fast Retailing Forecasts Increased Sales and Income in Fiscal 2012. UNIQLO International, Seen as the Driving Force, Generating Continued Strong Growth with Multiple New Store Openings and Four New Global Flagship Stores

The Fast Retailing Group reported an increase in sales but a fall in profit in fiscal 2011, the business year through August 2011, with consolidated sales rising 0.7% year on year to ¥ 820.3bln while operating income contracted 12.1% to ¥ 116.3bln and net income fell 11.9% to ¥ 54.3bln. The main factor underlying this result was a decline in operating income at UNIQLO Japan. Same-store sales at UNIQLO Japan did improve in the second half, the six months from March through August 2011, and operating income recovered to generate positive year-on-year growth in the second half. However, this improvement was not sufficient to offset the weak performance in the first half from September 2010 to February 2011. On the other hand, UNIQLO International performed extremely well in fiscal 2011, generating considerable gains in both sales and income, and our Global Brands segment also reported an increase in profits thanks mainly to the strong performance of our Theory brand operation.

Fast Retailing is deeply committed to expanding UNIQLO operations, particularly outside Japan, and is currently working to strengthen its operational base by opening even more stores in the Asian region, including China and Hong Kong, South Korea, Singapore, Taiwan, Malaysia, Thailand, and the Philippines, and also by opening global flagship stores in New York and other major cities around the world. In fiscal 2012, the year through August 2012, Fast Retailing is planning to open an additional 107 new UNIQLO stores outside of Japan, and also to open four global flagship stores on New York's Fifth Avenue, in Taipei, Seoul and Tokyo's Ginza shopping district.

Fast Retailing predicts both sales and income will increase in fiscal 2012, with UNIQLO International continuing to generate strong gains in both sales and income, and profits improving at UNIQLO Japan. In fiscal 2012, consolidated sales are estimated to rise 17.6% year on year to ¥ 965.0bln, operating income is seen increasing 16.4% to ¥ 135.5bln and net income is expected to expand 30.6% to ¥ 71.0bln. This translates into earnings per share of 697.34 yen and enables us to schedule an annual dividend of 230 yen, including an interim dividend of 115 yen.

■　UNIQLO Japan

As our current mainstay operation, UNIQLO Japan constitutes 73% of consolidated sales. UNIQLO Japan reported a fall in both sales and income in fiscal 2011, with sales contracting 2.4% year on year to ¥ 600.1bln and operating income contracting 16.8% year on year to ¥ 106.2bln. Same-store sales in the first six months to February 2011 fell 9.9% year on year as a delay in the launch of fall items and a warm winter knocked income lower during the season's peak months of November and December, and sales of some popular core items suffered from shortages in supply. As a result, operating income contracted considerably in the first half. Same-store sales recovered to post a 0.4% year-on-year increase in the second half from March to August 2011 and operating income also rose by 1.7% in the same six-month period. However, UNIQLO Japan also suffered from a worsening in the overall business environment in the second half as the sharp rise in raw cotton prices globally nudged the cost of sales ratio higher and knocked the gross profit margin lower. In the end, the pickup in income in the second half was not sufficient to offset the fall in the first half, and, as a consequence, the segment reported a decline in income for the full business year through August 2011.

Regarding new store openings at UNIQLO Japan, the opening of the first global flagship store in Japan, the UNIQLO Shinsaibashi Store, in October 2010 was a great success, and new large-scale stores were opened in major urban areas, including Tokyo and Osaka. We also opened more new stores within prime department store locations including the UNIQLO Daimaru Umeda Store in March and the UNIQLO Tachikawa Takashimaya Store in April. By the end of August 2011, our total store network, including 21 franchises stores, had expanded to 843 stores, and 129 of that total were large-scale stores. In fiscal 2011, we opened 61 new stores, and closed 27 stores as part of our drive to make our stores larger.

In terms of new product development at UNIQLO, we continue to strengthen the product development framework that we have with materials' manufacturers to ensure we respond in a timely fashion. We are creating new demand through the development and refinement of our highly functional ranges such as HEATTECH and Ultra Light Down items for the fall/winter season, and Sarafine (Dry Luxe), Silky Dry, Bra Tops, Style Up innerwear and Easy Exercise innerwear for the spring/summer season. Sales of these summer functional innerwear (Sarafine, Silky Dry and Style Up lines) doubled to 36 million units in fiscal 2011. HEATTECH sales around the world increased to 80 million units in fiscal 2011 from the previous year's 50 million units.

Looking ahead to fiscal 2012, we expect UNIQLO Japan to generate gains in both sales and income in the year to August 2012. We estimate sales will expand 9.5% year on year to ¥ 657.0bln and operating income will rise 5.0% year on year to ¥ 111.5bln. We also estimate same-store sales growth of 5.0% in fiscal 2012. We expect to add a net 24 new stores over the year, bringing the total number of stores, including franchise stores, to 868 by end August 2012. As part of our increasingly aggressive drive to open more global flagship stores and large-scale stores in Japan, we are planning to open the Ginza global flagship store (provisional name) with a shop floor of 5,000 square meters in March 2012, and the Shinjuku global flagship store (provisional name) with a floor space of 4,100 square meters in fall 2012. We plan to press ahead with the development of global flagship stores in key areas of the Japanese capital such as Shibuya, Harajuku, Ueno and Ikebukuro. On the profit front, we predict that the cost of sales ratio will continue to rise on the back of sharp increases in the price of cotton and other raw materials, and increased factory processing charges. However, we still expect to successfully expand operating income at UNIQLO Japan in fiscal 2012 by further strengthening controls on product discounting and overall business expenses.

■　UNIQLO International

UNIQLO International generated considerable gains in both sales and income in fiscal 2011 with sales expanding 28.7% year on year to ¥ 93.7bln and operating income increasing 40.6% year on year to ¥ 8.9bln. However, owing to the adverse impact of the strengthening of the yen, this performance was actually slightly below target.

The pace of new store openings was particularly strong in Asia, with 43 new stores opening across China and Hong Kong, South Korea and Taiwan, bringing the total store network in Asia to 181 stores by the end of August 2011. In addition, each individual Asian nation continued to generate double-digit growth in same-store sales and significant gains in both revenue and income. We achieved great success with the opening of our first store in Taiwan in October 2010. Sales at the first Taiwanese store far exceeded our initial target as the UNIQLO brand proved extremely popular with local shoppers and the operation was able to turn a profit in its first year of operation. In addition, we opened our first store in Malaysia in November 2010 and successfully expanded our store network in Singapore and Malaysia to a total of 7 stores by the end of August 2011.

In the United States, the New York Soho Store continued to generate double-digit growth in sales. We are now pressing ahead with final preparations for the opening of our global flagship store, UNIQLO New York Fifth Avenue Store, on Friday, October 14 (floor space: 4,600 square meters) and our megastore, UNIQLO New York 34th Street Store, one week later on Friday, October 21 (floor space: 4,300 square meters). In Europe, the Paris Opera Store in France continued, as expected, to improve on an already strong performance. Meanwhile, UNIQLO operations in both the U.K. and Russia fell short of targets, reporting operating losses in the year to August 2011.

For the full year to August 2012, we expect UNIQLO International to generate considerable gains in both sales and income. We estimate the scheduled acceleration in new store openings, mainly in Asia, will help boost sales for the segment by an impressive 70.7% year on year to ¥ 160.0bln, and increase operating income by 89.9% to ¥ 17.0bln. We are scheduled to add a net 107 new stores over the business year, bringing the total number of UNIQLO International stores to 288 by end August 2012. We are pressing ahead with our strategy to open global flagship stores in major cities around the world and are already preparing to open global flagship stores in Beijing and on New York's prestigious Fifth Avenue in October 2011 and in Seoul the following month.

■　Global Brands

In fiscal 2011, sales at our Global Brands segment dipped 0.9% year on year to ¥ 124.0bln but operating income increased by 12.0% to ¥ 8.7bln. The discontinuation of brands formerly operated by Cabin shaved ¥ 10.0bln off the revenue total which was also adversely affected by the strengthening of the yen. Our Theory brand operation in the U.S. reported a strong rise in income on the back of consistent double-digit growth in same-store sales. Our Theory operation in Japan also achieved gains in both sales and income across the full business year despite the temporary slump in sales recorded in the wake of the March 11 earthquake and tsunami. Our French-born women's fashion label, Comptoir des Cotonniers, fell short of target, posting a fall in income, while our French lingerie brand, Princesse tam.tam, performed to plan.

Same-store sales at our low-priced g.u. casualwear operation began rising in the second half of the business year, with brand awareness boosted by the opening of two flagship stores: the g.u. Shinsaibashi Store in November 2010 and the g.u. Ikebukuro East Entrance Store in April 2011. However, operating income at g.u. contracted over the full business year as the operation absorbed expenses associated with the opening of the two flagship stores.

In fiscal 2012, we estimate the Global Brands segment will generate a 16.9% increase in sales to ¥ 145.0bln and a 53.6% increase in operating income to ¥ 13.5bln. Sales of the g.u. brand are expected to top ¥ 50.0bln, and we predict sales and profit will rise at our Theory operations in both Japan and the United States.

■　Consolidated Sales and Income Predicted to Rise in Fiscal 2012

Fast Retailing predicts both sales and income will increase in fiscal 2012, with UNIQLO International continuing to generate strong gains in both sales and income, and profits improving at UNIQLO Japan. For the full business year through August 2012, consolidated sales are estimated to rise 17.6% year on year to ¥ 965.0bln, operating income is forecast to increase 16.4% to ¥ 135.5bln and net income is expected to expand 30.6% to ¥ 71.0bln. This would translate into earnings per share of 697.34 yen and enable us to schedule an annual dividend of 230 yen, including an interim dividend of 115 yen.

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Please see below the current list of entrusted operating officers for the FAST RETAILING group as of November 1, 2011.

Entrusted operating officer appointments across the FAST RETAILING group (as of November 1, 2011)

【REFERENCE MATERIALS】
Top personnel at major FAST RETAILING group companies

■【Board of Directors and Statutory Auditors of FAST RETAILING CO., LTD.】(as of November 1, 2011)

Note:
Mr. Hambayashi, Mr. Hattori, Mr. Murayama, and Mr. Shintaku are external directors as stipulated under Article 2, Section 15 of Japanese company law. Furthermore, Messrs Yasumoto, Shimizu, and Watanabe have been appointed external auditors as stipulated under Article 2, Section 16 of the Japanese corporate law.

■【Board of Directors and Statutory Auditors of UNIQLO CO., LTD.】(as of November 1, 2011)

Note1:
Mr. Yasumoto and Mr. Shimizu have been appointed external auditors as stipulated under Article 2, Section 16 of the Japanese corporate law.

■【Affiliated Company】(as of November 1, 2011)

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Fast Retailing Co., Ltd. (FR) and SM Retail, Inc. have concluded an agreement to establish a joint venture with a view to developing UNIQLO's business in The Philippines.

1. Objective of joint venture

This venture is established for the purpose of expanding UNIQLO business operations in The Philippines.

2. Overview of venture (the following is subject to change)

• (1) Business name: Fast Retailing Philippines, Inc.
• (2) Location: Metro Manila (Pasay City), The Philippines.
• (3) Representatives: Katsumi Kubota
• (4) Operations: The opening and managing of UNIQLO stores in The Philippines.

3. ABOUT SM RETAIL

SM Retail, the leading retail group in the Philippines, has over fifty years experience in the industry. Its retail operations include a chain of department stores, supermarkets, and hypermarkets strategically located in key cities of the Philippines. It also has chains of specialty store formats that serve niche markets by focusing on a wide selection of merchandise for each category like home stores, toy superstores, hardware superstore like ACE Hardware, personal care store with Watson's and appliance superstores, among others.

SM Retail is part of SM Investments Corporation, one of the country's largest conglomerates, which also has core businesses in mall operations, banking, property, and hotels and conventions.

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FAST RETAILING CO., LTD.
to Japanese page

At the 5th annual World Retail Congress held from 27 - 29 September 2011 in Berlin, Germany, Tadashi Yanai, President & CEO of leading Japanese retail company Fast Retailing, was inducted into the World Retail Hall of Fame. Today numbering over 100 retail legends from around the world, the World Retail Hall of Fame honors individuals, entrepreneurs and highly intuitive retailers who have founded or built international businesses that are admired all over the world. Tadashi Yanai was selected as one of three inductees for 2011 representing the three regions of Americas, Europe and the Middle East, and Asia-Pacific.

Fast Retailing was also selected as one of six finalists for the prestigious International Retail of the Year Award. Showcasing innovation and creativity in the field of retail, the World Retail Awards recognize and promote retail excellence to the wider business community around the world. There are nine categories of awards, and the values associated with all of the categories are business ethics, innovation and success.

Commenting on being inducted into the World Retail Hall of Fame, Tadashi Yanai, President & CEO of Fast Retailing, said, "I am honored and pleased to have been inducted into the World Retail Hall of Fame. I accept this recognition on behalf of all employees of the Fast Retailing Group, based throughout the world. I wish to also thank the World Retail Congress for choosing us as a finalist for the International Retail of the Year Award 2011. As an innovative Japanese retailer and manufacturer of private label apparel, our aim is to transform the world of clothes and to ensure that customers globally can experience firsthand our creations when they visit our UNIQLO, Theory, Comptoir des Cotonniers, Princesse tam.tam and g.u. stores. At the same time we will continue to contribute to society through our clothes, by helping to launch social businesses in nations where clothing becomes affordable to the local population."

For more information on the World Retail Hall of Fame and the World Retail Awards please visit
www.worldretailcongress.com

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■ ARC Gold Award for Overall Annual Report

The Fast Retailing annual report, Annual Report 2010, was awarded the Gold Award for the second year running in the Retail: Specialty Stores category of the Overall Annual Report division at the International ARC Awards 2011 held in the United States, the world's biggest annual report competition. In addition, Fast Retailing also won the Silver Award this year for Cover Photo/Design in the same Retail: Specialty Stores category.

The Fast Retailing annual report is a publication that communicates a wide variety of information to stakeholders including investors, business partners and individuals. Such information includes a message from our Chairman, strategies for growth, the company's business model and mission statement, our corporate concept, risk information, financial information, CSR activities, and information on corporate governance.

■ About the International ARC Awards

The International ARC Awards contest is an annual report competition held by MerComm, Inc.*, an independent awards organization located in the United States. The organization is free from the influence of specific industries, advertisers, or sponsors as reviews and evaluations are carried out by judges from a variety of countries and working in a wide range of industries. The competition's nearly 200 judges work in such fields as the financial industry, private corporations, and production industries. This year, the 25th year the awards were held, more than 2,100 entries were received from 31 countries around the globe.

Works are judged focusing on criteria related to the category in which they are entered, with the most coveted award being the Overall Annual Report Division. Other awards include Cover Design, Chairman's Letter, Photos, etc. Within each category, one Gold Award, one Silver Award, one Bronze Award, and one Honors Award are presented to selected works.

In judging and evaluating annual reports, key factors include whether the company's message is clear to the reader, the persuasiveness of the Chairman's message and other texts, how easy the financial information is to read and understand, originality of the cover and interior design, the cohesiveness of the overall report, and other items. Evaluations are exceedingly strict, with an evaluation of "not applicable" given if the minimum required score is not attained. The Gold Award has particularly exacting demands, requiring an average score of 90 or higher out of a total possible score of 100 points (for all evaluation items together); only approximately 5% of award recipients receive a Gold Award.

The awards ceremony is held annually in September in New York. This year, it will be held on September 16th.

*MerComm,Inc：　An independent awards organization that presents awards to corporations, groups and individuals who have engaged in original and effective communications in the areas of internal company guidance, annual reports, Web communications, etc., and who have contributed to the development of communication methods at a global level, with the aim of maintaining high standards for corporate communications. The organization has no advertisers or sponsors, allowing for fair and impartial reviews and evaluations.

Fast Retailing
Annual Report 2010

Theme:
Change the world with truly great clothing

The Fast Retailing annual report may be downloaded using the links below:
English version : http://www.fastretailing.com/eng/ir/library/annual.html
Japanese version : http://www.fastretailing.com/jp/ir/library/annual.html

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Fast Retailing Co., Ltd. has decided to appoint a new president from within the existing executive management team at consolidated subsidiary Link Theory Japan Co., Ltd.

1. Top Management Transfer at Link Theory Japan Co., Ltd.

2. Appointment effective September 2, 2011.

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Fast Retailing Co., Ltd. (Chairman, President and CEO Tadashi Yanai) and Mitsui Fudosan Co., Ltd. (President and CEO Masanobu Komoda) have signed an agreement to form a business alliance to expand their operations in East Asia.

The agreement builds on the strong partnership that the two companies have formed over many years, which has led to the placement of UNIQLO stores in LaLaport locations and other Mitsui Fudosan development projects. With both companies planning to aggressively expand their respective business operations in East Asia, their partnership agreement is expected to further strengthen their ties with each other and produce synergies that will quickly drive the expansion of both companies' operations in East Asia.

Purpose of the agreement

The two companies signed the agreement with the following aims in mind:

• • Fast Retailing hopes to accelerate the opening of its flagship UNIQLO brand stores across East Asia.
• • Mitsui Fudosan hopes to accelerate the expansion of its retail property business in East Asia.

Main items of the agreement

The main items of the agreement are as follows:

• • Mitsui Fudosan will share information with Fast Retailing about its development projects (urban, suburban and multi-purpose developments) in advance. The companies also plan to discuss the possibility of opening UNIQLO stores and to standardize store formats when Fast Retailing decides to open UNIQLO stores in Mitsui Fudosan developments.
• • The two parties plan to share development plans for commercial complexes in East Asia, as well as information about real estate properties and other matters.

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With deep regret, Fast Retailing announces the passing of its Chikara "Ricky" Sasaki on August 9, 2011 at the age of 60. At the time of his death, Mr. Sasaki was a Fast Retailing Group Executive Vice President and President and the CEO of Link Theory Japan Co., Ltd.

Funeral Service for Ricky Sasaki (March 16, 1951 - August 9, 2011)

Personal History

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Consolidated results

【Summary】Despite profit fall in third quarter, Fast Retailing still expects to attain full-year forecasts on strong sales of summer clothing 　

In the three months from March through May 2011, the third quarter of fiscal 2011, consolidated net sales for the Fast Retailing Group expanded 3.5% year on year to ¥ 194.6bln but operating income contracted 4.6% to ¥ 22.5bln. Operating income at UNIQLO Japan also fell in the third quarter as the March 11 earthquake and then the cool weather in April and May knocked same-store sales down 1.9% year on year. Operating income at UNIQLO Japan was also affected by a fall in the gross profit margin compared to the relatively firm margin in the previous year. On the other hand, UNIQLO International continued to contribute significant gains in both sales and income in the March to May quarter. Our Global Brands segment performed to plan in the third quarter thanks to a strong performance from our Theory brand operation.

The UNIQLO Japan operation did fall short of target in the March to May quarter. However, sales of summer items have been buoyant since the weather grew hotter in July. Our Super Cool Biz-related clothing has also been selling well. Therefore, we do still expect to be able to achieve our forecast for a rise in both sales and income in the second half, or the six months through August 2011.

For the full business year through August 2011, we forecast consolidated net sales to increase 2.6% year on year to ¥ 836.0bln, and consolidated operating income to fall 8.2% to ¥ 121.5bln, generating an income of 589.38 yen per share. Breaking down the operating income forecasts per operation: we estimate operating income will fall 14.6% year on year to ¥ 109.0bln at UNIQLO Japan, but we predict operating income will rise 57.1% year on year to ¥ 10.0bln at UNIQLO International, and rise 8.3% year on year to ¥ 8.5bln at our Global Brands segment. We forecast an annual dividend for fiscal 2011 of 180 yen per share, including the interim dividend of 95 yen paid out in May.

■　UNIQLO Japan

As our current mainstay operation, UNIQLO Japan constitutes 74% of consolidated sales. UNIQLO Japan reported a fall in both sales and income for the first nine months of the business year from September 2010 through May 2011. Over that period, sales from the UNIQLO Japan operation fell 4.7% year on year to ¥ 482.1bln and operating income contracted 21.3% to ¥ 91.0bln. In the latter part of that period, namely the third quarter from March to May 2011, UNIQLO Japan sales actually increased 0.7% year on year to ¥ 140.0bln while operating income shrank 11.2% year on year to ¥ 20.7bln. The fall in operating income in the third quarter can be attributed to a number of factors including the 1.9%-contraction in same-store sales which were adversely affected by the March 11 earthquake and persistent cool weather through April and May. Operating income was also affected by a 3.0-point fall in the gross profit margin in real terms. The gross profit margin fell further than initially planned after the March 11 earthquake necessitated more price adjustments on spring inventory, and the cost of cotton and other raw materials rose sharply. As a result of the above factors, overall sales at UNIQLO Japan fell approximately ¥ 3.0bln short of our latest estimate in the March to May quarter, and operating income came in approximately ¥ 1.0bln below target.

In terms of new store openings, our first global flagship store in Japan, the UNIQLO Shinsaibashi Store opened in October 2010, proved extremely successful and spurred us on to open more large-scale stores in Tokyo, Osaka and other major Japanese cities. We have also opened more new stores within prime department store locations including the UNIQLO Daimaru Umeda Store in March and the UNIQLO Tachikawa Takashimaya Store in April. By the end of May 2011, our total store network, including 21 franchises stores, had expanded to 842 stores, and 128 of that total were large-scale stores. In the nine months to May 2011, we opened 56 new stores, and closed 23 stores as part of our drive to make our stores larger. We also transferred one store to a franchise format.

On new product development, we continue to strengthen the product development framework that we have with materials' manufacturers to ensure we respond sensitively to latent customer needs. We are expanding our reach and attracting new demand through incremental improvements to our highly functional ranges such as HEATTECH and Ultra Light Down items for the fall/winter season, and Sarafine, Silky Dry, Bra Tops and Style Up innerwear for the spring/summer season. These ranges are selling even better in fiscal 2011 than in fiscal 2010, with sales of HEATETCH garments in Japan and overseas totaling 70 million units and sales of summer functional innerwear (Sarafine, Silky Dry and Style Up ranges) reaching 36 million units.

Over the full business year through August 2011, we estimate overall sales at UNIQLO Japan will contract 1.2% year on year to ¥ 608.0bln and operating income will fall 14.6% year on year to ¥ 109.0bln. The UNIQLO Japan operation did fall short of our latest estimates for the March to May quarter. However, sales of summer goods have picked up as the weather has grown increasingly hot from July, and our Super Cool Biz-related items are selling particularly well. Therefore, we still expect to achieve our forecast for a year-on-year rise in both sales and profit in the second half of fiscal 2011 from March to August 2011.

■　UNIQLO International

UNIQLO International continued to generate significant gains in both sales and income in the three months from March to May 2011. The pace of new store openings has been particularly strong in Asia, with 34 new stores added to the region's network spanning China and Hong Kong, South Korea, Taiwan, Singapore and Malaysia in the nine months to May 2011. At end May 2011, the store network in Asia had expanded to 152 stores. In addition, each individual Asian nation has continued to generate double-digit growth in same-store sales. Sales at our first store in Taiwan, opened in October 2010, have far exceeded initial targets, and we now predict UNIQLO Taiwan will turn a profit in its first year of operation. We are then scheduled to open a global flagship store in Taipei's Mingyao department store this fall. We are also actively challenging new Asian markets with our first store opened in Malaysia in November 2010, and our first store in Thailand due to open its doors in September 2011.

The UNIQLO operation in the United States remained strong in the third quarter with the New York Soho global flagship store continuing to generate double-digit growth in sales. We are looking to further establish UNIQLO's brand position in the U.S. market with the opening of another global flagship store, this time on New York's prominent Fifth Avenue, and also a megastore on New York 34th Street, the city's most lucrative shopping district. Turning to Europe, the Paris Opera global flagship store in France continued, as expected, to improve on an already strong performance. Meanwhile, UNIQLO operations in both the U.K. and Russia fell short of target in the March to May quarter.

For the full year through August 2011, we predict sales at UNIQLO International will expand 37.4% year on year to ¥ 100.0bln and operating income will increase an impressive 57.1% year on year to ¥ 10.0bln. We expect to add a net 40 new stores, boosting UNIQLO International's total network to 176 stores by end August 2011.

■　Global Brands

Our Global Brands segment performed as planned in the three months from March to May 2011. For the full year through August 2011, we estimate sales at Global Brands will fall 0.2% year on year to ¥ 125.0bln but we predict operating income will rise 8.3% to ¥ 8.5bln. Our Theory label remains strong and is outperforming our targets particularly in the United States. Despite the adverse impact of the March 11 earthquake and tsunami, our Theory operation in Japan managed to maintain sales and operating income at the previous year's level in the third quarter. Our French fashion label, Comptoir des Contonniers, failed to meet our target in the third quarter and income there is expected to fall in the full business year to August.

Same-store sales at our low-priced g.u. casualwear operation began rising from April, with brand awareness boosted by the opening of two flagship stores: the g.u. Shinsaibashi Store in November 2010 and the g.u. Ikebukuro East Entrance Store in April 2011. However, operating income at g.u. is likely to contract over the full business year as costs associated with the opening of the two flagship stores are absorbed.

■　Consolidated Forecasts for Fiscal 2011

For the full year through August 2011, we estimate net sales will increase 2.6% year on year to ¥ 836.0bln, operating income will contract 8.2% year on year to ¥ 121.5bln and net income will fall 2.7% year on year to ¥ 60.0bln. This translates into an income per share of 589.38 yen. These forecasts are unchanged from the latest figures announced April 7. In addition, we forecast an annual dividend for fiscal 2011 of 180 yen per share, including the interim dividend of 95 yen paid out in May.

■　Impact of March 11 Earthquake and Update on Fast Retailing Relief Aid

In the immediate aftermath of the March 11 earthquake and tsunami, 160 UNIQLO stores and 14 g.u. stores were forced to close temporarily. However, the majority of stores were able to reopen for business the following day, leaving 14 UNIQLO and 6 g.u. stores still temporarily closed at the end of March. As of July 14, only 4 UNIQLO stores remain closed and two of those are scheduled to reopen for business soon. We have accounted an extraordinary loss in the third quarter of ¥ 0.79bln for damage related to the March 11 earthquake.

The Fast Retailing Group has donated approximately 850,000 items including HEATTECH, fleece, underwear and towels, valued at ¥ 0.7bln, to people most affected by the March 11 earthquake and tsunami. Volunteers from among our staff have traveled to distribute the items in cooperation with NPOs working in the affected areas. In addition, the Fast Retailing Group has donated ¥ 0.2bln to support relief efforts, and, as of end May, customers had contributed ¥ 0.24bln to fund-raising collections in UNIQLO stores. This money has been channeled through the Japanese Red Cross and other NPOs involved in reconstruction support activities in the affected region. In addition, a limited edition of "SAVE JAPAN" T-shirts designed by 10 world-famous celebrities is being sold in UNIQLO stores globally. In June we donated ¥ 0.13bln of the profits from this limited edition to the Japanese Red Cross, and we plan to donate approximately ¥ 0.2bln to the Momo-Kaki Orphans Fund set up by Momo-Kaki Scholarship Foundation to help children who lost their parents in the March 11 disaster.

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