Dive Brief:

• Japanese apparel retail company Fast Retailing pulled back its net profit expectations for the second six months of its fiscal year 45.5% as price reductions at its Uniqlo brand have hit hard.

• Uniqlo saw weak sales in the high-volume November and December months as warmer weather muted sales of its popular thermal wear and outerwear, leading to a 1.9% decline in same-store sales in the first half of the fiscal year. Heavier discounting in January and February contributed to the 3.5% fall in the first-half gross margin. Operating profit declined 28.3% year on year.

• Fast Retailing's stock plummeted 13% on the report and dragged other Japanese stocks with it, and there are murmurs of Japanese officials possibly intervening to deal with the rising yen. 

Dive Insight:

Fast Retailing CEO Tadashi Yanai has clearly and often expressed his ambitions to overtake H&M and Zara as a worldwide fast-fashion apparel retailer. But it looks like the force and speed of Uniqlo’s expansion in the U.S. has been too much, too soon.

Uniqlo says it hasn’t found the same level of success at American malls that it’s found in its urban locations here. The retailer is also finding that H&M is well established in the U.S., including in malls, and is a tough competitor to beat in the suburbs.

Uniqlo said last year that it is scaling back its U.S. expansion plans from a goal to open 15 new stores to just five, for a total of 44. “The brand penetration in big cities such as New York, San Francisco and Chicago—where we will open a new store—is good, but not in the suburbs,” Yanai said at the time.

According to Reuters, Fast Retailing says it still plans to become the world’s biggest apparel retailer. To that end, 100 new Uniqlo stores will open across the globe over the next few years.

Uniqlo sells colorful basics and tech garments at affordable prices, and often collaborates with emerging designers on special collections. Last month Uniqlo launched a new partnership with Spring, the Google-backed e-commerce startup that allows consumers to shop multiple brands from a single mobile app. It is the first time Uniqlo has sold its apparel through a third party.