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Uniqlo expects profit at U.S. stores in 'couple of years'

Shoppers walk inside Fast Retailing's Uniqlo casual clothing store in Tokyo July 10, 2014. REUTERS/Toru Hanai

By Atsuko Kitayama

(Reuters) - Japanese fashion retailer Uniqlo aims to turn a profit at its small but expanding U.S. network of stores within the next couple of years, the company's top U.S. executive, Larry Meyer, said.

Well known in its home country for its inexpensive but trendy down jackets, jeans and undergarments, Uniqlo - short for "Unique Clothing" - is a relative newcomer in the United States.

It opened its first flagship store in New York City's chic Soho neighborhood in 2006. With this week's new opening in Wayne, New Jersey, the company, owned by the world's fourth-largest fashion retailer, Fast Retailing Co (9983.T), now operates 26 U.S. stores.

And the company plans to boost that number to 39 outlets by mid-November, Meyer, chief executive officer of Uniqlo USA, told Reuters.

Still, Uniqlo's ambitious roll-out plan has yet to earn a profit in the U.S., at least in part because of high opening costs.

"We are investing in building our brand and building stores, that includes building a workforce that is capable of handling the road we are putting in place," Meyer said.

He was optimistic that the U.S. operation was "on the way to getting (profitable) within the next couple of years."

Fast Retailing has provided few details and has said for the past few years that the U.S. business would emerge from the red "soon."

In Japan, Uniqlo net sales grew 6.1 percent to 163.8 billion yen ($1.51 billion) in the third quarter ended May 31, 2014, while international net sales jumped 57.7 percent to 95.6 billion yen over the same period.

The retailer plans to have 200 Uniqlo stores in the United States by 2020, part of a broader push to become the world's top fashion retailer. Its competitors include Spain's Inditex (ITX.MC), which owns the Zara chain, Sweden's Hennes & Mauritz (HMb.ST), or H&M, and Gap Stores Inc. (GPS.N).

Fast Retailing operates more than 1,400 Uniqlo stores worldwide, including more than 850 in Japan and over 300 in China.

After mid-November, when it will have 39 U.S. outlets, the chain intends to open 10 to 15 locations a year, Meyer said.

"We will be building revenue consistent with what 200 stores would generate," Meyer said.

He said some new stores will have the bigger flagship format and that e-commerce would make a contribution.

Building brand awareness was a big challenge, Meyer said, and sizing was another sticky issue.

Uniqlo has had to adjust its sizing by "scaling up" to fit the U.S. market, meaning a "medium" jacket in a Tokyo store may be a "small" in New York. The company is still looking into all sizing technology, he said.

In the short term, Uniqlo plans to open additional locations in Boston and Los Angeles, and its first Chicago store next fall.

(Reporting by Atsuko Kitayama in Toronto; Additional reporting by Solarina Ho; Editing by Jeffrey Hodgson, Bernadette Baum and Meredith Mazzilli)