UPDATE 3-Fast Retailing eyes M&A, new markets for sales boost

* Aims Y5 trln in sales in 2020, up from est Y682 bln in '09

* Will enter Russian market next year.

* Shares down 3.1 pct, paring earlier losses of over 4 pct

* Uniqlo same-store sales up 5.6 pct in August (Recasts, adds details, comments)

TOKYO, Sept 2 - Japan's Fast Retailing, operator of the Uniqlo casual clothing chain, said it aims to boost annual sales more than seven-fold to $54 billion by 2020 as it continues to seek acquisitions and overseas expansion to become a global fashion powerhouse.

The company, which runs about 780 Uniqlo stores in Japan and 80 overseas, said it planned to enter Russia next year and would expand rapidly in China, looking to beef up its global network to 4,000 stores by 2020.

The expansion could mean tougher competition for Gap Inc of the United States, Spain's Inditex and Sweden's Hennes&Mauritz.

Shares of Fast Retailing were down 3.1 percent, paring earlier losses of more than 4 percent. The benchmark Nikkei average was down 2.4 percent.

Operators of low-cost fashion stores like H&M and Inditex's Zara have weathered the economic downturn better than upscale rivals globally, but Uniqlo has fared even better than its international peers.

Uniqlo stores in Japan logged a hefty 11.3 percent in same-store sales for the 12 months that ended in August, defying the country's prolonged retail slump.

Japan's largest retailer, Seven & I Holdings, cut its full-year operating profit forecast by 12 percent earlier this week as a cool summer exacerbated weak consumer spending that has hit the firm and rival stores.

Investors have generally praised Uniqlo, which has successfully rolled out a series of hit products, such as clothing made of heat-trapping fabrics and camisoles with built-in bras.

But they say the company needs to present a solid overseas business plan to convince investors of its growth potential, given that the Japanese retail market has matured.

"Uniqlo's current strong performance has already been factored into the firm's share price. It needs a further growth story to push the stock a stage higher," said Naoki Fujiwara, fund manager at Shinkin Asset Management.

"There is a limit to domestic growth potential, it has to seek growth overseas, especially in Asia," he said.

ASIA SEEN AS GROWTH DRIVER

Fast Retailing, which also operates shoe stores and other chains, said it was aiming to lift sales to 5 trillion yen ($54 billion) by the financial year to August 2020, up from the 682 billion yen that was forecast for the year ended last month.

Of the sales target, the company said it would aim to generate 3 trillion yen in sales from its overseas Uniqlo business. That business has been forecast to post 37 billion yen in sales for the year just ended.

Fast Retailing CEO Tadashi Yanai said the bulk of the firm's growth will come from Asia, especially China, where it plans to open a flagship store in Shanghai in spring next year and eyes 100 store openings every year. It already has around 30 stores in mainland China and Hong Kong.

"In the near future, Asia will be the biggest market in the world, providing the biggest growth opportunity for Uniqlo," he told an annual strategy briefing. He expects to have 1,000 large Uniqlo outlets in China by 2020.

ACQUISITIONS YET TO COME

Acquisitions will be indispensable for growth in the U.S. and Europe, Yanai continued.

"Chances will definitely come (for acquisitions). There will be global industry consolidation, and we want to be the first to grab opportunities when they emerge," he said.

The company has so far been unable to land a big deal, losing a bidding war for upscale retailer Barneys New York in 2007 and giving up on a bid for Hong Kong apparel firm Giordano International in 2006.

"We have been making an effort, but we have not yet been able to pick up companies, especially large ones which we can work with to achieve growth," Yanai said. ($1=92.78 Yen)