By Rocky Swift

TOKYO (Reuters) - Japan's Fast Retailing Co, owner of clothing brand Uniqlo, is expected to post a record annual profit on Thursday as the yen's slump has boosted the value of its overseas sales even as soaring living costs dampen prospects for retailers.

The company, Japan's biggest retailer, has posted strong performances in North America and Europe in the first three quarters of the fiscal year that ended in August, but investors will look for signs of a recovery in China, its biggest foreign market with nearly 900 stores.

Operating profit for the fiscal year is expected to rise nearly 17% to 291 billion yen ($1.99 billion), according to an average of 12 analyst estimates from Refinitiv. Fast Retailing has forecast 290 billion yen.

That would exceed the previous profit record of 263 billion yen in the year ended in August 2019.

For the fourth quarter, analysts expect a 7% drop in profit.

The company, founded by Japan's richest man, Tadashi Yanai, is a bellwether for global retailers operating in China, the world's second-biggest economy but where sales and profits have been hurt by strict COVID-19 control measures.

As its Chinese operations slumped, Fast Retailing has put increased focus on North America and expects to turn an annual profit in the region for the first time this year.

But even in the United States and Europe, people are avoiding shopping for clothes, hurting sales at companies including H&M and prompting retailers to slash prices to clear inventory.

"China is continuously failing to live up to the company's expectations and the only factors holding Uniqlo's share price from breaking down are the North America growth and the yen depreciation," LightStream Research analyst Oshadhi Kumarasiri wrote in a report on the Smartkarma platform.

"Those too are now under threat, with a looming recession and Fed rate hikes failing to curb inflation," he said.

The yen slid to a fresh 24-year low against the dollar on Wednesday. Fast Retailing's shares are up 18% in 2022, compared with an 8.5% drop in the benchmark Nikkei index.

Yanai, who founded the company and owned about 21% of it as of February, and his family had a net worth of $23.6 billion as of May, according to Forbes.

Seven & I Holdings, another Japanese retailer with a large U.S. footprint, raised its full-year profit forecastlast week, citing the weak yen and strong fuel sales at its convenience stores in North America.

($1 = 146.3100 yen)

(Reporting by Rocky Swift; Editing by Muralikumar Anantharaman)