Uniqlo overseas push pays off for Fast Retailing
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Fast Retailing raised its full-year earnings forecasts after sales at its Uniqlo casual-wear stores in China and South Korea grew more strongly than expected during the first half of the financial year, showing its overseas expansion is bearing fruit.
Overseas growth is key to the Japanese firm’s goal of becoming the world’s top apparel retailer by 2020 ahead of Zara owner Inditex, Hennes & Mauritz and Gap.
Chief executive Tadashi Yanai said Fast Retailing would have more Uniqlo outlets overseas than in Japan by this autumn, with openings in mainland China, Hong Kong and Taiwan to continue at break-neck pace.
“Maybe in about five years, we’ll have 1,000 stores [in China],” he said, compared with 415 at the end of February. “Eventually we want to have about 3,000 stores [there].”
Uniqlo, known for its HeatTech fabric technology and rainbow-coloured basics, now has close to 1,600 stores globally, with about 46 per cent of those outside Japan.
Fast Retailing said it now expected operating profit of 200 billion yen for the financial year to August, up from its previous estimate of 180 billion yen. The average forecast of 22 analysts was for 197.25 billion yen.
Asia’s biggest apparel retailer also bumped up its revenue forecast to 1.65 trillion yen from 1.6 trillion yen and its net profit estimate to 120 billion yen from 100 billion yen.
Overseas sales at Uniqlo jumped 49 per cent in the first half from a year earlier, led by China and Korea, although the United States remained a weak spot. The firm did not break out sales results by country, only saying whether they met its targets.
In Japan, sales rose 12 per cent during the period as shoppers snapped up items like its ultra-light down jackets and extra-fine merino sweaters.
“Maybe in about five years, we’ll have 1,000 stores [in China],”
Fast Retailing also got a boost from the yen’s depreciation, booking a 13.5 billion yen foreign-exchange gain for the six-month period.
But the company also warned it was facing rising import costs from the weaker yen. As a result, it will raise prices by 10 per cent on average for roughly a fifth of its products in the next autumn/winter season at Uniqlo Japan.
Shares in Fast Retailing have gained 10 per cent in the year to date, while the Topix Index is up 13 per cent.
Separately, Britain’s Co-operative Group, the supermarkets-to-funerals operator that almost collapsed in 2013, said it had been rescued by selling assets including its pharmacies and could now focus on rebuilding.
Co-operative reported pre-tax profit of £124 million for the year to January 3, against a loss of £255 million a year earlier, on revenue of £9.4 billion, helped by disposals.
The mutually owned group said it had emerged from the rescue phase of a three-year turnaround as a slimmer business focused on its food stores, funerals, insurance and legal services. It has cut net debt to £808 million from £1.4 billion.
Chief executive Richard Pennycook said the hard work of rebuilding the group was under way after the completion of its rescue plan.
Questions & Answers
Q.What is the updated operating profit forecast for Fast Retailing for the financial year to August?
What is the updated operating profit forecast for Fast Retailing for the financial year to August?
Fast Retailing now expects an operating profit of 200 billion yen for the financial year to August. This is an increase from its previous estimate of 180 billion yen, surpassing the average analyst forecast.
Q.How quickly does Fast Retailing plan to expand Uniqlo stores in China?
How quickly does Fast Retailing plan to expand Uniqlo stores in China?
The firm aims to open stores in mainland China, Hong Kong and Taiwan at a break-neck pace. CEO Tadashi Yanai indicated they could have 1,000 stores in China in about five years, eventually targeting 3,000.
Q.Why will Uniqlo Japan be raising prices on some products?
Why will Uniqlo Japan be raising prices on some products?
The company warned it faces rising import costs due to the weaker yen. As a result, it will raise prices by 10 per cent on average for roughly a fifth of its products in the next autumn/winter season.