Uniqlo’s performance hit a new high with the recovery of Japan.
Interface Fashion once reported that in the first and second quarters of fiscal year 2022, Uniqlo’s revenue and profits in its two pillar markets, Japan and Greater China, continued to decline. At that time, Fast Retailing Group, the parent company of Uniqlo, expected that its comprehensive income in fiscal 2022 would increase by 3.1% year-on-year to 2.2 trillion yen (approximately RMB 107.1 billion), and its comprehensive operating profit would increase by 8.4% year-on-year to 270 billion yen (approximately RMB 107.1 billion). 13.1 billion yuan).
After the release of the third fiscal quarter performance report, Fast Retailing Group increased its full-year performance forecast. Comprehensive income forecast increases by 50 billion yen to 2.25 trillion yen (approximately RMB 109.6 billion), an increase of 5.5% from the previous year; comprehensive operating profit forecast increases by 20 billion yen to 290 billion yen (approximately RMB 14.1 billion) ), a year-on-year increase of 16.5%.
On the one hand, the performance increase is due toThe recent continued decline in the yen exchange rate, so the assumed exchange rate based on the fourth quarter performance forecast has been readjusted; on the other hand, it is mainly due to The third quarter was a strong quarter, beating expectations even in local currency terms. Fast Retailing Group expects that its full-year business profit and total operating profit will set a new record high.
In the third quarter, Fast Retailing Group’s comprehensive revenue reached 198.4 billion yen, a year-on-year increase of 8.7%, and operating profit was 38.1 billion yen, a year-on-year increase of 76.2%. Looking at the first three quarters, Fast Retailing’s total business and operating profits have reached a record high, whether calculated in Japanese yen or local currency.
The financial report pointed out that the strong performance in the third quarter was mainly due to the beyond-expected performance of overseas UNIQLO and Japanese UNIQLO divisions. This is also the first time that the Japanese market has escaped from the dilemma of consecutive declines in revenue and profits during this fiscal year.
Fast Retailing said that in the first half of the year, due to a high base in the previous year and a loss of opportunities due to a shortage of best-selling products, the performance of the Japanese market declined.
However, in the third quarter, due to the control of the epidemic, the demand for people to go out was high, and the Japan Shopping Golden Week and UNIQLO Thank-You Festival promotional activities performed well, same-store sales during the period increased by 7.8% year-on-year. Gross profit margin also improved by 3.9 percentage points year-on-year due to the reduction of discount promotions and optimization of discount rates.
At the same time, some UNIQLO Japan products will increase prices. According to a recent report by The Japan Times, Fast Retailing will increase the price of its best-selling classic polar fleece product by 1,000 yen (approximately RMB 48.7). There has never been such a high price increase before. This year, Uniqlo’s autumn and winter products will increase prices across the board. For example, the price of men’s ultra-light down jackets will increase by 1,000 yen to 6,990 yen (approximately (Total RMB 340).
Fast Retailing Group Chairman Yanai Tadashi told local media in April that it is difficult to easily decide to raise prices in today’s economic situation, but if the price of raw materials rises by 50%, it will be difficult for Fast Retailing to maintain the current pricing.
Another factor that has made Fast Retailing worried about performance growth before is that the Chinese market, which has always been regarded as the largest pillar of overseas markets, has been troubled by repeated epidemics. Performance has not stopped falling. .
In the third quarter, Overseas UNIQLO business units in Southeast Asia, South Asia and Oceania, North America and Europe (excluding Russia) all recorded substantial growth in both revenue and profit. Only the Greater China region recorded a significant decline in both revenue and profit.
The financial report pointed out that this was mainly due to the repeated restrictions on travel due to the epidemic, which led to the temporary closure of 169 stores, mainly in Shanghai, from March to May, resulting in a decline in sales. However, since June, as relevant restrictions began to be relaxed, performance has shown a recovery trend.
Uniqlo also told Jiemian Fashion that as of press time, all its offline stores in China have resumed business. There are also new stores ready to open in August and September.
Interface Fashion once reported that when the domestic epidemic situation improved from the end of May to mid-June, UNIQLO opened 17 new stores in mainland China. The total number of stores exceeded 888 strong>. In the past two years, UNIQLO has maintained a rate of opening 80 to 100 stores per year in China, paying special attention to the sinking market.
Although the aforementioned other overseas markets such as Southeast Asia and South Asia have recently been regarded by UNIQLO as the next growth expectation point, But China is still Uniqlo’s second largest market outside Japan.
In the nine months as of May 31, 2022, Greater China’s performance accounted for 23.3%, second only to Japan’s 36.3%. The performance of other overseas markets only accounted for slightly more than 10%. This means that boosting performance in Japan and China will remain Uniqlo’s focus. The financial report stated that Greater China is expected to record substantial growth in both revenue and operating profit in the fourth quarter after the epidemic-related restrictions have eased.
But it is worth mentioning that for a long time, Fast Retailing has not cultivated a second pillar brand besides Uniqlo to resist the risks of a single brand. Similar competitors such as Zara and H&M have vigorously developed mid-to-high-end differentiated brands such as Massimo Dutti and COS to gain a foothold in the market and increase their chips.
According to the third quarter financial report, Uniqlo has firmly occupied the focus of Fast Retailing Group with 84% of its performance, while GU, which is regarded as Uniqlo’s replacement brand, has only accounted for 10.8% of its performance so far.
Even in the Chinese market, compared to Uniqlo’s nearly 900 stores, GU has only developed more than ten stores since entering China in 2013. Except for a South China flagship store in Guangzhou, almost all GU stores are located in Shanghai. The Suzhou store that GU tried to expand overseas has been closed in 2020.
One of the problems is that GU has too few stores, resulting in low brand momentum. On the other hand, low-priced fast fashion brands have lost their cost-effectiveness due to the rise of Chinese e-commerce apparel brands. The high offline rent and labor costs have compressed profits and limited GU’s space for development.
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