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Despite Slowdown, Uniqlo Continues to Expand

Apparently only beginning its American invasion, Uniqlo has announced its aggressive plan to open ten new stores across the US.

Starting between October 4th and November 8th, the new store openings will bring the Japanese retailer’s US count to seventeen. Uniqlo also aims to spread its wings internationally. It opened new stores in Indonesia last June and plans to open more in Melbourne, Australia in 2014. As it stands now, Fast Retailing Co. has 2,327 stores globally with 847 Uniqlo outlets in Japan and 359 abroad.

Uniqlo’s robust expansion has surprised many given its recently languid performance. Typically a standout performer among Japan’s otherwise stagnant retail sector, Fast Retailing Co. reported a dramatic decline in third quarter profit. According to Bloomberg calculations, operating profits dropped 27.4 billion yen ($280 million), down from 27.6 billion the previous year.

As a result, the Uniqlo’s stock fell 5.8 percent. Fast Retailing Co. blamed its woes on a variety of contributing factors, including unseasonably warm weather that hurt sales of its autumn and winter clothing lines, steep discounts designed to attract more volume and basic operational and logistical problems that made it difficult for Uniqlo to keep its shelves adequately stocked with core products.

Despite some help from a substantially depreciated yen against the dollar, Uniqlo has struggled to regain former footing. Its overall sales have dipped 4.7 percent to 250.99 billion yen from 263.46 billion, and domestic sales have tumbled 15.5 percent. Uniqlo’s operating profit fell 18.4 percent to 49.85 billion yen from a once lofty 61.06 billion.

And there doesn’t seem to be any relief in sight. Uniqlo lowered its forecast for domestic sales, anticipating a 11.4 percent decrease in the first half of the next fiscal quarter. It also revised its revenue outlook, expecting a 3.8 percent rise to 846 billion yen compared to an earlier, and rosier, prediction of 856 billion yen.

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While acknowledging its missteps, Fast Retailing Chief Financial Officer Hidetsugu Onishi maintained a generally optimistic view. “Our sales in December declined at a steeper than expected pace. I don’t think the domestic market has already become saturated or hit a peak. We will concentrate more on basic goods and will reap the benefits in the second half,” he said.

In an attempt to revitalize slackening sales, Uniqlo plans to scale down both its labor costs and sales promotion costs by 7 billion yen over the next fiscal quarter.

The new stores are distributed widely. Four are scheduled to open in Northern California, two in New Jersey and three in New York. Uniqlo plans to raffle off $500 shopping sprees at the new locations to lure in customers.