In a Nutshell: The parent of fast-fashion chain Uniqlo on Thursday reported first-half results and detailed plans to open 400 to 500 new stores worldwide over the next five years, including 200 North American locations. Yanai has been vocal about his ambitions to make Uniqlo the No. 1 global casual apparel retailer.
Daisuke Tsukagoshi, group senior executive officer at Fast Retailing and CEO of Uniqlo USA, said Uniqlo North America is moving into an accelerated growth phase, with a Fiscal Year 2027 target of sales at 300 billion yen ($2.38 billion). Uniqlo will lean on LifeWear to help reach that goal, and also look to scale successful North American product worldwide while taking a more active role in local communities.
Tsukagoshi said the company has improved its gross profit margin by 8 points versus Fiscal Year 2019 by offloading unprofitable inventory and minimizing lost sales opportunities by air shipping strong-selling items. Moreover, the company reduced its selling, general and administrative (SG&A) costs by clsing unprofitable doors, reviewing store rents, better managing local store inventory levels, leveraging RFID technology and adding self-checkout.
Boston, New York, Philadelphia, Virginia, Chicago, Florida, Texas, Los Angeles, San Francisco, Hawaii, Vancouver, Edmonton, Toronto and Montreal are set to see new Uniqlo stores, the company said.
Takeshi Okazaki, group senior executive officer and financial officer at Fast Retailing, said the company operating profit hit a new record high, up 12.7 percent go 189.2 billion yen ($1.50 billion) from 167.9 billion yen ($1.33 billion).
Sales from North America and Europe were strong in the quarter, while South Asia, Southeast Asia and Oceania achieved record sales and operating profit. However, Uniqlo’s revenue and profit were down in Japan and the Greater China region on operational challenges linked to Covid-19.
“Appetite for apparel was dampened by continued Covid-related restrictions,” Okazaki said. Gross profit margin declined on end-of-season discounts needed to move excess inventory. During the half, 133 stores were temporary closed because of coronavirus restrictions.
The company operates 49 Uniqlo stores in Russia, and after initially keeping the stores open, Fast Retailing suspended operations there.
Net Sales: First half net sales for the period ended Feb. 28 rose 1.3 percent to 1.22 trillion yen ($9.69 billion) from 1.20 trillion yen ($9.53 billion).
The company didn’t break down revenue for North America, Europe or its business in Asia. However sales for Uniqlo Japan were down 10.2 percent to 442.5 billion yen ($3.51 billion) from 492.5 billion yen ($3.91 billion), and operating profit dropped 17.3 percent to 80.9 billion yen ($642.3 million) from 97.8 billion yen ($776.5 million).
Uniqlo International’s profit contribution from the U.S. and Europe expanded from 5 percent to 20 percent, making the two regions a “new earnings pillar” for Fast Retailing. Overall operating profit for the unit rose 49.7 percent to 100.3 billion yen ($796.4 million) from 67.0 billion yen ($532 million).
Meanwhile, the global brands group’s revenue rose 8.1 percent to 58.9 billion yen ($467.7 million) from 54.5 billion yen ($432.7 million). The company posted operating profit of 1.0 billion yen ($7.9 million), against a loss of 8.1 billion yen ($64.3 million) in the same year-ago period. Theory generated large revenue and profit gains as younger consumers drove “strong” sales of “easy-to-purchase, lower-priced items,” Okazaki said.
Earnings: Net profits rose 38.7 percent to 146.8 billion yen ($1.17 billion) from 105.8 billion yen ($840.1 million).
For Fiscal Year 2022, Fast Retailing projects an 11.9 percent gain in profits to 190.0 billion yen ($1.51 billion) on a 3.1 percent increase in revenue to 2.20 trillion yen ($17.47 billion). The company also warned that it expects revenue and profit to decline in the Greater China region for the second half and the fiscal year, mostly due to continued Covid restrictions.
CFO’s Take: “Our defensive stance in [the first half meant Uniqlo Japan wasn’t] able to offer enough of the products that customers wanted, and we suffered shortages of strong-selling items,” Okazaki said, adding that the company will strengthen its product lines, and further integrate physical stores with digital by “fully unifying store and [e-commerce] inventory.”