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Uniqlo Price Hikes Powered Parent’s Record Profit

Uniqlo parent Fast Retailing Co. Ltd., said higher prices and fewer promotions helped it reach a record full-year profit even with parts of China still restricted.

In a Nutshell: Uniqlo raised prices on fleece, down jackets and other fall and winter products in Japan to offset higher raw materials and transportation costs.

“It is impossible to keep prices unchanged in the face of a weak yen and high raw material prices,” Fast Retailing president and chairman Tadashi Yanai said at a press conference on Thursday. Higher prices didn’t seem to deter customers, he added.

Sales “recovered steadily” in all markets as demand for apparel picked up globally, with the LifeWear everyday apparel brand doing well. The company said it quickly pivoted to meet changes in production and distribution.

Uniqlo Japan’s same-store annual sales fell 3.3 percent as first-half comparable store sales fell 9.0 percent but second half comps rose 4.7 percent. Second half sales were particularly strong for Kando jackets and pants, shirts and other product that “satisfied renewed going-out needs as well as strong sales” of its Summer line. The division’s gross profit margin improved 2.5 points as it relied on fewer promotions.

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In contrast at Uniqlo International, most regions saw increases in revenue and profits. The Greater China region was the exception as sales contracted because of Covid restrictions, although sales improved in the fourth quarter from June to August as Covid requirements were eased.

Revenue in South Asia, Southeast Asia and Oceania rose 60 percent spike in revenue. Fast said a recovery in customers’ going-out needs plus proactive marketing helped boost the Uniqlo name among local customers and increase the number of new shoppers to the brand.

Uniqlo’s North America and Europe arms, excluding Russia where its business is closed, moved into the black after achieving a “large increase in revenue.”

The company plans to open 310 mostly Uniqlo international stores during Fiscal Year 2023. It estimates operating 3,747 stores including franchises at the end of the current fiscal year. It previously said it plans to 400 to 500 new stores over the next five years.

Net Sales: For the full year ended August, net revenues rose 7.9 percent to 2.301 trillion yen ($15.63 billion) from 2.132 trillion yen ($14.48 billion). Fast said full-year e-commerce sales rose 3.1 percent from year-ago levels to 130.9 billion yen ($889 million), representing 16.2 percent of total revenue.

By segment, Uniqlo Japan revenues decreased 3.8 percent to 810.2 billion yen ($5.50 billion). Uniqlo International’s revenue rose 20.3 percent to 1.119 trillion ($7.6 billion). Revenue for the GU business slipped 1.4 percent to 246.0 billion yen ($1.67 billion), while revenue for Global Brands including Theory and Comptoir des Dotonniers increased 13.8 percent to 123.1 billion yen ($836 million).

Earnings: Net income rose 60.9 percent to 273.3 billion yen ($1.86 billion) from 169.8 billion yen ($1.15 billion).

Operating profits rose 19.4 percent to 297.3 billion yen ($2.02 billion) from 249.0 billion yen ($1.69 billion).

The company is projecting operating profits to increase 17.7 percent to 350 billion yen ($2.38 billion). But net income is expected to fall 15.9 percent to 230.0 billion yen ($1.56 billion) on a revenue increase of 15.2 percent to 2.650 trillion yen $18 billion) for the year ending August 2023.

The projected decline in net income is because of a combination of rising inflation against the depreciation of the yen.

Company’s Take: The company said it will work on “aggressively” transforming its “business structure and create a solid foundation as a global No. 1 brand” in the coming fiscal year.

The “business environment continues to be severe in light of progressive inflation and the rapid depreciation of the yen,” it added.