The parent to Uniqlo turned an operating profit in the first quarter despite reporting revenue declines, as the coronavirus pandemic unevenly affected business worldwide.
In a Nutshell: Even with Covid-19 still flaring, Fast Retailing said its “medium-term vision is to become the world’s number one apparel retailer.”
To do that, the Japanese apparel giant said it is focused on expanding Uniqlo International, as well as GU’s physical and digital business. “We continue to increase Uniqlo store numbers in all markets and areas in which we operate, and open global flagship stores and large-format stores in major cities around the world to instill deeper and more widespread empathy for Uniqlo’s LifeWear concept of ultimate everyday wear,” said Tadashi Yanai, chairman, president and CEO of the Tokyo-based firm.
The company said it’s sticking with sustainability efforts in six areas: creating value through products and services, respecting human rights in the supply chain, respecting the environment, strengthening communities, supporting employee fulfillment and implementing good corporate governance.In Q1, Fast Retailing developed front-opening innerwear for individuals with disabilities, and created the All-Product Recycling initiative that donates collected Uniqlo apparel to refugees and people in need. It also started RE.Uniqlo, a project to sell recycled down that is 100 percent sourced from customers’ pre-owned products.
Net Sales: For the three months ended Nov. 30, net revenues fell 0.6 percent to 619.80 billion yen ($5.98 billion) from 623.48 billion yen ($6.01 billion) a year ago. Uniqlo operations in parts of Asia and Oceana, which include Southeast Asia, Australia and India, and in North America and Europe, were hit hard by the coronavirus pandemic, “resulting in considerable declines in both revenue and profit,” Yanai said.
Despite the revenue decrease, operating profits jumped 23.3 percent to 113.09 billion yen ($1.09 billion) from 91.69 billion yen ($884.5 million). “The impressive rise in profit can be attributed primarily to large increases in profit from Uniqlo operations in Japan and Greater China (Mainland China, Hong Kong and Taiwan), as well as rising profit and a strong overall performance from GU,” Yanai said.
By division, Uniqlo Japan posted an 8.9 percent gain in revenue to 253.8 billion yen ($2.45 billion), helped by strong sales of loungewear and HEATTECH blankets. Also doing well were the brand’s Ultra Stretch Active Pants and other items in its sports utility wear range. At Uniqlo International, revenues fell 7.2 percent to 260.6 billion yen ($2.51 billion). In Mainland China, revenues rose as same-store sales increased on the back of strong sales of warm clothing and products that fulfilled stay-at-home customer needs. Vietnam reported higher-than expected results after the country managed to control Covid-19 infections. In the U.S., declines in revenue were reported as some stores were temporarily closed and consumers’ movement outside the home was restricted. In Europe, the temporary closure of stores in the U.K., France, Belgium and Italy in November resulted in a “considerable decline in both revenue and profit” in the quarter.
Fast Retailing’s GU business reported a 4.9 percent gain in revenues to 76.5 billion yen ($737.1 million) from strong sales in knitwear that “either capture mass fashion trends or satisfied stay-at-home demand.” The Global Brands division reported a large decline in revenue, which was down 22.3 percent to 28.0 billion yen ($269.8 million). Theory was hard hit by large declines due to Covid-19 infections in the U.S. and Europe, while French label Comptoir des Cotonniers reported a wider operating loss.
Earnings: Net income for the quarter declined 0.7 percent to 70.38 billion yen ($678.9 million) from 70.91 billion yen ($684.04 million).
CEO’s Take: “While COVID-19 continues to affect our business performance in all markets, we continue to expand our operations while prioritizing the safety and health of all our customers, employees, and business partners,” Yanai said.