Fast Retailing Co., the parent of Uniqlo, GU and apparel brands such as J Brand and Theory, beat its own full-year estimates, posting 90.3 billion Japanese yen ($860 million) in net profit, which represents a 44.4 percent year-over-year drop in the 12 months ended August, indicating that the retail giant is on the road to recovery.
In a Nutshell: While operating profit for the year ended August fell 42 percent to 149.3 billion yen ($1.42 billion) and revenue declined 12 percent, Fast Retailing’s projections for 2021 represent a return to pre-pandemic levels. The company projects a record net profit of 165 billion yen ($1.57 billion) for the current business year through August 2021, an 82.6 percent surge from the previous year, as sales are forecast to rise 9.5 percent to 2.2 trillion yen ($20.9 billion).
More important, the Uniqlo owner sees positive expansion in the wake of the scenario that is playing out. Fast Retailing had 767 stores in mainland China as of August, roughly the same number of stores as Japan. But given its growth potential, Tadashi Yanai, chairman and CEO of Fast Retailing Co., says it’s possible to aim for 3,000 stores in China.
Inventory assets in total increased by 7 billion yen ($66.5 million) to 417.5 billion yen ($3.96 billion), with Uniqlo Japan up 2.3 billion yen ($21.8 million) amid an excess of spring/summer inventory. The company says tightly managing fall/winter order flow and expects core items from spring to normalize over that season.
Uniqlo International’s inventory levels have increased by 4.1 billion yen ($38.9 million), largely since Greater China and South Korea have “slightly excessive” spring inventory that is expected to normalize over the fall/winter season. Summer inventory is already at acceptable levels in the markets. However, South Asia, Southeast Asia, Oceania, Europe and North America have more excessive spring/summer inventory, but mainly core items that are expected to normalize by the second half of 2021.
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Capital expenditure declined by 2.4 billion yen ($22.8 million) year over year in fiscal 2020 to 82.7 billion yen ($785.1 million). That figure can be broken down into 17.8 billion ($169 million) yen for Uniqlo Japan, 23.5 billion yen ($223.1 million) for Uniqlo International, 8.5 billion yen ($80.7 million) for low-cost fashion chain GU, 2.4 billion yen ($22.8 million) for Global Brands, and 30.4 billion yen ($288.7 million) for IT systems and warehousing.
Fast Retailing Co. increased its investment in IT system and warehousing as part of its companywide Ariake Project, which furthers its digital goals transformation and eliminates waste in production, transportation, and sales. The company says as it invested more heavily in global flagship stores and large-format stores at Uniqlo Japan, the overall capital expenditure figure declined slightly year-on-year due to a reduction in new stores openings primarily at Uniqlo International.
Fast Retailing continued to enter new markets over the period with the first Uniqlo store opening in Milan in September of last year, the first store opening in New Delhi, India in October 2019 and the first store opening in Ho Chi Minh City in December.
Cash and cash equivalents as of Aug. 31, increased by 7 billion yen ($66.5 million) from the end of the preceding fiscal year, to 1.1 trillion yen ($10.4 billion).
The company also highlighted that by the end of 2020, it plans to reduce the use of plastic in shopping bags and product packaging by 85 percent (approximately 7,800 tons) by reducing the amount of plastic used and switching to environmentally friendly materials such as recycled paper.
Additionally, Fast Retailing has donated approximately 15 million masks to medical facilities around the world that are battling the coronavirus pandemic, and nearly 1.2 million isolation gowns to healthcare organizations in Japan.
The company also has donated approximately around 520,000 items of Uniqlo clothing (as of the end of July), including Airism and Heattech products and down jackets, to organizations supporting vulnerable members of society and medical institutions.
Net Sales: Consolidated revenue totaled 2 trillion yen ($19.08 billion), a 12.3 percent year-over-year decline from last year.
Fast Retailing Co. broke out its official earnings report for the full year and not the fourth quarter, but it indicated that same-store sales at Uniqlo Japan rebounded by a 20.2 percent year-on-year in the quarter after reopening its 311 closed stores. The company attributed the growth to strong sales of core summer ranges, products designed to satisfy stay-at-home demand, and Airism face masks.
Uniqlo Japan reported a decline in revenue in fiscal 2020, with revenue dipping 7.6 percent to 806.8 billion yen ($7.7 billion). Meanwhile, fiscal 2020 same-store sales (including e-commerce) declined 6.8 percent year-on-year.
Meanwhile, Uniqlo Japan’s e-commerce sales increased 29.3 percent year-on-year in fiscal 2020 to 107.6 billion yen ($1.02 billion), raising the proportion of online sales to total revenue from 9.5 percent to 13.3 percent
Uniqlo International, which is Fast Retailing’s largest segment, recorded significant declines in revenue for the year, with revenue falling to 17.7 percent to 843.9 billion yen ($8.01 billion). However, e-commerce sales increased by roughly 20 percent year over year as our online operations continue to expand favorably in all markets.
The GU segment recorded an increase in revenue, with revenue increasing 3.1 percent year over year to 246.0 billion yen ($2.3 billion).
Net Earnings: Across the board, Fast Retailing Co. posted a 90.3 billion yen ($860 million) net profit on a 44.4 percent drop, with operating profit declining 42 percent to 149.3 billion ($1.42 billion).
Uniqlo Japan reported a rise in profit in fiscal 2020, with operating profit expanding 2.2 percent to 104.6 billion yen ($992.8 million). Uniqlo International recorded another big decline in the year, as operating profit contracted 63.8 percent to 50.2 billion yen ($476.5 million). GU saw operating profit take a dive as well, totaling 21.8 billion yen ($206.9 million), a 22.5 percent year-over-year decline).
CEO’s Take: “The pandemic is a global crisis, but for us, it has become a turning point,” Yanai said at a press briefing. “This may finally be the turning point when we move from the age of the West to the age of Asia. Our hope is to become the world’s No. 1 apparel brand.”