Uniqlo parent Fast Retailing Co.’s first-quarter revenue jumped 1.2 percent to 627.3 billion yen ($5.5 billion) from the 619.7 billion yen ($5.43 billion) in the year-ago period. Net income totaled 93.5 billion yen ($820 million), up 33 percent from the 70.3 billion yen ($620 million) profit in 2021’s first quarter.
In a Nutshell: Japan’s fast fashion giant is facing the same increasing costs that forced many U.S. apparel and footwear brands to hike prices last year.
“It’s time to review and increase prices of some items as we face higher costs of materials, logistics and weaker yen,” Fast Retailing Co’s chief financial officer Takeshi Okazaki said in an earnings briefing Thursday. “Our baseline is trying not to raise prices as much as possible. It will be extremely limited.”
In Fast Retailing’s earnings report, chairman, president and CEO Tadashi Yanai said diversification efforts are paying off not just at Uniqlo but other brands like Gu and Theory.
The company’s financial disclosure comes just one month after it outlined its fiscal 2030 Sustainability Targets and Action Plan aiming to overhaul the supply chain and increase the value of its LifeWear apparel collection. The plan is part of Fast Retailing’s ongoing Ariake Project geared at advancing the company’s digital transformation and eliminating waste in production, transportation, and sales.
“As a united group, we are determined to strengthen initiatives designed to expand our business operations and promote sustainability as part of our quest to become a global No. 1 brand,” Yanai wrote. “We work hard to ensure our LifeWear ultimate everyday clothing is produced in working environments that are healthy, safe, and environment conscious, and strive to help solve a variety of social issues. We are currently channeling our efforts into expanding our e-commerce, Uniqlo International, and GU businesses as key pillars of operational growth.”
Inventories increased 0.24 percent to 405.1 billion yen ($3.55 billion) from 404.1 billion yen ($3.54 billion) in the 2021. The retailer’s consolidated gross profit margin improved by 1.6 percentage points year-on-year to 54 percent.
Fast Retailing is maintaining its initial October estimates for business performance, projecting full-year consolidated revenue of 2.2 trillion yen ($19 billion), which would be a 3.1 percent jump over last year.
The company expects consolidated operating profit of 270 billion yen ($2.37 billion), an 8.4 percent increase from 2021.
The fast fashion giant expects Uniqlo International to exceed expectations for the first half of FY2022 and generate “considerable” increases in both revenue and profit. While South Asia, Southeast Asia, Oceania and Europe are expected to post large increases in both revenue and profit, North America is forecast to achieve a large rise in revenue and break into positive operating profit.
The Greater China region is expected to report a decline in revenue and a large decline in profit, while Uniqlo South Korea is anticipated to boost revenue and profit. Uniqlo Japan is forecast to report lower revenue and a large decline in profits in the first half, but the retailer says the segment could attain a slightly higher performance than initially predicted.
Fast Retailing anticipates a revenue decline for the GU business segment and sees a major drop in profits in the first half. Meanwhile, Global Brands, which includes fashion label Theory and French women’s wear brand Comptoir des Cotonniers, is expected to perform roughly as planned by reporting a large increase in revenue and becoming profitable in the first half of 2022.
Cash and cash equivalents as of Nov. 30, 2021 totaled 1.2 trillion yen ($11 billion).
Net Sales: Consolidated first quarter revenue across Fast Retailing was 627.3 billion yen ($5.5 billion), a 1.2 percent year-over-year jump from the 619.7 billion yen ($5.43 billion) taken in last year.
Revenue at Uniqlo Japan decreased 10.8 percent to 226.4 billion yen ($1.98 billion) from 253.8 billion yen ($2.22 billion). First-quarter same-store sales contracted 7.7 percent compared to a strong previous year and after persistently warm weather through mid-October continued to stifle sales of fall/winter collections.
E-commerce sales declined slightly compared to the first quarter of fiscal 2021, with online sales totaling 36.6 billion yen ($320 million), a 0.2 percent decline year over year. This figure represented an approximate 50 percent increase compared to 2020 first quarter numbers, just ahead of the Covid-19 pandemic’s global outbreak.
Uniqlo’s international revenue numbers told a more positive story, with the fast fashion seller generating 299.7 billion yen ($2.63 billion), a 15 percent increase from the 260.6 billion yen ($2.28 billion) in 2021’s first quarter. Strong sales in South Asia, Southeast Asia, Oceania, North America and Europe helped generate considerable increases in revenue in the first quarter. Meanwhile, revenue declined slightly in the Greater China region.
Fast Retailing’s GU brand saw revenue decline 8.7 percent to 69.8 billion yen ($610 million) from 76.5 billion yen ($670 million) in the year-ago period. First-quarter same-store sales declined year-on-year after persistently warm temperatures stifled sales of fall items and production and distribution delays resulted in a later launch of winter ranges.
The Global Brands segment reported revenue growth of 9.5 percent to 30.7 billion yen ($270 million), with Theory and Comptoir des Cotonniers both had “large” revenue gains, the company said.
Net Earnings: Net income for the group was 93.5 billion yen ($820 million) on earnings of 916.21 yen ($8.02) per share, up 33 percent from the 70.3 billion yen ($620 million) of profit made in the 2021 first quarter on earnings of 689.29 yen ($6.04) per share.
Operating profit increased 5.6 percent to 119.4 billion yen ($1.05 billion) from 113 billion yen ($990 million) last year. First-quarter profit before income taxes rose 25.2 percent to 134.2 billion yen ($1.18 billion) from 107.1 billion yen ($940 million).
CEO’s Take: “We are already pressing ahead with reforms that will enable us to offer more services that combine the strengths of our physical store and e-commerce network and unify inventory management,” Yanai wrote. “Regarding Uniqlo International, we are accelerating the opening of new stores in all markets and areas in which we operate, and seeking to instill deeper and more widespread empathy for Uniqlo’s LifeWear concept by opening global flagship stores and large-format stores in the world’s major cities. In terms of our GU segment, we are working to strengthen GU’s position as a brand that offers fun fashion at amazingly low prices and seeking to expand the GU store network primarily in Japan.”