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Uniqlo Parent Ups Full-Year Outlook as China Sales Signal Recovery

What appears to be a recovery in Chinese consumer spending following lengthy Covid lockdowns gave Uniqlo parent Fast Retailing Co. Ltd. a pop in first-half results, and set the stage for a full-year guidance raise.

In a Nutshell: Fast Retailing said it saw strong performance from its Uniqlo operations in Southeast Asia, India & Australia, North America, and Europe regions, while its GU business “generated significant increases in both revenue and profit.” The company also said that higher interest income and other factors helped it generate 10.2 billion yen ($76.9 million) in interest income.

Fast also said it expects the Greater China region to report “significant increases in second-half revenue and profit as the Mainland China market gets back onto a recovery track.”

On the agenda is a plan to expand annual sales to 5 trillion yen ($37.67 billion) in the next five years, with a focus in part on evolving its digital operation and expanding the BU and Theory businesses.

Fast said Uniqlo Japan posted “firm sales” of its fall-winter items, and thermal winter products such as HeatTech innerwear. Strong spring sellers, including its wide-fit pleated pants and items such as its AirSense jacket and AirSense pants and shirts, helped boost first-half results. In the Uniqlo international operation, shifts in apparel choices have “fueled consumer appetite for LifeWear, our high-quality and long-lasting basic everyday clothing,” Fast said. GU saw strong sales of heat padded outerwear, super wide cargo pants and baggy slacks.

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The fast-fashion retailer expects to add more doors in 2023, and predicted that its total network will expand to 3,674 locations by the end of the current fiscal year. It estimated 809 Uniqlo Japan locations, including franchise units; 1,690 Uniqlo international doors, 469 GU stores and 706 Global Brands sites.

Net Sales: For the first six months ended February 2023, revenues rose 20.4 percent to 1.467 trillion yen ($11.06 billion), with every operating division posting double-digit revenue increases for the period.

By division, Uniqlo Japan revenues were up 11.9 percent to 495.1 billion yen ($3.73 billion), while same-store sales rose 10 percent in the period. Its Uniqlo International counterpart posted a 27.3 percent jump to 755.2 billion yen ($5.69 billion), with the Greater China region posting a decline in first-half revenue and profit due to the impact of Covid. “Performance has since started to recover, with the region generating strong sales from January and a rise in second-quarter profit,” Fast said.

The retailer has also selectively raised prices at Uniqlo where needed, which has helped its bottom line.

The GU brand saw a revenue gain of 18.5 percent to 145.5 billion yen ($1.1 billion), same-store sales showed improvement after a reduction in the assortment mix. The Global Brands group reported a 19.1 percent jump to 70.2 billion yen ($528.9 million). Theory reported a large increase in revenue but a decline in profits. The Comptoir des Contonniers business posted a decline in revenue and a wider operating loss.

Earnings: For the six months, operating profit rose 16.4 percent to 220.2 billion yen ($1.66 billion).

Based in part on higher sales trends in China for the first six months, the Japanese fast-fashion firm raised its estimates for the full year ending August 2023. It is estimating a 16.5 percent gain in full-year revenue to 2.680 trillion yen ($20.19 billion), on a 21.1 percent increase in operating profit to 360 billion yen ($2.71 billion). The new outlook represents an increase in estimates of 30 billion yen ($226 million) for fiscal year 2023 consolidated revenue and by 10 billion yen ($75.3 million) for consolidated profit.