Uniqlo’s domestic and North American sales growth drove third-quarter revenue and profit increases that helped parent Fast Retailing offset a Covid-driven slump in Greater China.
In a Nutshell: Sizable revenue and profit gains at Uniqlo International gave Fast Retailing confidence for continued fourth-quarter growth, which also plans for fewer Covid restrictions in the Greater China region.
For the quarter, the international segment saw strong growth in South and Southeast Asia and Oceania, North America and Europe, excluding Russia. Sales in Greater China fell after 169 stores mostly in Shanghai paused operations from March through May though sales recovered when they reopened last month.
“Performances from Malaysia, the Philippines, Indonesia, and Singapore proved especially strong,” Fast said. “UNIQLO North America generated a large increase in revenue and moved into the black in the third quarter, with the operation’s continued strong performance being underpinned by solid support from North American customers for T-shirts, tank tops, short pants, and other core products.”
The company said Uniqlo Europe generated a “large increase” in revenue and also “moved into the black in the third quarter.” LifeWear clothing helped provide a “favorable tailwind,” as did efforts to reach new customers as tourist demand grew.
At Uniqlo Japan, same-store sales rose 7.8 percent from a year ago. The quarter saw strong sales of Kando jackets and pants, as well as blouses. Helping the quarterly results were strong performances from Golden Week sales and the Uniqlo anniversary sale.
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“The third-quarter gross profit margin improved 3.9 points year-on-year thanks to a lower discounting rate linked to our efforts to restrict discount sales,” Fast said. “In addition, the selling, general and administrative expense ratio improved by 1.4 points year-on-year as we further boosted operational efficiency primarily in the areas of personnel and distribution expenses.”
Other Fast divisions didn’t fare so well. Revenue at the GU division suffered amid product delivery delays, although sales of trend items such as color slacks were strong. And the business used fewer discounts to improve gross profit margins by 1.5 points year-on-year. At the Global Brands division, Theory posted higher revenue, but also lower profits attributed to lockdowns in Shanghai. Product shortages hurt sales at he PLST, and Comptoir des Cotonniers narrowed its operating loss as it improved cost efficiencies after closing unprofitable stores and including other structural changes.
Net Sales: The company said revenue for the quarterly period to the end of May rose 10.3 percent on a year-over-year basis to 546.1 billion yen ($3.93 billion).
Uniqlo Japan posted a 76.2 percent gain in operating profit to 38.1 billion yen ($273.9 million) on an 8.7 percent increase in revenue to 198.4 billion yen ($1.43 billion). Uniqlo International saw operating profit increase 5.6 percent to 32.4 billion yen ($233 million) on a 13.9 percent gain in revenue to 248.0 billion yen ($1.78 billion). For GU, operating profit was flat at 8.4 billion yen ($60.4 million) on a 0.7 percent decline in revenue to 67.7 billion yen ($486.7 million). The Global Brands division posted a loss of 300 million yen ($2.2 million) on a 19.5 percent increase in revenue to 31.0 billion yen ($222.9 million).
For the nine months, Fast Retailing’s revenue rose 3.9 percent to 1.765 trillion yen ($12.69 billion).
Earnings: Operating profit for the quarter rose 36.5 percent to 81.8 billion yen ($588.2 million).
Operating profit for the nine months rose 19.0 percent to 271.0 billion yen ($1.95 billion).
The company raised its annual forecast and is now expecting operating profit of 290 billion yen ($2.09 billion) on revenues of 2.250 trillion yen ($16.18 billion). The previous forecast was operating profit of 270 billion yen ($1.94 billion) on revenues of 2.200 trillion yen ($15.82 billion).
Company’s Take: “We expect Uniqlo International will achieve large increases in revenue and profit for both the second half of fiscal 2022 and the full business year and we also expect revenue and profit to increase year on year in local-currency terms,” Fast said, noting that it is also expecting a slight increase in revenue at GU and a profit in the second half at Global Brands.