Uniqlo operator Fast Retailing posts 32% rise in profit, beats forecasts

TOKYO – Japan’s Fast Retailing, owner of global clothing brand Uniqlo, booked its fifth consecutive record annual profit on Oct 8, citing strong results in all regions and overcoming effects of a weak yen at home.

Operating profit rose about 32% to 743.13 billion yen (S$6.17 billion) in the 12 months ended Aug 31, from 564.3 billion yen in the prior period, the apparel maker said in a statement. That beat the company’s own forecast of 730 billion yen and the 726.45 billion yen average estimate from 16 analysts polled by LSEG.

Fast Retailing forecast operating profit in the year ending August 2027 of 830 billion yen, in line with analysts’ average estimate. The revenue outlook is 4.45 trillion yen, also matching expectations.

Annual revenue for the year just ended climbed 17% to a record 3.96 trillion yen, putting it solidly on a path to pull ahead of H&M as the world’s No. 2 apparel retailer and challenge Zara for the top spot.

The sales milestone underscores Fast Retailing’s ascent among global high-street fashion retailers, with sales set to surpass Hennes & Mauritz, which is projected by analysts to post sales of 222.7 billion Swedish kronor (S$28.5 billion) for its fiscal year ending November, while narrowing the gap with Zara owner Industria de Diseno Textil. 

Even so, Fast Retailing founder and chief executive officer Tadashi Yanai still needs to more than double annual sales to reach his long-term target and build the global apparel powerhouse he has long envisioned. 

“Our milestone of achieving 10 trillion yen in sales is now coming into view,” he said at a news conference in Tokyo on Oct 8. “The goal of becoming global No. 1 has been clear since our founding.”

The Uniqlo operator has beaten quarterly expectations throughout the year and repeatedly raised its profit guidance.

But management also warned that a weak yen was making conditions more difficult in Japan, where higher import costs were expected to weigh on fourth-quarter results and lead to price increases.

North America and Europe have been highlights for the company’s overseas operations in recent periods, providing a counterbalance for sluggish results in mainland China, where consumers remain reluctant to spend.

From one store in Hiroshima in 1984, the group has grown to more than 2,500 Uniqlo locations globally, selling inexpensive fleeces and basic goods made primarily in Asian manufacturing hubs.

Fast Retailing is widely seen as a bellwether for consumer sentiment in Japan and China, still its biggest foreign market with nearly 900 Uniqlo shops. Store numbers have levelled off in both markets, reaching saturation levels in Japan while the company is shutting underperforming locations in China and replacing them with newer, larger shops to revive foot traffic.

With online retail eating into the business of standard Uniqlo outlets, Fast Retailing is putting increasing focus on massive, multi-level stores that act as destinations unto themselves.

The format has helped grow the brand in North America and Europe, and Fast Retailing is looking to double the number of so-called flagship stores in Japan to 20 in the next decade, Yanai told the Nikkei newspaper in August.

Uniqlo’s resistance to the fast-fashion industry’s emphasis on rapidly changing trends is helping it to build its brand around functional, high-quality everyday clothing, a strategy that has made the business increasingly difficult to replicate, according to Takahiro Kazahaya, analyst at UBS Tokyo.

“They’re close to being one of a kind,” he said.

Yanai also spoke on Oct 8 of his ambitions to expand everywhere.

“We are embarking on a major challenge aimed at our next phase of growth,” he said. “One of the key stages that will drive this next growth is South-east Asia, Australia and India.” REUTERS, BLOOMBERG