Japanese Uniqlo’s ambitious future aims
Japanese Uniqlo, respectively the man behind it, Tadashi Yanai wants the Japanese apparel store chain to become the world’s number one by 2012, this was his announcement around three years ago. Today it is number four, behind H&M Hennes and Mauritz (S), Inditex (E) and Gap (USA)
Last Thursday, Fast Retailing,, the parent company of Uniqlo, reported 13 % higher revenues of JPY 926.7 million for the fiscal year ended in August and a net profit jumping around 30 % to JPY 71.7 billion (around USD 916.1 million) backed by the company’s trademark down jackets, USD 100 cashmere sweaters and colourful basics. The projection for the current fiscal year is a rise of 14 % to JPY 1.06 trillion.
However the final quarter of the fiscal year up to August has been shattered by weak early summer sales at Uniqlo Japan stores, pushing the company into the red with a quarterly loss of JPY 863 million thus missing its own full year profit target and blaming unseasonable weather as the main cause and there was also a decrease of the operating profit margin to 17 % (18 %) in the Japanese business and 21 % in the fiscal year of 2010. Hidden are the effects of the ambitious opening of new stores internationally due to the fact that in Japan Uniqlo is ubiquitous and known for its basic low price designs but internationally, the brand is positioned as a newcomer in most markets and is witnessed as a cool and fashionable export from Japan.
A big push in Japan came in 2003 with the introduction of the “Heat Tech” innerwear and has sold 300 million items up to now. But no new technology with similar popularity has been following.
The aim of Uniqlo founder Yanai is massive organic growth, rather than via a major acquisition and the company needs its cash generation machine to be in prime working order to reach this goal. He is targeting 1000 stores in China by 2020 and another 1000 in other parts of Asia. Fast Retailing’s share of the highly fragmented global apparel market reached 0.6 %, double the size of 2007 and ranking seventh largest in the world, where as Inditex (Zara Chain) and H&M each had a share of one percent and Gap one of 0.9 %.
The founder is set building up the company’s next worldwide stepping stone with another store chain called g.u., targeting squarely at younger women conscious of both fashion and budget. It is priced lower than Uniqlo in Japan and it has attracted attention by recreating local Japanese stars like Harajuku street fashion princess Kyary Pamyu Pamyu to model in ad campaigns and thus sales are rising. The first overseas g.u. store is to be opened in 2014 at a not yet known location. The crucial key is whether Fast Retailing can maintain profitability from domestic Japanese business to underpin its drive into overseas business. Lately, overseas store openings continue as projected and most recently it opened a store in San Francisco (USA), bringing the number of U.S. stores to five. The company entertains a broad programme of hiring and training new managers to absorb the growing pains.
Yanai is a strong believer in the importance that China will play a major part in Fast Retailing’s future development and despite the actual political tensions between the two nations. Uniqlo has become a hit in China since its arrival in 2002 and will not be affected by the political tensions, because it is a strong brand and offers a wide range of products that will continue to appeal to Chinese customers, reports the Wall Street Journal