Japanese clothing chain is faced with higher costs to keep customers
Uniqlo, belonging to Fast Retailing Company has to face higher costs to keep customers in Japan and most of its profit gains came mainly from foreign currency and securities holdings
The jump in net profit is with 56 % impressive in the first three months to May, but flat operating profit reveals that even sales promotion didn’t help to increase sales at Uniqlo stores in Japan, bcause customers become extremely savvy in taking advantage of discounts. The net profit outlook for the full year ending in August remains as expected. The company takes steps to control margins as it looks to boost top line sales.
The company is aggressively expanding in Asia and other areas. It will open 10 new stores in the USA by August 2014, after mammoth flagship stores were opened already in New York and San Francisco. According to plans it wants to become the biggest clothing retailer in the world by 2020. In Asia, Fast Retailing has already reached such a position. The strategy is also to further develop its other brands, including discount casual retailer g.u. and fashion brands like J Brand and Theory. Nervertheless, the company still depends with the bulk of its sales in Japan, where Uniqlo stores can be found in very major shopping district and where extended weekend discounts were lately offered, accompanied by a major advertising campaign was launched. The items in stock at stores have been pushing up inventory costs. Same store sales in Japan rose 9.3 % in the latest reported quarter, but customers spent 5.8 % less per capita. Overall sales in Japan rose 11.3 %.
Total sales at Uniqlo stores overseas rose 61 %, reflecting the accelerated expansion. Warm weather propelled the sales of the trademark camisoles with built-in bras and sweat absorbent undershirts at home, while total brand visibility increased through Asia. End of May the chain operated 852 Uniqlo stores in Japan and 410 overseas where it has been opening about three new ones a week. In june the first stores were opened in Indonesia and the Philippines.