Heavy discounting necessary to offload winter stock has hit Uniqlo sales. Parent Fast Retailing has struggled with a shortage of popular winter items in the past, and overcompensated last winter by ordering too much inventory ahead of what proved to be an unusually warm season.
As a result, the Japanese retailer’s first-quarter profit took a hit which in turn impacted of first-half results issued yesterday.
The company reported declines in both revenue and profit in the first half of the current financial year, with revenue totaling ¥491.3 billion, (US$4.397 billion) down 5 per cent from the previous corresponding period, and operating profit totaling ¥67.7 billion ($606 million), down 23.7 per cent from the previous year. Same-store sales fell 9 per cent, however online sales, which now account for 9.9 per cent of Uniqlo sales in Japan and 20 per cent in China, rose 30.3 per cent.
The weak first quarter for Uniqlo sales was in part compensated for by a double-digit increase in sales and profit in China, which helped the brand turn in a better-than-expected rise in operating profit to ¥68 billion ($609 million) for the three months to February.
The company said it now expects an operating profit of ¥260 billion for the financial year through August, compared to its previous forecast of ¥270 billion in January. The revised outlook would still be a record high and represent a 10 per cent year-on-year rise.
Uniqlo re-stated its medium-term vision of becoming the world’s number one apparel retailer.
“In pursuit of this aim, we are focusing our efforts on expanding Uniqlo International and our GU casual fashion brand,” said Tadashi Yanai, chairman, president and CEO of Uniqlo. “We continue to increase Uniqlo store numbers in each country in which we operate, and open global flagship stores and large-format stores in major cities around the world to further develop Uniqlo as a global brand.”
He said that within the company’s international division, Greater China and Southeast Asia are entering “a new stage of growth as key drivers of operational expansion”.
Uniqlo Greater China generated double-digit growth in both revenue and profit in the first half of the year despite the dampening effect of the mild winter weather.
“Within that region, our operation in Mainland China continued to report strong growth in revenue and profit of approximately 20 per cent year on year. Uniqlo South Korea also reported increases in both revenue and profit. Uniqlo Southeast Asia & Oceania generated significant rises in both revenue and profit thanks to strong increases in same-store sales in every single one of the region’s markets.
Meanwhile, the company plans to open more GU stores in Japan, while expanding the brand’s international presence, primarily in Greater China and South Korea.