Japanese retail giant Fast Retailing has exceeded expectations with its operating profit and predicts further growth in the upcoming year. The company, which owns popular brands like Uniqlo and Theory, saw a 6.2% increase in revenue for the year ending August 31, partially recovering from the previous year’s 12.3% drop. Fast Retailing’s revenue reached ¥2.13tn ($18.8bn), with strong performance in China, where Uniqlo’s revenue rose by nearly 17% in China, Hong Kong, and Taiwan.
Although the overall increase in group sales was not significant, net profit skyrocketed by 88% to ¥169.85bn due to the negative impact of the pandemic in 2020. Fast Retailing is projecting a 3.1% increase in revenue to ¥2.2tn in the current year, with a 3% rise in net profit to ¥175bn. The company highlighted the recovery of its Uniqlo business, with revenue from Uniqlo Japan increasing by 4.4% to ¥842.6bn and operating profit rising 17.7% to ¥123.2bn. Full-year same-store sales, including e-commerce, increased by 3.6%, driven by strong sales of stay-at-home items and core Fall/Winter ranges. However, same-store sales only grew by 0.9% in the second half of the year due to the declaration of a state of emergency and unfavorable weather conditions. E-commerce sales in Japan rose by 17.9% to ¥126.9bn, accounting for 15.1% of total revenue. The gross profit margin for Uniqlo Japan also improved by 1.4 points as the company focused on full-price sales.
Uniqlo International reported significant growth in revenue and operating profit, with revenue increasing by 10.2% to ¥930.1bn and operating profit expanding by 121.4% to ¥111.2bn. Greater China played a crucial role in this growth, with revenue rising by 16.7% to ¥532.2bn and operating profit expanding by 52.7% to ¥100.2bn. However, South Korea experienced a slight decrease in full-year revenue, while Southeast Asia, Australia, and India reported a 15% decline in operating profit due to the severe impact of the pandemic.
Fast Retailing’s North American operation bounced back after the lifting of Covid-19 restrictions in May, resulting in a profitable second half of the year and halving its full-year loss. Europe also saw a significant increase in revenue and a positive operating profit, driven by strong e-commerce sales and the performance of the company’s Russian operation.
The company’s GU brand witnessed an increase in revenue but a decline in profit. GU’s revenue rose by 1.4% to ¥249.4bn, while operating profit dropped by 7.6% to ¥20.1bn. The brand faced challenges in the second half of the year due to the state of emergency in Japan and difficulties in keeping up with fashion trends. However, GU’s e-commerce sales rose by 50% compared to fiscal 2019 levels, accounting for 11% of total sales.
Fast Retailing’s Global Brands segment experienced a 1.3% decline in revenue to ¥108.2bn and an operating loss of ¥1.6bn, which is a smaller loss compared to the previous year’s ¥12.7bn loss. The improved performance of the Theory brand contributed to this result, with revenue increasing and losses decreasing in the US, and a strong performance in Asia, particularly in mainland China and Hong Kong.
Overall, despite the challenges posed by the pandemic, Fast Retailing has been able to improve profitability by recovering sales in North America and Europe, implementing cost-saving measures, and adjusting inventory management. The company remains optimistic about its future growth prospects and is confident in its ability to take advantage of opportunities in the global retail market.
Useful Links:
1. Fast Retailing News Release
2. Reuters Article on Fast Retailing’s Rising Profits
