Fast Retailing, the parent company of popular brands Uniqlo, GU, and Theory, has started its recovery in China after a challenging period due to Covid-19 restrictions. The company owns approximately 900 stores in China and saw its operating profit increase by 16% to ¥220 billion compared to the previous year. This positive result not only signifies a promising turnaround for Fast Retailing but also for other brands that have been impacted by the prolonged effects of the pandemic in China.
As a result of its strong performance, Fast Retailing has raised its full-year profit forecast to ¥360 billion, surpassing the expectations of analysts. Uniqlo Japan, one of its prominent brands, experienced an 11.9% growth in revenue, reaching ¥495.1 billion. However, its operating profit saw a slight decline of 1.6% to ¥67.3 billion, which was attributed to increased procurement costs caused by the depreciation of the Japanese yen. Despite this, Uniqlo Japan achieved a 10% increase in like-for-like sales, driven by the success of its AW22 items and thermal products. The brand’s wide-fit pleated pants and innovative items like the AirSense jacket and pants also contributed to the positive results in the first half of the year.
Uniqlo International reported a significant increase in revenue and profit, with revenue rising by 27.3% to ¥755.2 billion and operating profit expanding by 22.2% to ¥122.6 billion. This growth is primarily attributed to the brand’s success in Southeast Asia, India & Australia, North America, and Europe (excluding Russia), indicating a promising phase of expansion in these regions. Although Greater China experienced a decline in revenue and sharp fall in profits during the first quarter due to Covid-related issues, sales started to recover in January, resulting in a slight decline in second-quarter revenue and a significant increase in second-quarter profit. Thus, the overall performance in China is now on a positive track of recovery.
Fast Retailing’s brands’ success can be attributed to the changing demands in clothing prompted by the Covid-19 pandemic and rising inflation, which have increased consumers’ interest in LifeWear. GU, another brand under Fast Retailing, witnessed substantial increases in both revenue and profit. Revenue rose by 18.5% to ¥145.5 billion, and operating profit grew nearly 40% to ¥13 billion. GU’s strategy of offering a limited number of mass-trend products and ensuring sufficient supply proved to be successful, with heat padded outerwear, super wide cargo pants, and baggy slacks performing exceptionally well.
However, the GU brand experienced a decline in gross profit margin primarily due to the rapid depreciation of the Japanese yen in the first half of the year. On the other hand, the Global Brands segment reported an increase in revenue but a decline in profit. Revenue rose by 19.1% to ¥70.2 billion, but operating profit dropped by 85.3% to ¥0.1 billion. The Theory brand, which generated higher revenue, experienced a decline in profit. This decline was primarily caused by a decrease in the gross profit margin at Theory’s US operation and a decline in profits from its China-focused Asian operation due to Covid-related challenges. Nonetheless, Theory Japan reported a significant rise in both revenue and profit, benefiting from the recovery of department-store customer visits and successful stock management strategies.
Finally, the PLST brand, a sub-brand of Uniqlo, achieved slightly higher revenue and incurred a smaller loss. However, the France-based Comptoir des Cotonniers brand reported a decline in revenue and a slightly wider operating loss over the six-month period.
Useful links:
– Fast Retailing’s Investor Relations
– Uniqlo Singapore Store
