International operations have played a vital role in the impressive performance of Fast Retailing, the parent company of renowned clothing brand Uniqlo, during the first quarter. Despite facing a sales decline in both China and its home market of Japan, the company managed to achieve growth in profits driven by its overseas markets. This marks a significant shift from previous years, where China and Japan served as the primary drivers of sales and profit growth for the company.
Fast Retailing reported a remarkable 5.6% increase in operating profit, reaching 119.4 billion yen ($1.04 billion) for the three-month period ending on November 30. This exceeded market expectations, as analysts had predicted an average operating profit of 102.6 billion yen according to Refinitiv. Encouraged by its strong performance, the company has maintained its projection for the fiscal year ending in August, expecting an 8.4% increase in operating profit to 270 billion yen.
Uniqlo’s international business achieved record-breaking results in the first quarter, driven by robust sales in South Asia, North America, and Europe. However, the ongoing pandemic negatively impacted sales in China, while warm weather in Japan led to a decrease in sales for fall and winter clothing. As COVID-19 vaccinations progress and the company expands further into the Chinese market, Fast Retailing anticipates a gradual recovery to pre-pandemic sales levels. In fact, the company recently opened its third flagship store in Beijing and plans to open 100 additional stores in the country each year.
Nevertheless, Fast Retailing has highlighted potential risks related to production and logistics delays, which have also affected other major clothing groups. The company previously announced delays in the release of certain clothing items due to pandemic-related lockdowns at partner factories in Vietnam. Additionally, the rapid depreciation of the yen has resulted in increased costs for raw materials and shipping, putting pressure on domestic pricing. To cope with these challenges, Chief Financial Officer Takeshi Okazaki emphasized the necessity of raising prices for certain products.
As Fast Retailing continues to expand its global presence, the company’s reliance on the strength or weakness of the yen will become less significant. A stable currency market is considered ideal for the company’s operations. It is worth noting that Fast Retailing’s shares have experienced a 9.5% decline year-to-date, contrasting with a mere 1.1% drop in the benchmark Nikkei 225 index.
Useful links:
1. Reuters – Fast Retailing Company Profile
2. Fast Retailing – Uniqlo’s Global Store Locations
