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Just-Style : Fashion Consulting / Fast Retailing - Uniqlo
Spotlight on...Fast Retailing
14 August 2008 Source: just-style.com
The Uniqlo Kobe Harborland store
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Fast Retailing Co, operator of the Uniqlo casual clothing chain, is emerging in Japan as the lone champion in a retail landscape that looks predominantly bleak this year. Michael Fitzpatrick looks at how the company is bucking the trend.
Thanks to the credit crunch and weakening consumer spending, clothing retailers saw lacklustre results in the March-May quarter. But only Fast Retailing managed to keep its head above water.
Typically for major retailers the slump has been caused by sluggish clothing sales.
According to leading men's retailer Daimaru, sales of expensive items such as foreign brands have abruptly plunged since April and, across the board generally, sales of men's wear in Japan has dropped 7% while clothing has fallen 5% since the spring.
The prices of petrol and other goods and services in Japan are at an all time high after the country suffered from deflation over the last 15 years.
J Front Retailing Co, created by integrating Daimaru Inc and Matsuzakaya Holdings Co, for example, reported a JPY3.6bn (US$32.8m) consolidated net profit for the first three-month period of fiscal 2008, down 28% from their combined results a year earlier.
J Front lowered its full-year net profit forecast to JPY19.1bn, down 18% on the year.
Bucking the trendThe latest figures from Fast Retailing show that it is managing very ably to buck the trend.
Fast Retailing's consolidated net profit surged 27% to JPY40bn for the September 2007-May 2008 period - meaning that 98% of the JPY41bn target for the full year through August had been attained in just the first nine months.
The company's stocks are also on the roll in an economy that many say has now entered recession.
Fast Retailing's stock jumped JPY250 higher than one previous day's close at one time, while most major retailing issues were losers on the equity market on the day.
"We have been more fortunate than most, and not too hard hit by the lack of consumers at out-of-town shopping malls where shopping is right down owing to higher prices at the pumps," says a Fast Retailing spokesman.
Savvy marketing Uniqlo places its unprecedented success in the teeth of an oncoming recession on savvy marketing.
Young women have been targeted of late via big media campaigns that focus on new lines such as slender but high-rise jeans that have proven popular recently among women in Japan.
"Uniqlo continues to be successful because it became the first chain store to reach that level in Japan, thanks to a strong foothold in the main cities and a combination of good quality, low price basic products," says Tokyo based fashion analyst Loic Bizel at Lebiz Consulting.
"Over the last couple of years the arrival of some international chain stores (such as H&M and Abercrombie & Fitch) has made Uniqlo push its more fashion oriented products, producing quicker, closer to the trends and in smaller volume in order to meet demand."
Uniqlo's gross profit to net sales ratio outstripped its target in the third quarter from March to May, improving by 2.4 points compared to the previous year as the company exercised stronger control over discounting.
Uniqlo's cost ratio improved 1.4 points year-on-year as the advent of its regional employee system also helped reduce time spent hiring and training new personnel, and efforts to improve operational store efficiency led to a rise in productivity.
Restructuring lossSome restructuring however will see some profit loss for Uniqlo this year after Fast Retailing recently took the decision to merge three of its Japan apparel subsidiaries (low-cost casual wear brand developer GU Co Ltd, and retailers Onezone Corp and Viewcompany Co).
This will take effect from 1 September.
"The newly merged company will strive to create a new style of shoe business within the footwear industry, and the cheapest quality clothes in the low-cost clothing market," the company said in a statement.
"We are looking to further improve profitability by boosting the new company's operational efficiency through the merger of production, product, marketing, supervision and management planning functions.
"We are expecting to account a special loss of JPY1.8bn in the year to 31 August 2008 as the three-company merger results in inevitable store closures and office transfers."
Mr Bizel suggests there might be tougher times ahead, however, as the foreign competition ups its game in Japan.
"Despite the positive given figures, I think that they [Fast Retailing] will be facing some hard times due to the opening of H&M and the recent and increasing fierce competition between the Japanese brands developed by the major trading companies or the select stores," he says.
"Still, with their capacity of investments they could take over some additional domestic or international brands in order to reach their target of JPY1 trillion by 2010."
posted by Fashion in Japan @ 5:47 PM
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