Challenging Zara as the World’s Largest Fashion Retail Company
Uniqlo parent company saw its half-year operating profit soar by 23% on high demand for its products in China. The retail business recently started to implement a new business strategy that is focused on fewer discounts but higher quality and branding.
The owner of Uniqlo brand saw its operating profit rise to ¥168 billion ($1.53 billion) for the six months to end February. This is higher by about 23% compared to ¥136.7 billion ($1.25 billion).
As a result, the fashion business hiked the full-year operating profit guidance to ¥255 billion ($2.33 billion) from earlier ¥245 billion ($2.24 billion). The raised guidance still fell short of the analysts’ median forecast of ¥262.9 billion ($2.4 billion).
Business revenues for the same period were down 0.5% to ¥1.2 trillion ($11.04 billion). Uniqlo Japan saw its business revenue rise by 6.2%, while operating profit in the home country soared by over 36%.
Internationally, the retail business recorded a weaker-than-expected H1 performance in Europe and United States (US) due to renewed lockdown measures to curb the spread of the COVID-19 virus. On this front, business revenue fell 3.6%.
"Performance in most regions of Uniqlo International, as well as within Global Brands, reported declines in revenue and profits due to the severe impact of Covid-19," the fashion business said in a statement.
In Europe, the same-store sales plummeted by roughly 40% amid the store closure over the four months from November. The company added that stores reopened for business for two weeks in December, at which time the retail business witnessed strong demand in Europe and particularly in France. Uniqlo expects to continue experiencing challenges in Europe as major countries, such as Germany and France, introduce new movement restrictions.
However, strong performance in Japan and China in particular, pushed the Uniqlo parent company into a strong financial position going forward. Uniqlo operates about 800 stores in mainland China and it is expecting to continue to generate strong profit margins in this market. The gross profit margin rose by 4.7% in China.
"Sales and profits in China exceeded our projections. Profitability rose because we were able to limit discounts as we tried to improve our product value and branding,” Chief Financial Officer Takeshi Okazaki told reporters today.
Given that Asia remains the strongest market for the retail company, it is working to double the rate of store openings to 100 per year.
Shares of Fast Retailing closed today’s Tokyo trading session nearly 1.7% higher. The company has a market capitalization of over $88 billion, the second biggest in the fashion retail sector behind Zara owner Inditex.
Asia’s largest fashion retail company Uniqlo reported soaring profits for six months through February on the back of the strong demand in Asia, specifically in China.