Uniqlo owner gets serious about conquering North American market

Tokyo

FAST Retailing is doubling down on the North American market, targeting 200 Uniqlo stores selling casual, functional clothing from the current 57 in 5 years.

The loss-making US and Canada business is on track to post an operating profit for the first time this fiscal year, which ends in August, and achieve annual revenue of 300 billion yen (S$3.2 billion) in 2027, with an operating margin of 20 per cent, chief financial officer Takeshi Okazaki said during a results briefing on Thursday (Apr 14).

Ever since opening its first store in New Jersey in 2005, Uniqlo has struggled to reach the same scale of success seen in Japan and China. Now, with the war in Ukraine and resurgence of Covid in China fuelling uncertainty in clothing sales across the world, Fast Retailing is shifting its focus to a market where the outlook is relatively stable.

To do so, the retailer said it will focus on opening stores on coastal cities and upscale shopping malls. "Europe and North America are becoming a second pillar for growth overseas after greater China," Okazaki said at the briefing.

Europe and North America generated 20 per cent of total operating profit for the 6 months ended February, compared with 5 per cent for fiscal 2019, said the company. New product development and e-commerce sales will be a key part of the strategy in Canada and the US, as well as boosting brand awareness and marketing, stated presentation materials.

"The brand recognition and the popularity are increasing 2 years in a row in the US," Daisuke Tsukagoshi, head of US operations, said at the briefing. "Based on customer feedback, we'll find and develop products which will sell globally."

Earlier on Thursday, Fast Retailing reported a 27 per cent jump in quarterly operating profit to 70 billion yen, and kept its outlook for the fiscal year at 270 billion yen. Revenue was 592 billion yen for the quarter, while the forecast for the year was also kept at 2.2 trillion yen.

Last month, Fast Retailing's rival Hennes & Mauritz (H&M) reported a sudden slowdown in revenue growth during March, sending shares to a 2-year low.

China, the largest market for Fast Retailing outside of Japan, is sticking to its zero-Covid policy, locking down cities such as Shanghai.

The retailer temporarily suspended operations in Russia in March, joining a growing list of global businesses in curtailing their activities in the country after its invasion of neighbouring Ukraine. The market makes up for 2 per cent of the total for operation profit and sales, Okazaki said.

Fast Retailing also plans to open more than 300 stores globally next fiscal year and will use them to diversity profit drivers even further, he said. Fast Retailing stock, which hit a record in February 2021, has lost more than 40 per cent since then. BLOOMBERG