Uniqlo: CEO admits the start of the year was plagued by strategic mistakes

In an interview with Nikkei magazine, the founder and CEO of Japanese retailer Uniqlo recognised he has made strategic mistakes, by underestimating the current mood of Japanese customers, leading to results which are regarded as negative.

"The items whose prices we raised have failed to find buyers. The market is extremely tough and our decision to increase prices was not a good one. Consumers find themselves in a situation that goes beyond what I imagined," stated Tadashi Yanai, as quoted in the economics daily's Wednesday morning edition.

In 2015, Uniqlo decided to raise the price of several items by 10%, due to unfavourable fluctuations in currency exchange rates. The group's costs abroad are high and, when the yen is weak (as was the case until recently), they increase sharply.

The strategy was unsuccessful, and last week the Fast Retailing group (owner of the Uniqlo brand) slashed its forecasts for the fiscal year from September 2015 to August 2016, due to the sales slump, notably in Japan.

Uniqlo failed to meet its targets in Japan with the winter collections (including the HeatTech line) due to the cold weather's late arrival, and Uniqlo customers have been visiting the brand's 844 Japanese stores less frequently than usual.

The 13% rise in revenue recorded by Uniqlo stores abroad, 890 of them now (174 more than a year ago), was not sufficient to prevent their associated operating income from plummeting 31% down, to JPY29.4 billion, due to operational losses in the USA and declining profitability in China and South Korea too.

Fast Retailing is now expecting a net annual income of JPY60 billion (€480 million) only, compared to JPY110 billion previously forecasted.

Mr Yanai has indicated that the group will review its commercial policy and its organisation, in order for everyone, at all levels, to show a greater sense of responsibility.

Talking to students and some journalists at a recent conference in Tokyo, Mr Yanai stated that 'the management of a business is anything but settled, it's a string of crises," adding that "it's when you start to feel satisfied with yourself that business grinds to a halt."

Still, for many years Uniqlo had accustomed everyone to good news, showcasing ever-increasing results year after year. Consequently, Mr Yanai's recent warning was defined as "shocking" by the Japanese press.

The following day, the company's share price fell by nearly 13% on the Tokyo Stock Exchange.