Uniqlo profits soar, global business set to be bigger than Japan

By

Sandra Halliday

Published
Oct 12, 2017

The year to next August will be a big one for Fast Retailing with the company saying Thursday that its international revenues will beat its Japanese turnover for the first time ever in the period.

That’s a big milestone for the Uniqlo owner with its star chain’s overseas ambitions having seen setbacks as well as progress over the past few years.

But setbacks seem to be largely a thing of the past now with the company saying it expects its profits to hit a record level in the year to next August after more than doubling in its latest full year.

Fast Retailing said that in the 12 months to August 31, net profit surged to ¥119 billion ($1.1 billion) even though its sales rose only 4.2% to ¥1.86 trillion. The slow sales growth was partly down to sluggish domestic turnover, but international business was strong, helped by the effect of the weaker yen.

Operating profit for the latest period soared nearly 39% to ¥176bn, helped by the firm’s cost cuts, even though it reported a mixed performance at its various international units. For instance, the US unit was still lossmaking even though its losses shrank by half. Overall though, operating profits from overseas Uniqlo stores almost doubled as China, Southeast Asia and Oceania proved strong. However, Japanese operating profits dropped over 6% as costs rose.

The company also said that it saw a considerable improvement in the gross profit-to-net sales margin “following the shift towards much tighter discounting.”

“We will take initiative in reforming every process, including planning, production, logistics and sales,” its CEO Tadashi Yanai told press at a news conference to talk about the results.”If we become passive, we would fall into a decline.”

But he’s not expecting a decline any time soon and international growth is the reason. Foreign sales accounted for 38% of Fast Retailing’s revenue in the latest year, up from only 22% in fiscal 2013. And with international sales expected to be the majority by this time next year and the firm predicting record sales and profits, its prospects look bright.

Domestic sales may still be an issue but the company is taking action. It wants to boost e-sales for Uniqlo by 30% over the next year, which should have a big effect, and Yanai also hinted at external online partnerships to come.

It all means a prediction of net profit reaching ¥120bn on revenue of ¥2.05trn in the new financial year. Not bad at all.