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Fast Retailing posts 38.6 percent profit rise, revenues up 4.2 percent

By Prachi Singh

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Business

For the financial year from September 1, 2016 to August 31, 2017, the Fast Retailing Group’s consolidated revenue totalled 1.8619 trillion Japanese yen (16 billion dollars), a rise of 4.2 percent, while operating profit reached 176.4 billion Japanese yen (1.57 billion dollars), a rise of 38.6 percent. The company’s profit before income taxes rose to 193.3 billion Japanese yen or by 114.3 percent and profit attributable to owners of the parent increased to 119.2 billion Japanese yen or 148.2 percent.

Uniqlo International, the company said, generated strong increase in profit, which proved the key driver of overall group performance. The company added that it is focusing on expanding Uniqlo International and low-priced GU casual fashion brand.

The group to focus on global expansion of Uniqlo and GU

Within the Uniqlo International segment, the group feels that Southeast Asia in particular is entering a new stage of growth and is set to become the segment’s second pillar region after Greater China (Mainland China, Hong Kong and Taiwan) and South Korea. In terms of the GU operation, in addition to opening more GU stores in Japan, the company is also planning to expand GU’s international presence by opening more stores in Mainland China, Hong Kong and Taiwan.

Uniqlo Japan reported a rise in revenue but a fall in profit in fiscal 2017, with revenue totalling 810.7 billion Japanese yen (7.2 billion dollars), a rise of 1.4 percent and operating profit totalling 95.9 billion Japanese yen (0.85 billion dollars) or a decline of 6.4 percent. In the twelve months to August 31, 2017, same-store sales, including online sales, expanded by 1.1 percent year-on-year.

The company said, warm weather during the most vigorous sales month of December resulted in a modest rise in same-store sales in the first half of 0.1 percent year-on-year. However, same-store sales subsequently expanded by 2.4 percent in the second half on buoyant sales of products such as wireless bras, Dry Stretch Kando Pants, easy ankle pants and UT T-shirts. Meanwhile, e-commerce sales increased 15.6 percent in fiscal 2017 to constitute 6 percent of total sales.

Uniqlo International revenue rose to 708.1 billion Japanese yen (6.30 billion dollars) or 8.1 percent in fiscal 2017, while operating profit almost doubled to 73.1 billion Japanese yen (0.65 billion dollars) or 95.4 percent. The company said, several factors contributed to this strong performance, including a considerable improvement in the gross profit to net sales margin following the shift towards much tighter discounting in each individual operation, the positive effects of cost-cutting efforts, and a halving of the operating loss at Uniqlo USA. Uniqlo Southeast Asia & Oceania generated a strong performance. The expanded range of polo shirts, DRY T-shirts and other core products in that region, and strong sales of products designed specifically to suit the region’s climate and culture both helped generate a significantly higher gross profit margin.

The company added that Uniqlo South Korea generated a considerable increase in operating profit for the full financial term as the operation’s positive management reforms helped encourage a recovery in same-store sales in the second half. Uniqlo Greater China reported a significant rise in operating profit, with same-store sales in Mainland China continuing their rising trend on the back of successful sales campaigns. Uniqlo USA reduced its operating loss by half in fiscal 2017 due to efforts to tailor product ranges to suit specific regions, some successful sales promotions, and continued business reforms. At Uniqlo Europe, operating profit dipped slightly after the opening of 20 new stores mainly in Russia and France resulted in increased costs. In September 2017, Fast Retailing opened its first store in Spain, Barcelona.

Global Brands segment increases revenue and profit

The Global Brands segment generated increases in both revenue and profit in fiscal 2017, with revenue rising to 340.1 billion Japanese yen (3.02 billion dollars), an increase of 3.5 percent and operating income expanding to 14 billion Japanese yen (0.12 billion dollars) or 47.5 percent.

Fast Retailing said, considerably higher profits from the Theory fashion label and shrinking impairment losses from the J Brand premium denim label contributed to the rise in Global Brands operating profit. GU reported a rise in revenue but a decline in profit in fiscal 2017, with revenue rising to 199.1 billion Japanese yen (1.77 billion dollars) or 6 percent and operating profit contracting to 13.5 billion Japanese yen (0.12 billion dollars) or 39 percent. Same-store sales declined 3 percent.

In international markets, after the first GU store opened in Hong Kong in March 2017. Theory generated a significant increase in operating profit on the back of strong sales from the US Theory brand and improved profitability from Theory’s PLST brand operation. Revenue from our France-based Comptoir des Cotonniers operation declined but the label’s cost-cutting drive helped successfully reduce operating losses. The France-based Princesse tam.tam label generated a further operating loss, while US-based J Brand accounted for a 3.6 billion Japanese yen (0.03 billion dollars) impairment loss.

Fast Retailing expects 10.1 percent revenue rise in FY18

In fiscal 2018, Fast Retailing expects to achieve consolidated revenue of 2.05 trillion Japanese yen or a rise of 10.1 percent year-on-year), operating profit of 200 billion Japanese yen (1.77 billion dollars) or an increase of 13.4 percent, profit before income taxes of 200 billion Japanese yen or a rise of 3.4 percent and profit attributable to owners of the parent of 120 billion Japanese yen (1.06 billion dollars) or a rise of 0.6 percent.

All three Fast Retailing business segments are expected to generate increases in both revenue and profit in fiscal 2018. The company forecasts that the overall Fast Retailing Group network will expand to a total of 3,502 stores by the end of August 2018: 831 stores (including franchise stores) at Uniqlo Japan, 1,246 stores at Uniqlo International and 1,425 stores at Global Brands.

Picture:Uniqlo Korea website

Fast Retailing