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Business |REPORT

Fast Retailing annual profit up, aims international expansion

By Prachi Singh

8 Oct 2015

The Fast Retailing Group has said that its consolidated revenue increased 21.6 percent year-on-year for full financial year spanning September 1, 2014 to August 31, 2015. Consolidated operating profit increased 26.1 percent and consolidated profit before income taxes for the year rose 48 percent year-on-year.

Uniqlo International proved the strongest among the three business segments, and the key driver of Group growth in fiscal year 2015. Operating profit generated by Uniqlo operations outside of Japan expanded 31.6 percent. Meanwhile, Uniqlo Japan reported a steady rise in profit, with operating profit expanding 10.3 percent year-on-year. Low-priced GU fashion casualwear brand, one of the labels under the Global Brands segment, performed extremely well in fiscal year 2015, generating 174.9 percent increase in operating profit year-on-year.

Uniqlo to expand wings beyond Japan

The Group’s medium-term vision is to become the world’s number one apparel manufacturer and retailer. To achieve this target, the company has focused its efforts on expanding Uniqlo International operations by continuing to open new stores in each country, where it already operates. It also plans to open global flagship stores in major cities around the world, to boost awareness and visibility of the Uniqlo brand and strengthen the global operational base.

The group will also promote GU brand by accelerating stores opening in Japan and launch the label in the Chinese market positioning it as the second important label under the group portfolio.

Revenues and profit jump at Uniqlo Japan

Uniqlo Japan reported record high performance with revenue expanding 9 percent and operating profit increasing 10.3 percent year-on-year on the back of a strong 6.2 percent rise in same-store sales. However, the gross profit to revenue margin contracted by 0.2 point year-on-year in fiscal year 2015.

During the Fall/Winter season, sales of core winter ranges such as Heattech, Ultra Light Down and wool sweaters outstripped expectations. The launch of our spring ranges also went well, but sales of summer items were dampened slightly by the unusually cold rainy season in June and early July.

Uniqlo International also reported a revenue rise of 45.9 percent, while operating profit expanded 31.6 percent. Within the Uniqlo International framework, Greater China (Mainland China, Hong Kong and Taiwan) and South Korea proved to be the key drivers of growth by reporting significant increases in revenue and profit.

Operating profit at Uniqlo Southeast Asia was steady but contracted in Europe. Sales also fell short of target and operating losses expanded at Uniqlo USA, partly due to the rapid expansion of the store network, with 17 new stores opening in fiscal year 2015. However at the standout Uniqlo Greater China operation revenue increased 46.3 percent and operating profit expanded by 66.1percent.

The number of Uniqlo Greater China stores stood at 467 as of August 31, 2015. The total number of Uniqlo International stores expanded by 165 to 798 stores during the year.

Global Brands segment in positive

Global Brands reported 17.6 percent rise in revenue and operating results shifted from an operating loss in fiscal year 2014 to an operating profit in fiscal year 2015. The GU label boasted 314 stores in Japan and five stores outside of Japan as of August 31, 2015. Meanwhile, Theory fashion brand was adversely affected by the lackluster US market for luxury fashion, and reported a contraction in operating profit. French fashion brand Comptoir des Cotonniers also reported a fall in operating profit. J Brand reported a higher operating loss after being hit hard by the downturn in the US premium denim market.

Outlook for the coming year

The Group estimates consolidated revenue to increase13 percent and consolidated operating profit to rise 21.6 percent year-on-year for the year ending 31 August 2016. Profit before income taxes is expected to increase 10.7 percent and profit attributable to owners of the parent by 4.5 percent.

All three business segments are expected to achieve gains in both revenue and profit. The Group forecasts it will expand its total global store network to 3,173 stores by the end of August 2016. That estimate can be broken down into 846 Uniqlo Japan stores including franchise outlets, 958 Uniqlo International stores and 1,369 stores for the Global Brands segment.