Fast Retailing profit drops on weak sales, expects recovery in FY21

The Fast Retailing Group’s revenue and profit declined in fiscal 2020. The company said in a statement that for the twelve months to August 31, 2020, consolidated revenue totalled 2.0088 trillion yen, down 12.3 percent and operating profit totalled 149.3 billion yen, down 42 percent resulting from large falls in both revenue and profit in the second half period due to Covid-19. The group’s pre-tax profit declined to 152.8 billion yen down 39.4 percent and profit attributable to owners of the Parent declined to 90.3 billion yen, down 44.4 percent in the twelve months period.

Uniqlo Japan, the company added, reported a decline in revenue but a rise in profit, with revenue declining to 806.8 billion yen, down 7.6 percent and operating profit expanding to 104.6 billion yen, up 2.2 percent, while fiscal 2020 same-store sales including e-commerce declined 6.8 percent. In the first half, the company said, same-store sales declined 4.6 percent after sales of warm clothing struggled during the warm winter weather and in the second half, same-store sales declined by 9.6 percent as the spread of Covid-19 resulted in temporarily store closures and customer visits declined as people were encouraged to stay at home.

Uniqlo Japan witnesses rise in Q4 same-store sales

However, the company further said that same-store sales rebounded by 20.2 percent in the fourth quarter after stores were reopened due to strong sales of core summer ranges, products designed to satisfy stay-at-home demand, and AIRism face masks. Meanwhile, Uniqlo Japan e-commerce sales increased 29.3 percent in fiscal 2020 to 107.6 billion yen, raising the proportion of online sales to total revenue from 9.5 percent to 13.3 percent. The Uniqlo Japan gross profit margin rose 2.4 points.

Uniqlo International recorded significant declines in both revenue and profit, with revenue falling to 843.9 billion yen, down 17.7 percent and operating profit contracting to 50.2 billion yen, down 63.8 percent due primarily to large declines in revenue and profit in the second half on the back of Covid-19 and the recording of full-year impairment losses for the segment of 15.8 billion yen mainly on operations in South Korea and the United States. However, e-commerce sales increased by 20 percent.

While Uniqlo Greater China including Mainland China, Hong Kong, and Taiwan reported a decline in revenue and a significant contraction in operating profit, with revenue for the year totalling 455.9 billion yen, down 9.3 percent and operating profit totalling 65.6 billion yen, down 26.3 percent, Greater China performance improved at a faster pace than predicted from March onwards as local support for LifeWear concept grew and Greater China e-commerce sales expanded by approximately 20 percent.

Sales at Uniqlo South, Southeast Asia & Oceania including Southeast Asian nations, Australia, and India declined by approximately 13 percent to 150 billion yen and operating profit shrank by approximately 40 percent in fiscal 2020. The company said, having performed extremely well in the first half to generate double-digit growth in both revenue and profit, the region was heavily impacted by Covid-19 in the second half. In South Korea, same-store sales declined significantly and the operation posted an operating loss on the back of ongoing Japan-South Korea tensions and the impact of Covid-19.

In North America (USA and Canada), nearly all stores were closed from the middle of March through to the end of June. Changes in the social climate from June onwards and a resurgence in Covid-19 infections resulted in a large decline in revenue and a wider operating loss for the full year through August 31, 2020. Uniqlo Europe was also hit hard by Covid-19 with many stores being closed temporarily and a huge decline in tourist numbers knocking revenue lower and resulting in a slight operating loss for the full year.

During the year, Fast Retailing opened stores in Milan, Italy in September 2019, New Delhi, India in October 2019, and Chi Minh City, Vietnam in December 2019.

Highlights of GU and Global Brands’ performance

GU segment recorded an increase in revenue but a decline in profit in fiscal 2020, with revenue reaching 246 billion yen, up 3.1 percent and operating profit totalling 21.8 billion yen, down 22.5 percent. GU Japan same-store sales (excluding e-commerce sales) increased in the first half on the back of strong sales of knitwear, however, the impact of COVID-19 in the second half resulted in a 5.2 percent decline in GU Japan same-store sales for the full year. Full-year e-commerce sales performed strongly, expanding by approximately 60 percent. The GU gross profit margin declined 0.7 point.

The Global Brands segment reported large declines in both revenue and profit, with revenue totalling 109.6 billion yen, down 26.9 percent and the segment reporting an operating loss of 12.7 billion yen compared to a 3.6 billion yen operating profit in the previous year. This weak performance, Fast Retailing said, was due primarily to the large impact of Covid-19 in the United States and Europe, which resulted in continued losses for France-based Comptoir des Cotonniers and Princesse tam.tam brands and US-based J Brand label and also forced the Theory operation into the red. PLST brand also saw revenue decline due to COVID-19, resulting in a slight full-year operating loss. Comptoir des Cotonniers stores were temporarily closed for nearly two whole months resulting in a large decline in revenue and continued operating losses for the full business year.

In fiscal 2021, the Fast Retailing Group expects to achieve consolidated revenue of 2.2 trillion yen, up 9.5 percent, operating profit of 245 billion yen, up 64 percent, pre-tax profit of 245 billion yen, up 60.3 percent and profit attributable to owners of the Parent of 165.0 billion yen, up 82.6 percent. Overall Fast Retailing Group network is expected to expand to a total 3,725 stores by the end of August 2021: 813 stores (including franchise stores) at Uniqlo Japan, 1,558 stores at Uniqlo International, 445 stores at GU and 909 stores at Global Brands.

Picture:Facebook/Uniqlo