UNIQLO Is Not Affected By China'S Economic Slowdown, Discount Sales, Profits And Sustainable Development.

Fast Retailing, the parent company of Uniqlo, a Japanese fashion giant, recently said that its profits fell in the first quarter of fiscal year 2019 under the influence of abnormal warm winter.

UNIQLO has been popular with consumers for its simple and cost-effective clothing, but the brand is not optimistic in the local Japanese market.

China's economic slowdown has also raised concerns that mainland China is one of the main drivers of its growth.

Takeshi Okazaki, chief financial officer of fast marketing group, said: "the year before, we performed well in the local market, and there was no backlog of winter clothes, so we increased the volume this season, but we met with warm weather." (Okazaki Ken)

According to the first quarter of 2019 fiscal year ending November 30, 2018, the core business data of fast marketing group are as follows:

Sales grew by 4.4% to 644 billion 400 million yen.

Operating profit fell 8.1% to 104 billion 600 million yen, much less than analysts had expected to grow 3.5% to 118 billion yen.

Net profit fell 6.4% to 73 billion 400 million yen over the same period.

Fast Retailing also pointed out that because of the discount sale of UNIQLO to reduce inventory, the next quarter will be more difficult.

Under the influence of discount sales, it is estimated that in the first half of fiscal year 2019, the profits of Japan's local market will slide beyond expectations.

At the same time, UNIQLO will also increase promotional activities in the Greater China and Korea markets to reduce inventory in winter.

Xun points out that in order to achieve its goal of the world's first apparel retailing business, it will continue to expand its overseas market and strengthen its GU.

Specific strategies include opening up UNIQLO stores in overseas markets, opening up global flagship stores and large stores in major cities of the world, and expanding the global visibility of brands.

As far as UNIQLO's overseas market is concerned, the Greater China and Southeast Asian market will become the backbone of group growth in the future and further improve the profits of the US market.

In terms of GU, we should speed up the opening of stores in the Japanese market and expand the overseas market centered on Greater China and Korea.

UNIQLO brand performance

In the quarter, UNIQLO Japanese local market:

Sales fell 4.3% to 246 billion 100 million yen compared with the same period last year.

Operating profit fell 29.9% to 37 billion 900 million yen, but still contributed to over 1/3 of the group's operating profit.

Store sales, including electricity providers, fell 4.3% year-on-year.

Express sales said knitted jackets, fleece and more fashionable styles show a bright eye. But because of the "high temperature" weather in October and November, sales of core commodities in winter were weak.

In the quarter, local market electricity supplier sales increased by 30.9% year-on-year, accounting for 9.7% of total sales, up from 7% in the same period last year.

But the yen went down and the cost of raw materials increased, leading to a 3.2% decline in gross profit margin compared with the same period last year.

The increase in logistics costs, the depreciation costs arising from automation of distribution center warehouses located in the open areas of Tokyo, and so on, all contributed to an increase of 2.2% in the company's year-on-year cost.

According to Xun, the profit of the local market in the second half of the year is expected to increase significantly, thanks to stronger cost control.

In the quarter, UNIQLO overseas market:

Sales grew by 12.8% to 291 billion 300 million yen.

Operating profit grew 12.6% to 52 billion 500 million yen over the same period.

According to Xun, UNIQLO overseas market has become the largest business unit of the group.

Xun hopes that in the first half of fiscal year 2019, the group will benefit from strong sales and profit growth of UNIQLO overseas business.

In the first quarter, from the regional markets:

Accelerate the integration of online and offline to drive the mainland market to continue to grow at a high speed of two figures.

The growth trend of all stores in all regions of Southeast Asia and Oceania is to achieve double growth in sales and profits.

The US market, which has been losing money all the year round, has also narrowed its losses further by adjusting the composition of regional products and investment channels.

The European market has seen substantial growth in sales and profits, of which the Russian market has performed well.

In September 2018, the first Holland store in UNIQLO opened in Amsterdam, and the largest flagship store in Southeast Asia opened in Manila, Philippines.

Okazaki Ken said he was not worried about the slowdown in China's economy.

"I believe China's economy is slowing down, but there is no evidence or evidence that it has an impact on our business," he said, but he will remain vigilant at all times.

In the 2018 fiscal year, XXX increased 78 stores in the Chinese market and the total number of stores increased to 633.

Japan has closed 4 stores and now has a total of 827.

Although Fast Retailing expresses no need to worry about China's economic slowdown, some analysts are worried. How long will UNIQLO's growth in the Chinese market last?

The prevailing view is that China's economic growth will slow down partly due to the Sino US trade war. The Chinese government is also actively taking measures to stimulate domestic demand growth.

Other brands under fast selling

The first quarter sales of sub line GU increased by 7.7% to 65 billion 400 million yen compared with the previous year, and operating profit fell 4.9% to 8 billion 500 million yen, mainly due to the strengthening of advertising investment.

Xun Jian pointed out that adjusting the composition of commodities and strengthening the advertising sales of e-commerce have effectively promoted the growth of brand sales, especially the performance of sweatshops, oversize knitted sweaters and so on.

Other brands of XXX group were classified as Global Brands. Sales in the first quarter increased 1.8% to 40 billion 700 million yen, and operating profit fell 9.9% to 2 billion 700 million yen.

According to brand:

The sales of New York fashion brand Theory increased in the US market, which was positively affected by the reduction of discount, and the profit increased.

Japanese fashion brand PLST sales rose, but profits rose as new stores and other costs rose.

French fashion brand Comptoir des Cotonniers, French underwear brand Princesse tam.tam and Losangeles jeans brand J Brand continued losses;

At present, fast sales remain the same as expected. As of the 2019 fiscal year of August 2019, it is estimated that:

Sales increased by 8% to 2 trillion and 300 billion yen compared with the same period last year.

Operating profit increased by 14.3% to 270 billion yen over the same period.

Net profit increased 6.6% to 165 billion yen.

Focus on "sustainable development"

In the first quarter of fiscal year 2019, newsletter added a new content: sustainable development.

With the declaration of "making the strength of clothing social" as a declaration, fast marketing aims to create a sustainable development of the global environment and society through the clothing industry.

Xun points out that the group is composed of six important areas: "creating new value through commodities and sales", "respecting the human rights and working environment of the supply chain", "environmental protection", "coexisting with the community", "happiness of workers", and "correct operation".

As soon as possible, the society as a whole includes:

In January 2019, Xun announced that it plans to provide paper and biodegradable plastics in more than 2000 stores around the world to replace existing plastic shopping bags and product packaging.

In October 2018, it signed the UN's UN Global Compact, which is advocated by the United Nations, which restricts the four standards of human rights, labor standards, environmental protection and corruption prevention.

In November 2018, the list of main cooperative factories of UNIQLO and GU was announced.

In 2016, Jeans Innovation Center, an innovative R & D center focused on Yu Danning (denim clothing), was set up in California, USA, aiming to further improve the quality and value of other brands of cowboy products in UNIQLO and other groups. In 2017, it announced two major environmental protection measures: ecological washing materials and laser fading technology.

As of November 2018, in the area of "coexistence with the community", Xun has donated 17 thousand and 700 UNIQLO and GU products to the victims of the north channel earthquake.

In the "merchandise recycling activities" (uniforms and GU stores' clothing for the needs), Xun has donated 90 thousand commodities to refugees and immigrants from Venezuela to the Republic of Columbia.