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Uniqlo operator sees Q1 profit rise amid sluggish China performance

by January 9, 2025
written by January 9, 2025

The operator of the global clothing chain Uniqlo reported first-quarter results on Thursday that, while showing a rise in profits, fell slightly short of analyst expectations.

A sharp decline in profit in China overshadowed strong sales in its home market of Japan, highlighting the complexities of balancing global growth in a dynamic retail environment.

Fast Retailing announced that its operating profit rose 7.4% to 157.6 billion yen ($996.84 million) in the three months ending November, compared to the same period a year earlier.

However, this figure was slightly below a consensus forecast of 160 billion yen from six analysts polled by LSEG.

Despite the mixed results, Fast Retailing maintained its full-year operating profit forecast of 530 billion yen, putting the company on track for a fourth consecutive year of record earnings.

Uniqlo: a bellwether for consumer spending

Known for its affordable, durable fleeces, and cotton shirts, Fast Retailing has long been considered a key indicator for consumer spending in both Japan and, more recently, China, where it operates over 900 Uniqlo stores.

While domestic sales have been bolstered by a surge in duty-free shopping, fueled by a tourism boom and a weak yen, sales growth in China has cooled down, prompting the company to reassess its strategy in the region.

China strategy and global Expansion

In response to the slower growth in China, Fast Retailing is scaling back new store openings and adopting a “scrap-and-build” approach to revitalize underperforming locations with redesigned stores.

The previous year’s record results were driven by improved profit margins and increased international brand awareness.

However, the company remains vulnerable to changes in weather patterns and shifts in consumer fashion preferences.

While Japanese sales were boosted by cold weather in December, increasing demand for thermals, unseasonably warm temperatures in China resulted in flat sales for October and November.

The company has also seen positive results in North America and Europe, where it is currently mounting an aggressive expansion strategy in pursuit of its ambition to become the world’s No. 1 clothing brand.

This was exemplified by the opening of five new Uniqlo stores in Texas in October.

Wage hikes set pacesetter in home market

In its home market, Fast Retailing has become a pacesetter for wages in the service industry.

Keen to retain valued employees, the company announced on Wednesday that it will institute a significant increase in pay for its Japanese employees.

This comes on the heels of a similar hike in 2023, which helped to break the pattern of stagnation in the nation’s wage outlook.

Wages for full-time headquarters and sales staff will rise by as much as 11% from March, while annual salaries for new employees will increase by about 10%, according to the company.

The post Uniqlo operator sees Q1 profit rise amid sluggish China performance appeared first on Invezz

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