TOKYO: Just as inflation hits the US apparel retail tycoon as it tries to lure shoppers back into its stores with large inventories and deep discounts, Japan’s Uniqlo has been hit hard by the coronavirus pandemic’s transformation of its business model. After that, we are about to have the best year ever in North America.
Retailers from Gap to Kohl’s have warned that profit margins are eroding as inflation-aware customers hold back on clothing purchases. But Fast Retailing’s flagship brand is poised to post its first full-year profit in North America, aided by revamped logistics and pricing strategies introduced during the pandemic, as well as an essentially halt to discounting. said there is.
Fast Retailing did not disclose how much profit it will make from the 59 Uniqlo stores in the region, 43 of which are in the United States and 16 in Canada. US dollar), this number would be small.
But Japan’s aging population is shrinking its customer base, raising concerns about how much it can rely on China as a growth engine. Analysts say whether Fast Retailing can sustain its progress in North America will see it surpass Spain’s Inditex, set by founder and chief executive Tadashi Yanai, to become the world’s leading apparel retailer. It is said that it will be an important measure of how close you are to reaching your lofty goals.
Oshadhi Kumarasiri, analyst at LightStream Research, publisher on the Smartkarma platform, said:
Daisuke Tsukagoshi, 43, but already a 20-year veteran, said in an interview with Reuters that Fast Retailing’s head of North America, Uniqlo, used the pandemic as an opportunity to “scratch everything” and start over in North America. Crucially, Uniqlo has stopped nearly all discounts and basically re-educated customers to get used to flat rates.
“Competitors offer 50% or 60% discounts, but we basically stopped doing that,” Tsukagoshi said.
Instead, the company has renewed its focus on basic clothing items such as loungewear and lean inventory management, setting up an automated warehouse system that links inventory in its brick-and-mortar and e-commerce shops.
Uniqlo is also increasing its use of more expensive air freight to shorten lead times for its popular products and avoid logistics disruptions caused by the pandemic. We are increasing the use of air transport to
“Even if we use air, we try to get the goods into the warehouse in the shortest possible time,” said Mr. Tsukagoshi.
It’s not clear how much the company’s business has benefited from yen trading at its lowest level in decades. US earnings are much more valuable when converted to Japanese currency, but the cost of purchasing materials in yen is now much higher.
The warehouse-away company’s stores appear brighter and more tailored to American tastes, according to GlobalData retail analyst Neil Saunders. But Uniqlo may have misread the market by abandoning discounts.
“Low prices are interesting to U.S. consumers and it works, but some people like these bargains and feel they are a good deal,” he said.
“And Uniqlo doesn’t always offer that.”
Is Xinjiang dangerous?
Uniqlo, best known for its fleece and cheap basics, first entered North America in 2005 and plans to open 30 stores a year before reaching 200 over the next five years, with stores in New York and New York along the way. It has expanded into major cities such as San Francisco. To wider areas such as Texas and Florida.
The company expects annual sales in the region to reach 300 billion yen by 2027, and aims to boost its operating profit margin from the current 5% or more to 20%. Regional chief Tsukagoshi said that cutting logistics and marketing costs and lowering rents beyond the big cities would make it possible.
Some are skeptical.
Kumarasiri, an analyst at Lightstream Research, said that even Fast Retailing’s home market of Japan hasn’t reached a 20% profit margin, making its expansion and profitability targets “a little too ambitious.” appear.
One risk to the company’s plans could be its reliance on manufacturing in China, where human rights disputes swirl over labor and cotton produced in Xinjiang.
There have been no signs of a US consumer boycott so far, but Fast Retailing has not denied using Xinjiang cotton, unlike rivals such as Sweden’s H&M. A shipment of Uniqlo shirts was blocked at the Port of Los Angeles last year on suspicion of violating a ban on the material.
French prosecutors also launched an investigation last year into the company and three other retailers suspected of covering up “crimes against humanity” in Xinjiang. It was not immediately clear whether the stage had been reached.
The company denied the allegations and said it does not tolerate human rights abuses among its suppliers and vendors.China has denied all accusations of human rights violations in the region.