Earnings were up thanks to large gains from Uniqlo Japan and Greater China

Earnings were up thanks to large gains from Uniqlo Japan and Greater China

Fast Retailing, owner of the Uniqlo casual clothing brand, has reported a higher-than-expected rise in earnings in its first-quarter thanks to an impressive rebound in sales.

In the three months to November 2020, operating profit climbed 23.3% to JPY113bn (US$1.09bn) thanks to large gains from Uniqlo Japan and Greater China. Net earnings, however, were down slightly to JPY70.3bn from JPY70.9bn a year earlier. Consolidated revenues were down 0.6% year-on-year to JPY619.7m.

Uniqlo Japan reported a rise in revenue and a significant increase in profit in the quarter, with revenue up 8.9% to JPY253.8bn, and operating profit up 55.8% to JPY60bn. First-quarter same-store sales increased by 7.3% year-on-year.

Uniqlo International reported a 7.2% decline in revenue but a 9.5% increase in operating profit to JPY260.6bn and JPY41.1bn, respectively. Earnings were fuelled by a significant increase in profit at Uniqlo Greater China, especially in Mainland China and Taiwan, and a shift from an operating loss to an operating gain at Uniqlo South Korea.

Global Brands, meanwhile, reported a decline of 22.3% in revenue to JPY28bn and a slight operating loss in the first quarter of JPY0.2bn to JPY1.8bn.

"Due to the difficulties involved in estimating corporate performance during the Covid-19 pandemic, we have decided to maintain our initial forecasts for FY2021, which we announced in October 2020," the company said.

This includes a 9.5% increase in consolidated revenue to JPY2.2 trn, a consolidated operating profit jump of 64% to JPY245.0bn, and net earnings of JPY165bn, representing growth of 82.6%.

Impressive rebound

Pippa Stephens, retail analyst at GlobalData, a leading data and analytics company, says Fast Retailing's strong reliance on Asia has allowed it to experience an impressive rebound in sales during the quarter.

"[Japan and China] have both seen Covid-19 cases mostly suppressed, encouraging consumers to return to physical stores and releasing pent up fashion demand, contributing to the retailer's enviable operating profit growth, which was also supported by lower discounting this year on the back of unseasonably warm weather in its domestic market durinh.

"Fast Retailing's main hindrance is its expansive store estate across both Europe and North America; two of the current epicentres of the pandemic. While the retailer still plans to expand its portfolio further within these regions, it should wait until Covid-19 has been successfully mitigated in these areas, as consumer demand for clothing and footwear will continue to be significantly dampened while consumers are stuck at home and physical stores remain closed.

"As consumers become increasingly concerned about the environmental impacts of their fashion purchases, Fast Retailing is catering to their changing demands with an in-store garment recycling program and increased use of recycled materials within its garments. These initiatives are also well communicated to customers via in-store signage and social media, which is highly advantageous to its brand image. To become even more competitive with rivals like H&M, which is well renowned for its sustainable credentials, Uniqlo should increase the proportion of its ranges made from eco-friendly fabrics and become even more transparent with customers about the sourcing of each product, via labelling and detailed descriptions on its website."