Fast Retailing generated JPY716.3bn (US$5.58bn) revenue growth in the first quarter of 2022-2023 (September to November 2022), which is a 14.2% increase (JPY89bn) and was boosted by Uniqlo International sales rising by 19.4%.

GlobalData associate analyst Louise Deglise-Favre points out this is in part due to the effects of the yen’s depreciation boosting revenue from foreign markets and explains that in contrast, Uniqlo Japan continued to underperform with sales only growing 6.4% on the year despite being against negative comparatives.

She states: “While the yen’s depreciation helped Uniqlo’s international sales, higher operational costs in Japan meant that its total operating profit fell by 2.0%. This will likely continue into Q2, especially as Fast Retailing pledged to increase the salaries of its Japanese staff by up to 40% earlier in the week.”

Meanwhile, the company’s operating profit was down 2.0% year-on-year to JPY117.0bn and its gross profit margin also dipped, which Fast Retailing attributes to
the warm weather in the bumper trading month of November stifling sales, and admits the “result was slightly below forecast”.

Fast Retailing is quick to point out that except for the Greater China region and Japan, Uniqlo reported large revenue, profit gains in all markets and record results for Southeast Asia, North America, Europe (excluding Russia).

Deglise-Favre believes the strength of the Uniqlo International performance was driven by the Europe and North America region, which grew 21.2% on the year due to successful marketing boosting consumer awareness of its LifeWear proposition.

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She says: “The brand has established itself as a destination for good-quality affordable basics, which will help it in the coming year as the cost of living crisis continues to rage on.”

In contrast, she highlights that sales in mainland China were once again impacted by Covid restrictions, which forced the temporary closure of 247 stores over the period, leading to a decline of 3.2% in sales and a fall in profits.

Deglise-Favre suggests the Chinese government’s recent announcement of the end of travellers’ quarantine and its strict zero-Covid policy could boost sales thanks to an influx of international and domestic travel and more normal consumer behaviour.

She concludes: “While the group’s FY2022/23 is off to a good start, Fast Retailing must ensure it turns its domestic performance around by creating more excitement around its product ranges, like it has in Europe with its collaborations such as with Marni in December 2022, as Japan represents 47.2% of the group’s total revenue so is crucial to its future.”

Fast Retailing expects to achieve consolidated forecasts for FY2023 first half and full year, following the company’s record high performance in fiscal 2022 with revenue rising 7.9% year-on-year to JPY2.3 trillion (US$15.7bn) and sales recovering steadily in all markets, and plans a mass store expansion in 2023.