Recession can’t slow Uniqlo

by Naoko Fujimura and Ladka Bauerova

Bloomberg

While celebrities watched models strut down catwalks during fashion week in Paris, dozens of people lined up in the rain to buy 40 euro cashmere sweaters at the newly opened Uniqlo store in the city’s Opera district.

Two days earlier, it was “impossible to get inside” the store, which is across the road from the Galeries Lafayette department store, Guillaume Terne, 24, said. “There has been so much talk about the brand that I simply couldn’t miss it.”

While the global recession has hurt luxury brands, Uniqlo’s owner, Yamaguchi-based Fast Retailing Co., may see its profit for the business year ending August jump 23 percent to a record on increased demand for the chain’s $45 jeans and $17 camisoles with fitted bra cups. The debut of +J, a brand overseen by German designer Jil Sander, may help sustain sales that jumped 32 percent last month.

“No one else can win like Fast Retailing in the retail industry,” said Ichiro Takamatsu, chief executive officer at Japanese hedge fund advisory Alphex Investments Co. in Tokyo. “The company stimulates demand with its ability to introduce new items.”

Chief Executive Officer Tadashi Yanai has increased his focus on product development and design, collaborating with Walt Disney Co. to make T-shirts. Products including HeatTech thermal wear and Bra Tops camisoles have helped boost Uniqlo’s sales at stores open at least a year in Japan by 11 percent last business year.

In Tokyo, hundreds of people waited for hours for the Oct. 2 opening of the expanded Uniqlo store in the Ginza district, where brands including Gucci, Chanel, H&M and Zara compete for shoppers.

Fast Retailing has reported year-on-year sales growth for every month except two since September 2008, when Lehman Brothers Holdings Inc. filed for bankruptcy, plunging markets worldwide into crisis.

Domestic sales at Uniqlo stores open at least a year surged 32 percent last month, while those at Isetan Mitsukoshi Holdings Ltd. and other department stores slipped at least 5 percent.

That growth “is astounding in such economic conditions,” said Shigeo Kikuchi, an equity manager at Takagi Securities Co.

Fast Retailing said Oct. 8 its full-year profit may rise 25 percent as its +J brand and other new clothing lines boost sales at its Uniqlo chain.

Net income may be ¥62 billion for the 12 months ending next August from ¥49.8 billion last year, Japan’s biggest clothing retailer said. That compares with the ¥64.6 billion average estimate of 18 analysts compiled by Bloomberg.

The retailer forecast sales to grow 17 percent to ¥798 billion this year, with operating profit to increase 11 percent to ¥120 billion.

Uniqlo has reported year-on-year domestic sales growth for every month except two over the past year, with revenue surging 32 percent last month.

In Paris on Oct. 5, four days after the Uniqlo outlet opened, Friderique Marchand, 29, and Lucie Bloch, 27, waited in the rain for the discounts offered during the store’s first month of operation. “You can get the basics in a hundred different colors, and the prices aren’t bad,” Marchand said.

Gianni Versace SpA said Oct. 6 it will close its Japanese stores and review its entire business strategy. PPR SA, the French owner of Gucci, reported first-half profit dropped 76 percent to 189 million euro and Hermes International SCA, maker of Birkin handbags, posted a 7 percent drop in net income in the same period.

“Fast Retailing is one of the stars in the retail industry,” said Koichi Ogawa, who helps oversee $28 billion at Daiwa SB Investments Ltd. in Tokyo. “It’s faring well with its low-price strategy when the whole industry is slumping.”

Fast Retailing is expanding even as job losses and wage cuts chill household spending in Japan, where retail sales fell 1.8 percent in August from a year earlier, the 12th straight monthly decline. The company also plans to open more stores in China and other overseas markets.

In Ginza, Fast Retailing expanded its Uniqlo store 50 percent.

Giuliano Bettolini, an Italian teacher who has lived in Japan for 20 years, bought a winter overcoat for ¥14,900 at Uniqlo’s Ginza store.

“I have seen lots of things going up and down,” said Bettolini. “Uniqlo has got the right formula for the present situation.”