Fast Retailing Co. is doubling down on the North American market, targeting 200 Uniqlo stores selling casual, functional clothing from the current 57 in five years.
The loss-making U.S. and Canada business is on track to post an operating profit for the first time this fiscal year, which ends in August, and achieve annual revenue of 300 billion yen ($2.4 billion) in 2027, with an operating margin of 20%, Takeshi Okazaki, Fast Retailing’s chief financial officer, said during a results briefing Thursday.
Ever since opening its first store in New Jersey in 2005, Uniqlo has struggled to reach the same scale of success seen in Japan and China. Now, with the war in Ukraine and resurgence of COVID-19 in China fueling uncertainty in clothing sales across the world, Fast Retailing is shifting its focus to a market where the outlook is relatively stable. To do so, the retailer said it will focus on opening stores in coastal cities and upscale shopping malls.
‘A second pillar for growth’ for Uniqlo
“Europe and North America are becoming a second pillar for growth overseas after greater China,” Okazaki said at the briefing. Europe and North America generated 20% of total operating profit for the six months ended in February, compared with 5% for fiscal 2019, according to the company.
New product development and ecommerce sales will be a key part of the strategy in Canada and the U.S., as well as boosting brand awareness and marketing, according to presentation materials.
“The brand recognition and the popularity are increasing two years in a row in the U.S.,” Daisuke Tsukagoshi, head of U.S. operations, said at the briefing. “Based on customer feedback, we’ll find and develop products which will sell globally.”
Earlier on Thursday, Fast Retailing reported a 27% jump in quarterly operating profit to 70 billion yen and kept its outlook for the fiscal year at 270 billion yen. Revenue was 592 billion yen for the quarter, while the forecast for the year was also kept at 2.2 trillion yen.
Last month, Fast Retailing’s rival Hennes & Mauritz AB reported a sudden slowdown in revenue growth during March, sending shares to a two-year low. China, the largest market for Fast Retailing outside of Japan, is sticking to its policy of eliminating COVID-19 infections, locking down cities such as Shanghai.
The retailer temporarily suspended operations in Russia in March, joining a growing list of global businesses in curtailing their activities in the country after its invasion of neighboring Ukraine. The market makes up for 2% of the total for operation profit and sales, Okazaki said.
Fast Retailing also plans to open more than 300 stores globally next fiscal year and will use them to diversify profit drivers even further, Okazaki said.
Fast Retailing stock, which hit a record in February 2021, has lost more than 40% of its value since then.