Uniqlo bets big in South­east Asia

Fast Re­tail­ing Co’s ca­sual-cloth­ing chain looks for growth out­side Ja­pan as par­ent’s prof­its flag

China Daily (USA) - - BUSINESS - By BLOOMBERG

Ca­sual-cloth­ing chain Uniqlo is tak­ing its big­gest chance in South­east Asia.

The unit of Fast Re­tail­ing Co is open­ing a store on Sin­ga­pore’s iconic Or­chard Road that will have 2,700 square me­ters of shop­ping space on three floors. The store will be Uniqlo’s largest in the re­gion as the brand looks for growth out­side Ja­pan to re­vive flag­ging prof­its at its par­ent.

Fast Re­tail­ing is busy open­ing stores in the US, Lon­don and across Asia to help re­duce its de­pen­dency on a home mar­ket where Ja­panese house­hold spend­ing is fall­ing.

Bil­lion­aire Chair­man Tadashi Yanai Thurs­day re­it­er­ated plans to gen­er­ate 5 tril­lion yen ($48 bil­lion) in sales by 2020 to keep Fast Re­tail­ing com­pet­i­tive with Hennes & Mau­ritz AB and Zara-owner In­di­tex SA. Low prices are now key in that equa­tion.

“Keep­ing the low prices ev­ery day is im­por­tant. That will be crit­i­cally im­por­tant given this en­vi­ron­ment,” said Yanai at a brief­ing in Sin­ga­pore ahead of the store’s de­but. In May, he re­versed the com­pany’s ear­lier at­tempt to hike prices that re­sulted in slump­ing sales. “We also aspire to pro­vide truly great cloth­ing at the low­est pos­si­ble prices.”

This will be the 25th store in Sin­ga­pore for Asia’s largest cloth­ing re­tailer, bring­ing its South­east Asian pres­ence to about 130 out­lets. The 67-yearold Yanai, Ja­pan’s rich­est man with a net worth of $18.3 bil­lion, called the open­ing of the flag­ship store an op­por­tu­nity. He sees mar­kets in the As­so­ci­a­tion of South­east Asian Na­tions — the ASEAN re­gion — pos­si­bly con­tribut­ing to 30 per­cent of Uniqlo’s in­ter­na­tional sales in five years.

“South­east Asia ex­pan­sion will help Yanai achieve his 5 tril­lion-yen sales tar­get,” said Dairo Mu­rata, an an­a­lyst at JP­Mor­gan Se­cu­ri­ties Ja­pan Co. “But to achieve that goal in three years will be dif­fi­cult.”

Uniqlo last Septem­ber opened a six-story China flag­ship store in cen­tral Shang­hai, and Yanai re­it­er­ated plans to open 100 stores a year in­China on its way to a po­ten­tial 3,000. The brand’s South­east Asia pres­ence in­cludes about 30 stores each in Malaysia, Thai­land and the Philip­pines.

That over­seas ex­pan­sion has made Fast Re­tail­ing more vul­ner­a­ble to a strength­en­ing yen, which prompted a cut to its full-year net in­come fore­cast in July. Yanai said the ex­change rate’s ef­fect on the com­pany’s bot­tom line is a prob­lem, “and the im­pact can not be un­der­es­ti­mated”.

Yet, re­cent signs of re­cov­ery in the Uniqlo busi­ness lifted Fast Re­tail­ing’s shares 8.7 per­cent in Au­gust, par­ing the year-to-date slump in the stock to 16 per­cent. Shares dropped 1.1 per­cent to 35,940 yen in Tokyo trad­ing Thurs­day while the coun­try’s bench­mark in­dex ad­vanced.

Fast Re­tail­ing’s op­er­at­ing in­come for the third quar­ter that ended in­May rose 19 per­cent from a year ago as sales in Ja­pan and over­seas im­proved. To keep up with the in­creas­ing pop­u­lar­ity of e-com­merce, Uniqlo will re­vamp its lo­gis­tics and dis­tri­bu­tion, Yanai said on Thurs­day.

There are also op­por­tu­ni­ties for ex­pan­sion in the US, par­tic­u­larly on the West Coast since it is seen as an ex­ten­sion of Asia, he said.

“Ja­panese busi­nesses, in­clud­ing ours, need to trans­form the waywe do busi­ness,” he said.

While Fast Re­tail­ing will ex­pand in the US, with plans to open four new stores this year, it’s still strug­gling with a lack of brand aware­ness, es­pe­cially in the sub­urbs, said Hiroshi Taki, chief ex­ec­u­tive of­fi­cer of Uniqlo in the US.

Fast Re­tail­ing has sus­tained losses in the US, where it has 44 stores. But it plans to dou­ble its mar­ket­ing spend­ing by open­ing pop-up stores in New York and us­ing bill­boards, so­cial-media in­flu­encers and lo­cal am­bas­sadors to drum up in­ter­est in the brand, Taki said in an in­ter­view at a ren­o­vated store in SoHo, NewYork.

It also plans to ex­pand its e-com­merce­busi­ness, es­pe­cially through mo­bile phones, to make the busi­ness ac­count for as much as 30 per­cent of its to­tal US sales in two to three years, he said.

“Not many peo­ple have pur­chased our prod­ucts, although they know about our brand, Uniqlo, so we are mak­ing a mar­ket­ing ef­fort to let peo­ple know,” Taki said through an in­ter­preter. “We will fo­cus on New York City first. With that suc­cess in New York City, we can suc­ceed any­where else.”

net worth of Tadashi Yanai, Ja­pan’s rich­est per­son and chair­man of Uniqlo The num­ber of Uniqlo stores that Yanai plans to open ev­ery year in China

AN­THONY KWAN / BLOOMBERG

A cou­ple look at a dis­play win­dow of a Uniqlo store in the Cause­way Bay dis­trict of Hong Kong, China, on June 19. The cloth­ing com­pany sees a po­ten­tial for 3,000 Uniqlo stores in China, and $48 bil­lion in world­wide sales by 2020.

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