Fast Retailing tailors a bright future in Asia

Hong Kong (Reuters Breakingviews): Fast Retailing is tailoring a bright future in Asia. Full-year results show the 3.5 trillion yen ($ 32 billion) fashion retailer behind Uniqlo is back on track overseas: growing rapidly across the region, staunching US losses, and unveiling bold plans for China. After earlier missteps, this Japanese group is going global in style.

Figures for the 12 months to end-August mark a welcome turnaround after a nasty 2015-2016. During that time, operational flubs and currency headwinds forced Fast Retailing to slash forecasts repeatedly, and operating profit crashed nearly 23%. The stock nearly halved.

But Tadashi Yanai’s outfit has regrouped. Operating profit for the year just past soared nearly 39% to 176 billion yen. That was thanks in large part to Uniqlo’s international operations, where operating profit nearly doubled to 73 billion yen. To achieve this, the company took a stern approach to discounting, cut costs, and halved operating losses in its troubled US business. Wisely, Yanai now appears focused closer to home. China and South East Asia – where operating profit doubled last year – are probably easier markets for a Japanese fashion house to master, and offer more growth potential to boot, than North America and Europe.

In ten years, the group has gone from 13 Uniqlo stores in Greater China to 555: not far off the 640 stores that industry titan Inditex, the owner of Zara, had in China and Taiwan at the end of its last financial year. Fast Retailing targets 1,000 Chinese Uniqlo stores within four years, and wants to quadruple operating profit there in five years to 200 billion yen – more than the entire group’s current level.