Fast Retailing sales fall; UNIQLO Japan to expand in H2
08 Apr '11
5 min read
Same-store sales at UNIQLO Japan contracted 9.9% year on year in the six months through February 2011, but the result was being compared with the extremely robust performance for the same period of the previous year during which same-store sales rose 13.1% year on year. Unseasonably warm December weather also served to stifle the sales of fall and winter items. As a result, customer numbers in the second half shrank 5.0% year on year and the average customer spending fell 5.2% for the same period.
UNIQLO Japan's gross profit margin fell 3.4 points year on year when compared using the same accounting procedure. We conducted more discounting to liquidate inventory of fall items, and increased production of HEATTECH items resulted in more limited-offer sales than in the previous year when production levels were tight. SG&A expenses rose 1.1 points year on year in the six months through February 2011, however, solid control enabled a reduction in costs for personnel, advertising and distribution, resulting in the SG&A expense total for the first half coming in ¥ 8.4bln below our initial estimate.
We expect UNIQLO Japan to generate increases in both sales and operating income in the second half of the business year through August 2011, with sales seen rising 7.1% year on year to ¥ 265.8bln, and operating income forecast to rise 9.5% to ¥ 38.6bln over the same period. We have revised downward our second-half estimate for UNIQLO Japan sales by ¥ 8.0bln in the wake of the March 11 earthquake. Stores forced to close due to the disaster are expected to detract ¥ 3.0bln from total sales with the impact of the reduced number of new store openings estimated at ¥ 2.0bln.
Nonetheless, our most recent estimate of a 3.0% year-on-year increase in same-store sales at UNIQLO Japan in the second half remains unchanged. Following the March 11 earthquake, same-store sales fell even further below the previous year's level in March, contracting 10.5% year on year, but subsequently sales have begun to rebound gradually and we expect same-store sales to increase from April onward. We estimate the gross profit margin will dip 1.8 points year on year in the six months to August 2011 on the back of increased cost of sales, but we also expect increased revenue and cost-cutting measures to nudge operating income higher in the same period.
We added a net 16 stores in the first half to bring the total of directly-run and franchise outlets at the end of February 2011 to 824 stores. We expect to expand the number of large-scale stores, locations with a retail space in excess of 1,600 square meters, to 129 and the overall store total to 836 by the end of August 2011.
-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Telangana State Industrial Infrastructure Corporation Limited (TSllC Ltd)")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Taiwan Textile Federation (TTF)")
