New Financial Report Of Japan Clothing Giant Fast Sale Group

In the global FMCG market, UNIQLO's parent company, the Japanese clothing giant Fast Retailing, has always been an amazing existence. Founder Liu Jingzheng's legendary career and rigorous business philosophy have been regarded as the standard by new entrepreneurs. The rapid expansion after its rise has established its position as the head enterprise of FMCG clothing retail.

Today, fast retailing is still at the top of the industry, but its situation is not very good, which is reflected incisively and vividly in the secondary market. In February this year, the stock price of fast selling rose to 105000 yen at one time, and then fell continuously. By the end of October 15, its share price was 7278 yen / share, down nearly 30% from its high point. At the same time, the sharp fluctuations in the market value of Fast Retailing also made him lose the title of Japan's richest man, and he was replaced by the founder of sensor manufacturer keinxi takeoka.

Compared with the bad news that "Liujing is losing his position as Japan's richest man", the financial year 2021 report released by Fast Retailing recently seems to be comforting. According to the data released, its business has been running smoothly all over the world, especially in the Greater China market, which has almost become the key to boosting the performance of Fast Retailing in the last fiscal year.

However, this does not mean that fast retailing can rest assured. In the Chinese market separated by a river, FMCG - or its main brand, UNIQLO - still has a long way to go. Every change of emerging new competitors and iterative consumption trends is worth careful consideration. If one step is wrong, fast retailing is likely to repeat the mistakes of Zara and H & M.

　 Under the growth, there are still hidden worries

From this financial report, we can see that the wounds left by fast sale in the epidemic last year are rapidly recovering.

According to the data, the group's total revenue in fiscal year 2021 is 2.1329 trillion yen, which is 6.2% higher than that of 2020 fiscal year, which is 2.0088 trillion yen; The operating profit reached 249 billion yen, a significant increase of 66.7% compared with that of 1493 billion yen in fiscal year 2020. In addition, its net profit increased by 94.3% to 175.684 billion yen compared with that of fiscal year 2020.

In terms of brand segmentation, UNIQLO still contributes the most revenue to FMCG, and among them, UNIQLO overseas business division is the most profitable. According to the financial report, UNIQLO's overseas market revenue reached 930.1 billion yen, up 10.2% year-on-year; The total operating value was 111.2 billion yen, with a year-on-year increase of 121.4%. In terms of network channel, its sales volume increased by 20% year-on-year, and its proportion in revenue also increased to about 20%.

In the financial report, FMCG attributed the sharp growth in fiscal year 2021 to the strong recovery of UNIQLO's overseas business, especially in Greater China, which was slightly affected by the epidemic. According to the data, the revenue contributed by greater China market to UNIQLO rose from 455.9 billion yen in 2020 to 532.2 billion yen in 2021, an increase of 16.7% year-on-year.

In addition, business in North America and Europe also rebounded significantly, rising from y183.4 billion in fy2020 to y195.4 billion in fy2021, up 6.5% year on year. In the financial report, Fast Retailing attributed the growth of the region to the slowing down of epidemic control measures. In addition, the excellent performance of online channels and the Russian market also greatly promoted its growth pace.

UNIQLO's business in Southeast Asia, South Asia and Australia was not so lucky. As Malaysia, Thailand and the Philippines were seriously affected by the epidemic, the performance of the whole region did not grow, but declined slightly by 1% to 202.4 billion yen. However, Singapore, Indonesia, India and Australia still recorded significant growth in revenue and operating profit, which may become an important force in the recovery of UNIQLO's overseas business in the next quarter.

The picture is from the financial report of FMCG

Compared with the strong overseas business, the recovery trend of UNIQLO in China is not obvious.

According to the financial report, UNIQLO (UNIQLO) business division in Japan generated 842.6 billion yen in fiscal year 2021, up 4.4% year-on-year; The operating value of the company was 123.2 million yen, with a year-on-year increase of 17.7%. The sales volume of online channels was 126.9 billion yen, up 17.9% year-on-year, accounting for 15.1% of revenue. It can be seen that although the domestic business of Fast Retailing also accounts for half of its revenue, there is still a big gap compared with the overseas business in terms of growth rate and other data.

　 UNIQLO sticks to Chinese market

At present, the consumption power of Japanese clothing market is still strong. According to the statistical report of statista, the current annual consumption of Japanese clothing reaches 18.3 billion US dollars. In the next three years, the average growth rate of Japanese clothing market will be 51%. By 2024, this market will exceed 46.7 billion US dollars, and the per capita annual consumption will also reach 1265 US dollars.

However, on the other hand, the tradition of offline shopping in Japanese society has a long history. Although online channels have been rising in recent years, it is still difficult to match the traditional offline channels in the short term. Therefore, FMCG, which mainly relies on offline channels, will face the problem of slowing down the growth of the local market. At the same time, the change of consumption concept and aesthetic concept of the younger generation in Japan, as well as the rise of clothing rental websites such as airclose, laxus, leeap, etc., have impacted the traditional clothing retail enterprises led by Fast Retailing.

"If you don't grow, you will die." this is one of the management policies proposed by Liu Jingzheng. In order to implement this law, fast sale under his leadership has focused more on overseas markets in recent years. As a result, as we can see, the Chinese market has become the promised place for UNIQLO, its main brand. Here, Fast Retailing did not encounter the traditional offline constraints similar to those in Japan. Instead, it drew inspiration from China's booming e-commerce formats. UNIQLO has been able to maintain a certain dominant position in the tide of fast fashion brands withdrawing from the Chinese market through increasing the size of local marketing and accurate insight into consumer demand.

At present, Fast Retailing seems to want to use the simplest tactics - opening stores, to maintain its advantages in the end. At the UNIQLO new product launch earlier this year, UNIQLO Greater China CMO Wu pinhui announced that in the future, UNIQLO will maintain the opening speed of 80-100 stores a year in China, and will sink the stores to the third and fourth tier cities at the same time. Soon after, in November, UNIQLO plans to open a new global flagship store in Beijing, its third global flagship store in mainland China.

However, can UNIQLO's advantage be maintained indefinitely?

With the change of times and economic development, the Chinese market is no longer as easy to capture as UNIQLO had just entered China. When generation Z with high cultural confidence stepped on the consumption stage, domestic products with national culture became their favorite. The "overseas" label was no longer a panacea to stimulate consumption. At the same time, in recent years, the global clothing industry chain has gradually shifted, which is forcing the domestic new consumer brands to upgrade and work hard on technology and fabrics, which makes the gap between them and overseas brands smaller and smaller.

The emergence of direct consumer oriented marketing models such as live delivery with goods makes it easier for new brands to rise. Mjstyle and ur, which have sprung up in recent years, are the best examples. In addition, some of the old brands that no one cares about can also take advantage of some marketing opportunities and become popular. When new and old brands compete with UNIQLO at the same level, what advantage does UNIQLO take pride in?

What is the real competitiveness?

As we all know, the reason why UNIQLO continues to be popular with consumers in Japan largely depends on its low price. However, in the Chinese market, due to the tariff, management cost and consumption level gap, its price and positioning are above the middle end, and this price band is just the focus of many domestic brands. What's more, the relaxed Japanese style that UNIQLO focuses on is gradually cooling down, replaced by women's group style and brandy girl style.

UNIQLO's biggest advantage in the Chinese market is the huge channels left by its layout for many years, which is why it is trying to strengthen this moat recently. In addition, in view of the misunderstanding of fast fashion brands by consumers after Zara and H & M failed in the Chinese market, fastsell has also tried to tear this label off for UNIQLO in recent years. In previous financial reports, it called itself "a technology company that constantly innovates fabrics.".

Although these measures can alleviate the competitive pressure of UNIQLO to a certain extent, if we want to continue to maintain high growth in the Chinese market, create new localized brands, and take the road of "group army combat", it is also the solution of fast sales.

Acquiring or building new local brands to achieve performance growth has always been a common strategy of Fast Retailing. Taking this fiscal year as an example, in the North American market, fastsell has achieved a good result of narrowing the loss through the more grounded chaopai theory. However, it lacks relatively localized sub brands in the Chinese market. Of course, Gu, comptoir des cotoniers, theory and other sub brands have entered China, but they have not played their own unique advantages compared with gap and Forever 21.

At present, the economic development of Guochao in Chinese market is at the right time. If Fast Retailing seizes the opportunity to launch a new brand combined with oriental elements and make a difference with the new brands in domestic market in terms of pricing, it will have the opportunity to make up for UNIQLO's single brand and open up a new growth path.

Generally speaking, Fast Retailing needs a thorough and in-depth change in the Chinese market. Nowadays, UNIQLO has become less and less popular in China in a positive way, and what ordinary consumers can see in the press is their negative news. This also reflects from the side that the time and space left by the Chinese market for UNIQLO is running out. Can fast retailing lead it out of the trough and return to the peak? Investors are looking forward to its answer.