By Quentin Webb
(The author is a Reuters Breakingviews columnist.)
HONG KONG, Oct 13 (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 U.S. losses, and unveiling bold plans for China. After earlier missteps, this Japanese group is going global in style.
But Tadashi Yanai's outfit has regrouped. Operating profit for the year just past soared nearly 39 percent 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 U.S. 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.
At 13.3 times forecast EBITDA, according to Thomson Reuters Eikon, Fast Retailing shares look more fast fashion than haute couture. Inditex, in contrast, trades at a loftier 15.6 times. Yet analysts expect very similar growth from both - roughly 10 percent annual EBITDA growth over the next four financial years, Eikon data shows. Provided Fast Retailing can keep executing well in its own neighbourhood, that price tag could start to look a little down-market.
- On Oct. 12, Japan's Fast Retailing reported record annual operating profit of 176 billion yen ($1.6 billion), a near 39-percent increase, for the year ended Aug. 31. Revenue rose 4.2 percent to nearly 1.9 trillion yen.
- The company said it plans to have 1,000 Uniqlo stores in Greater China, by which it means the People's Republic of China, Hong Kong and Taiwan, within four years. It now has 555. Within five years it aims to quadruple operating profit from Greater China to 200 billion yen, on revenues of 1 trillion yen.
- Fast Retailing shares stood 3.4 percent higher by late morning in Tokyo on Oct. 13, at 36,050 yen per share.