Uniqlo strikes back whereas Burberry retires

Wednesday, 12 October 2011
The operator of the Uniqlo chain of clothing stores Wednesday said it expects double-digit profit and revenue gains this fiscal year, in a sign that efforts to gain global presence through an ambitious series of store openings are bearing fruit in the form of still-tiny but steady earnings growth. Meanwhile and despite its 30% increase, Burberry plans to implement severe contingency measures.

Ahead of the opening of its biggest-ever Uniqlo store on New York's Fifth Avenue on Friday, Fast Retailing Co. said it is forecasting a 31% gain in net profit to Y71 billion in the current fiscal year ending August 2012. Dow Jones explained how making a major push overseas, Japan's biggest apparel retailer by sales expects its overseas Uniqlo business alone to rack up a Y17 billion operating profit for this fiscal year, nearly the double what that segment brought in during the just-ended business year with a 71% gain in revenue to Y160 billion. The company also confidently predicted that overseas sales are about to expand almost exponentially with sales abroad overtaking domestic sales in the year ending in August 2015. Last month, Fast Retail unveiled aggressive plans to become the world's largest apparel retailer by opening 200-300 stores per year outside Japan to better fight bigger rivals such as Gap Inc. (GPS) and Spain's Zara.

In line with this strategy, the company said it is planning opening of 107 new Uniqlo casual clothing stores mainly in Asian nations by August 2012 will bring the overseas store number to 288. The company was operating 843 Uniqlo stores in Japan and 181 outside its domestic market as of its Aug. 31 book closing. "We can expect business opportunities will outweigh the risks" outside Japan because of our good reputation overseas, summarized Chief Executive Tadashi Yanai at a press conference.

In the same vein and region, India’s market for luxury goods is developing more quickly than expected and is poised to grow by about 20% in the next 12 months, according to a new report. The Indian Luxury Review 2011 from the Confederation of Indian Industry (CII) and AT Kearney estimates that the Indian luxury market has grown by about 20% in the last year to reach a value of US$5.8bn, in line with the report’s five-year projections. Apparel and accessories have continued to perform strongly, contributing to growth in luxury products of 29%, well ahead of expectations of 23% growth.

Back to the Old Continent, shares of Burberry rose almost 3 per cent on Wednesday, however, when the group reported 30 per cent sales growth to £830m in the six months to September 30. “There’s absolutely no signs of any slowdown, it’s all contingency planning,” said Stacey Cartwright, chief financial officer. AS reported by the Financial Times, she said Burberry had modelled “significant sales reductions” into its fast-growing Chinese business, which accounts for 10 per cent of the group’s sales, “to see what we would get”.

“Even if our current sales per square foot projections are a double-digit percentage lower than we’re expecting them to be, we will still exceed our 25 per cent internal rate of return hurdle,” Ms Cartwright added.

Angela González-Rodríguez

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