Uniqlo UNIQLO Has Become The "National Brand" Of China'S Middle Class, But Japan'S Demand Is Weak.

Uniqlo UNIQLO sales retrogression due to the unusually warm weather in Japan's domestic market for two consecutive months, resulting in the first time the parent company Fast Retailing Co. Ltd. (9983.T) fast Marketing Group recorded a profit decline in the first quarter in three years, but the price of the unimpeded group rose by 7.28% to 55850 yen on Friday afternoon.

Analysts have downplayed concerns about the contraction of profits, saying that this is due to warm winter sales promotion, which does not prove that there is a problem in operation.

Kuni Kanamori, a Nikko Securities analyst, believes that although profits may be damaged by the first quarter this year, he believes he will be able to recover in the next financial year.

No Agency analyst Christina Ng said UNIQLO is benefiting from China's multi-channel expansion and slowing global economic growth, especially in terms of the proportion of Chinese consumers' spending on clothing and fashion.

She even said that the decline in first quarter profits could even be seen as a good news for Japanese giants, because the potential for profit growth in the international market is far greater than that in the Japanese market, which is hard to break through.

She also said that UNIQLO has become the largest casual wear brand in the Chinese market and has become the "national brand" of the Chinese middle class.

In the first quarter of fiscal year ending November 2018, Fast Retailing Co. Ltd.'s sales profit decreased by 8.1% to 104 billion 665 million yen, or 970 million 200 thousand US dollars, less than 118 billion yen of market expectations in the first quarter of fiscal year 2019.

Japanese Uniqlo's operating profit plunged 29.9% to 37 billion 900 million yen.

The group pointed out that the temperature in Japan remained high in 10-11 months, and the flagship sales in winter were all in a slump.

In the first quarter, the business recorded a 4.3% decline in same store sales, and its revenue also declined by 4.3% to 246 billion 140 million yen per year.

Meanwhile, online store sales rose by 30.9%, a significant increase to nearly 10%.

A group of executives told the Nikkei Asia review that "seasonal factors are not the only reason for slowing sales." the lack of new products has also led to weaker demand. He pointed out that the core products of autumn and winter in 2018 were almost the same as those in 2017.

The chief financial officer, Takeshi Okazaki, said in a performance press conference that because of the cold winter of 2017, the winter products were out of stock, so as to avoid repeating the same mistakes, the composition of autumn and winter commodities this year focused on warm clothing, but the result was warm winter.

Japan's Uniqlo sales data released on Thursday by Fast Retailing Co. Ltd. show that the same store sales have resumed an increase of 5.2%, mainly due to the strong cold weather to promote the sales of winter clothing, and sales promotion at the end of the year also attracted a large number of customers.

As for overseas Uniqlo, although growth has slowed down compared with the same period in the same period of last year and the 2018 fiscal year, the operating profit can still reach 52 billion 500 million yen by 12.6%, and for the first time, it surpasses Japan's Uniqlo for the first time, making overseas Uniqlo the largest contribution to the group's profit.

The reason for this slowdown is that the Greater China and South Korea are also affected by the warm winter. The group emphasizes that the incomes and profits of these two important markets continue to grow.

Among them, China's mainland's operating profit maintained double-digit growth momentum, e-commerce also benefited from the combination of brand self operated website and WeChat Mini program and stores, and continued to achieve double-digit growth.

As of November 30th, 753 stores in Greater China had generated 134 billion 848 million yen in revenue, accounting for 20.9% of the group's total revenue.

In the first quarter, the income and profit of Southeast Asia and Oceania and Europe increased significantly, and the US market also achieved double growth, and moved steadily towards the goal of turning losses into profit in this fiscal year.

GU excellent sales rebounded under the push of commodity composition adjustment and marketing enhancement. Revenue rose by 7.7% to 65 billion 400 million yen in the first quarter, while operating profit continued to fall 4.9% to 8 billion 600 million yen. In the current fiscal year, the brand will continue to expand its international scale with greater China and South Korea as its center.

Global brand business will continue to rely on Theory brand independently, revenue can increase by 1.8% to 40 billion 700 million yen, operating profit will be reduced by 9.9% to 2 billion 700 million yen, and all other businesses except Theory include PLST, Comptoir des Cotonniers, PRINCESSE Tam Tam and J Brand.

In the first quarter, Fast Retailing Co. Ltd. had a total revenue of 644 billion 466 million yen, an increase of 4.4% from 617 billion 26 million yen in the same period of the previous year, and net profit fell by 6.4% to 73 billion 467 million yen per annualized year.

When the group released its 2018 fiscal year results in November, it put forward the outlook for the 2019 fiscal year's annual revenue, operating profit and net profit increased by 8%, 14.3% and 6.6% to 2 trillion and 300 billion yen, 270 billion yen and 165 billion yen respectively.

Management today reiterated this group of goals, but said that the Japanese Uniqlo needs to increase its discount in the current two quarter, which may result in a decrease in the business revenue in the first half of the fiscal year, and the discount rate in the two quarter of the Greater China and South Korean market is expected to increase. However, this will unimpede the overall performance of Uniqlo beyond its original expectations.

In the second half of the fiscal year, Japan's Uniqlo will achieve a substantial increase in revenue through measures such as gross margin improvement and fund control.

Takeshi Okazaki, chief financial officer, told reporters that China's economic slowdown has not affected the group business yet, but management will remain vigilant.

Fast Retailing Co. Ltd. (9983.T) reported 55280 yen on Friday, up 6.19% from Thursday's closing price of 52060 yen, contributing 120 points to the 195.9 increase in the Nikkei 225 index.