Uniqlo: A Fast Expansion in Russia, Slower in Spain

The Japanese fashion multinational is advancing in the works of its first store in Spain, which will be located in Barcelona, ​​on the Paseo de Gràcia 18, on the corner with Gran Via. The opening will take place after more than a year of reforms in the premises, since it announced in February 2016 its definitive bet on the Spanish market, where the company wants to become strong. The store, which will occupy four floors and will have an area of ​​1,730 square meters,  and will have the fashion lines of women, men and, perhaps, also children.

Presentation of the autumn-winter collection of the 2017-2018 season in Madrid
The company last week met press and other opinion leaders in Madrid to explain its business philosophy as well as to present its novelties for the upcoming Fall-Winter 2017/18 season. This philosophy is based on the technology applied to the design, the minimalism of high quality, obtained from intelligent materials with perfect cuts and solid colors. According Uniqlo: «the functionality made pledge combined with very reasonable prices. All of this can be found in any of the lines that make up Uniqlo’s collections, which seeks to facilitate the lives of its consumers, since for the Japanese company, clothing represents food and housing together with the three basic requirements for life and, therefore, has to be taken care of».

Uniqlo will open its first store beyond the main Russian cities
Uniqlo Fast Retailing Group, a subsidiary of the Japanese company announced that the number twenty store in the Russian Federation, would open in the city of Nizhny Novgorod on August 25 and will occupy an area of ​​1,600 square meters.

«Opening the first Uniqlo store in Nizhny Novgorod is one of the most important events for us. We are very proud of the fact that Russian buyers appreciate Uniqlo and show their loyalty to our fashion concept,» said Takahiro Wakabayashi, vice president of Fast Retailing, also noted that the company plans to further develop in the regions.

The main novelty of this new establishment is that it is the first store of the Japanese giant, outside Moscow and St. Petersburg, which poses an additional challenge for the company and, if successful, would open the door to an expansion in the rest Of the various cities with more than one million inhabitants in Russian regions, such as Samara, Novosibirsk or Yekaterinburg.

Discreet growth in turnover and operating profit
Uniqlo Japan generated revenue and earnings increases in the first half of fiscal year 2017, with revenues of 455.1 billion yen, (EUR 3,7 billion, + 0.3% per annum) and operating income of 68.7 billion yen (EUR 544 million + 7.3% year-on-year). Sales taking into account the same number of stores, including online sales, increased 0.1% year-on-year. The total number of Uniqlo stores in Japan fell in 14 net stores to 791 (excluding 41 franchise stores) by the end of February 2017. Of this total, two stores moved from stores directly operated to franchises.

A number of factors contributed to increased sales of the same store in the first half. First, the rebates on the occasion of Uniqlo’s anniversary in November 2016 generated a very positive response. Core Winter ranges such as Heattech innerwear, cashmere sweaters and Blocktech apparel also performed well, and the spring ranges of 2017 got off to a good start in February.

In terms of profit, the gross profit margin improved by 2.1 points year-on-year, keeping new prices attractive, instantly recognizable and maintaining firm control over discounts. Thanks to persistent cost reduction efforts, the company could successfully reduce all business expenses by a margin higher than originally planned, with the exception of distribution costs, which grew temporarily by the measures taken to transform the logistics systems and by a greater distribution of costs of other external services. As a result of the increase in distribution costs, the ratio of sales, general and administrative expenses increased 0.8 points year-on-year.

E-commerce sales increased by 11.7% year-on-year in the first half of fiscal year 2017 to ¥ 28.2 billion, representing 6.2% of total sales. The company aims to expand e-commerce by offering a wider range of special online sizes and exclusive online ranges, as well as enhancing services designed to make online shopping more convenient, such as enabling customers pick up their purchases online at local convenience shop or at the nearest Uniqlo store.

Disclosure: The Luxonomist is not responsible for the views expressed in the article. The text has been written freely expressing their own ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.