Casual clothing chain Uniqlo is taking its biggest chance in Southeast Asia.
The unit of Fast Retailing Co is opening a store on Singapore’s iconic Orchard Road that will have 2,700 square metres of shopping space on three floors. The store will be Uniqlo’s largest in the region as the brand looks for growth outside Japan to revive flagging profits at its parent.
Fast Retailing is busy opening stores in the United States, London and across Asia to help reduce its dependency on a home market where Japanese household spending is falling.
Billionaire chairman Tadashi Yanai Thursday reiterated plans to generate 5 trillion yen ($48 billion) in sales by 2020 to keep Fast Retailing competitive with Hennes & Mauritz AB and Zara-owner Inditex SA. Low prices are now key in that equation.
“Keeping the low prices everyday is important. That will be critically important given this environment,” said Yanai at a briefing in Singapore ahead of the store’s debut.
In May, he reversed the company’s earlier attempt to hike prices that resulted in slumping sales. “We also aspire to provide truly great clothing at the lowest possible prices.”
This will be the 25th store in Singapore for Asia’s largest clothing retailer, bringing its Southeast Asian presence to about 130 outlets. The 67-year-old Yanai, Japan’s richest man with a net worth of $18.3 billion, called the opening of the flagship store an opportunity. He sees markets in the Association of Southeast Asian Nations possibly contributing to 30% of Uniqlo’s international sales in five years.
“Southeast Asia expansion will help Yanai achieve his 5 trillion-yen sales target,” said Dairo Murata, an analyst at JPMorgan Securities Japan. “But to achieve that goal in three years will be difficult.”
Uniqlo last September opened a six-story China flagship store in central Shanghai, and Yanai reiterated plans to open 100 stores a year in China on its way to a potential 3,000. The brand’s Southeast Asia presence includes about 30 stores each in Malaysia, Thailand and the Philippines.
That overseas expansion has made Fast Retailing more vulnerable to a strengthening yen, which prompted a cut to its full-year net income forecast in July. Yanai said the exchange rate’s effect on the company’s bottom line is a problem, “and the impact can not be underestimated.”
Yet recent signs of recovery in the Uniqlo business lifted Fast Retailing’s shares 8.7% in August, paring the year-to-date slump in the stock to 16%. Shares dropped 1.1% to 35,940 yen in Tokyo trading Thursday while the country’s benchmark index advanced.
Fast Retailing’s operating income for the third quarter that ended in May rose 19% from a year ago as sales in Japan and overseas improved. To keep up with the increasing popularity of e-commerce, Uniqlo will revamp its logistics and distribution, Yanai said Thursday. There are also opportunities for expansion in the US, particularly on the West Coast since it’s seen as an extension of Asia, he said.
“Japanese businesses, including ours need to transform the way we do business,” he said.