For Uniqlo, EMs remain a bright spot

Skinny jeans and toasty, dry undergarments are still selling in emerging markets it seems.

Fast Retailing, the parent of Japanese cheap-chic clothing chain Uniqlo, on Thursday reported a 26.1 per cent jump in full year profits, as hipsters from China to South Korea flock to its stores.

For the year to end of August, sales grew 23.1 per cent to ¥1,143bn ($11.6bn), topping the trillion-yen mark for the first time. Net income jumped by more than a quarter to ¥90.3bn.

Japan – which remains the company’s biggest market – saw sales grow 10.2 per cent to ¥683.3bn during the year. However, operating income fell 5.4 per cent as aggressive marketing promotions ate into margin.

But the brand’s brightest spots are arguably in emerging Asia, where it has been expanding at a furious pace.

While its stores in Europe (comprising of the United Kingdom, France and Russia) just about broke even and its US business remains mired in operating losses, sales and operating income from China, Hong Kong and Taiwan surged – thanks in part to 102 new store openings.

Revenue from the three countries, at ¥125bn, accounted for nearly half of Uniqlo’s total international sales. Operating income from the three, at ¥13.5bn, represented nearly 74 per cent of the international division’s total.

Uniqlo’s southeast Asia operation, which currently includes Singapore, Malaysia, Thailand, the Philippines and Indonesia, also “performed strongly” and “exceeded expectations” during the year.

The results from Uniqlo should provide some minor comfort to companies with exposure to emerging markets. Shares in consumer goods companies across Europe and the US all fell after Unilever warned last week that weak growth and currency weakness in EMs would result in lower underlying sales growth for the third quarter.

But then to be fair, selling skinny jeans is not quite the same as selling body washes. It’s also worth keeping in mind that Uniqlo’s eye-popping EM growth is coming from a low base compared to the big consumer staples companies. Top line growth is also being given a boost from new store openings – the company did not disclose like-for-like sales growth for its international businesses.

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