The Chinese Market Has Become The First Factor Affecting UNIQLO'S Performance.

Thanks to the excellent performance of the Chinese market, investors have completely forgotten the downturn in the domestic market of the Japanese fast fashion giant Uniqlo UNIQLO, and the reduction of the annual profit forecast.

After Thursday's announcement of the record mid-term results, UNIQLO's parent company Fast Retailing Co. Ltd. (9983.T) XXX group opened 3.60% yen and 57500 yen on the Tokyo stock exchange, which further soared in the morning and rose 6.74% to 59240 yen in early trading. The trading volume of 6288.HK group HDR also increased 4.08% to HK $39.55.

Up to the end of February, Asia's largest apparel retailer revenue increased by 6.8% from 1 trillion and 186 billion 765 million yen to 1 trillion and 267 billion 697 million yen.

During the reporting period, the growth rate of UNIQLO's international business increased by 14.3%, from 507 billion 456 million yen to 580 billion 6 million yen, which was the main driving force of the group's revenue growth. The operating profit increased by 9.6%, from 80 billion 763 million yen to 88 billion 486 million yen, and 15.3% of the operating profit rate was the first time higher than that of UNIQLO, Japan's first half year operation profit margin 13.8% of the first half of the year fell by 420 basis points, operating profit plummeted to 23.7% yen to 67 billion 741 million yen, and the yen fiscal year was the Japanese yen in the same period.

Fast selling means that the Greater China market recorded double-digit revenue growth in the first half of the year. The revenue and profits of mainland China recorded a growth of about 20%. The second largest international markets in East Asia, Korea's market revenue and profits also doubled. In recent years, the Southeast Asian market and the Oceania Market, which were developing in recent years, stimulated by the surge in sales of the same store, the revenue and profits grew rapidly.

In the first half of this year, the fast selling business profit was 173 billion 475 million yen, compared with the 172 billion 995 million yen in 2018, an increase of 1.4%, and the operating profit rate dropped by 80 basis points to 13.6%. The net profit was 114 billion 29 million yen, 9.5% higher than the 104 billion 150 million yen in 2018, and the earnings per share increased from 7809.69 yen to 9423.53 yen.

The company draws 240 yen medium term interest and the same amount of interest at the end.

Both the first quarter results and the medium-term results released yesterday show that the fast selling group's unstable profitability in the Japanese market is no longer the key to affecting the final performance of the company. After the first time in the 2018 quarter of the three quarter, when international business profits surpassed the mainland for the first time, China has actually become the first determinant of the largest apparel retailer in Asia.

The Group Chairman and chief executive officer, Tadashi Yanai Liu Jing, said at a mid-term performance conference held in Tokyo on Thursday that sales of fast selling in China would not drop because China had a large number of middle-income families, and the company could achieve the target set by 1000 stores in mainland China in the 2021 fiscal year.

During the reporting period, Japan operates 825 UNIQLO stores and 1311 overseas markets.

By the end of March, there were 672 stores in the Chinese market, with a net increase of 39 in half a year, plus 67 and 28 in the Taiwan and Hongkong markets respectively, which was almost the same as that in the Japanese market, and was close to the total 827 stores in the Japanese market.

In the 2018 fiscal year, UNIQLO added 78 stores to the mainland market.

Fast Retailing expects that at the end of the fiscal year end August, Japan's UNIQLO maintains 827 stores unchanged, and the international UNIQLO store will expand to 1407, while the parity brand GU will reach 423 excellent, and the number of global brand stores such as Theory, Comptoir des Cotonniers and so on 982, making the total number of stores in the group reach 3639.

Unlike Zara, H&M and other competitors slowing down the expansion of physical stores, UNIQLO basically maintained the expansion of the 100 stores in the Chinese market every year. Meanwhile, its online business has also flourished in the Chinese market. It is the most popular clothing brand of Tmall.com Tmall platform.

Benefiting from the strong performance of the Chinese market, the fast business profit increased from 57 billion yen to 68 billion yen in the two quarter, which is better than the 64 billion yen expected by the market.

During the reporting period, UNIQLO accounted for 282 billion 484 million yen in the Greater China market, accounting for 26.37% of the brand's income of 1 trillion and 71 billion 349 million yen, and Japan's UNIQLO income of 491 billion 343 million yen, accounting for 45.86% of the brand, accounting for 22.3% and 38.8% of the group's revenue respectively.

However, in the first half of the year, Japan's UNIQLO revenue fell to 0.5% yen, or 491 billion 343 million yen, of which 0.9% of the same store sales fell.

Only the electricity business channel recorded a strong growth of 30.3%, accounting for a significant increase from 7.5% to 9.9%.

In the first half of the year, the gross margin of Japanese UNIQLO plummeted by 330 basis points, and the overall gross margin of the group dropped by 140 basis points to 47.9%.

The downturn in the Japanese market also affected the forecast of the annual sales profit of fast selling, from 270 billion yen to 260 billion yen, representing an increase of 10.1%. The net profit of the female parent maintained an increase of 6.6% to 165 billion yen. The annual revenue forecast remained unchanged at 23000 billion, representing a year-on-year increase of 8%.

GU business income in the first half of the year was 117 billion 195 million yen, an annual increase of 10.7%. During the same period, sales in the same store were also positive. Gross margin increased by 300 basis points, stimulating operating profit rate by 350 basis points to 12.1%, while operating profit increased 54.3% to 14 billion 122 million days.

The global brand is still a weak spot in the fast selling market, but it has little to do with it.

In the first half of this year, the business revenue further declined by 0.9% to 78 billion 449 million yen, but it turned over the same period last year, losing 5 billion 653 million yen from the same period of last year, and it gained 3 billion 125 million yen in operating profit.

Theory business profits rose during the period, while Comptoir des Cotonniers continued to lose money.

In the first half of fiscal year 2018, the total goodwill of Theory and Comptoir des Cotonniers was reduced by 9 billion 940 million yen, of which 7 billion 792 million yen was arranged by Comptoir des Cotonniers, while Theory HELMUT LANG brand occupied the remaining 1 billion 39 million yen.

At the end of last month, Fast Retailing announced that its founder, Andrew Rosen, had resigned as chief executive, serving as a brand consultant. Its position has been taken over by chief operating officer Dinesh Tandon in April 1st.

Andrew Rosen is the godfather of contemporary fashion in New York. Besides Theory, Proenza Schouler Rag & Bone, Alice + Olivia and J Brand all have their investment behind New York's hottest young brands, and almost all of the fast selling global brand businesses come from the acquisition of the brand name of investment.

On Friday's closing, Fast Retailing Co. Ltd. (9983.T) XXX group shares surged 7.89% to 59880 yen in the afternoon after the restlessness, almost 59980 yen in the day, and the volume increased by more than three times.

As a heavyweight, the surge in fast selling contributed 162 points to the Nikkei index and stimulated the latter to create a 21870.56 point increase of over four months in December 5th, increasing 0.68% or 159.18 points throughout the day.