Japan's UNIQLO "Dragging Its Legs", Fast Marketing Group Small Targets Ahead Of Schedule?

In the Japanese economic downturn, UNIQLO, who has been playing the leading role in the Japanese apparel industry, has been playing down its brand and emphasizing its cost-effective performance. With the expansion of the scale, the Japanese market is already hard to satisfy, so China will naturally become a top priority when looking abroad.

Its parent company, fast selling group (06288), was listed on the HKEx in 2014 to complete its capital connection with the Chinese market. At that time, it was the high-speed expansion of UNIQLO's overseas expansion.

It is learned that in 2014, when XXX group landed at the HKEx, it declared that it would achieve the sales target of 5 trillion yen in 2020. Instead of buying, it surpassed Zara parent company InditexSA in 2020 and became the largest apparel retailer in the world. However, after the end of fiscal year 2016, its sales target in 2020 dropped to 3 trillion yen.

How is this goal accomplished today?

The Japanese market is dragging its feet, and the "small target" is hard to achieve.

It has been observed that in July 12th, XXX group released the three quarterly bulletin as at May 31st. The announcement shows that the first three quarters of the fast forward group (September 1, 2018 to May 31, 2019) achieved a profit of 18228 billion yen, an increase of 7% over the same period last year, operating profit of 247 billion 600 million yen, an increase of 3.7% over the same period last year, and the share of the shares should be 158 billion 600 million yen, an increase of 7% over the same period last year.

Looking at the single quarter, as of May 31st, three months, the sales revenue reached 555 billion 200 million yen, an increase of 7.3% over the same period, and the profits of shareholders should be 44 billion 600 million yen, up 1% over the same period last year.

Although the single quarter profit growth is relatively small, but mainly by the clothing sales season, the first three quarters of the overall data, revenue and profits have achieved a relatively stable growth.

However, according to the business, the Japanese market continues to be a "drag" for group performance. According to the business division, fast selling group includes Japan UNIQLO, overseas UNIQLO, GU and global brands. From the perspective of revenue share, overseas UNIQLO exceeded Japan's UNIQLO for the first time in 2018, and the proportion of overseas UNIQLO income increased to 45% in the three quarter of 2019, while the proportion of Japan's UNIQLO income fell to 38.5%.

Japan's UNIQLO side saw a double decline in revenue in the first three quarters, with a yield of 701 billion yen in the period, a slight decrease of 0.5% compared to the same period, while operating profit of 96 billion 700 million yen, down 19.5% from the same period last year. The three quarter single quarter income of 209 billion 700 million yen, a slight decrease of 0.5% over the same period, operating profit of 29 billion yen, down 7.5%.

Zhitong financial APP learned that the performance of UNIQLO's performance was significantly affected by the weather. According to the report, the discount rate has been enlarged in the first half of the year by the influence of warm winter. The adjustment of inventory level has eased in the third quarter. However, the gross profit margin in the first three quarters dropped by 2.4 percentage points, leading to a sharp decline in operating profit in the first three quarters.

In contrast, overseas UNIQLO gained 820 billion 500 million yen in the first three quarters, up 14.6% from the same period last year, operating profit of 124 billion 800 million yen, an increase of 11.1% over the same period last year. China's market profits increased by more than 20%, becoming the biggest contributor to overseas growth. In addition to the rapid growth of China's market demand, overseas markets are less affected by seasonal fluctuations because of the southern hemisphere covering Southeast Asia and Oceania.

It is worth mentioning that Japanese UNIQLO's online store sales have increased rapidly, with the single quarter sales of 19 billion yen in the three quarter, an increase of 16.1% over the same period last year. However, at present, the proportion of income is relatively low, only 9.1%. In the short term, it is difficult to become a major driving force for its growth.

And the next quarter of the season entered the single season of clothing sales, the overall income is the lowest in the year. From the quarterly profit data, we can see that the fourth quarter is basically in a deficit state, so from the current data, the performance in 2019 is also predictable. As for the goal of 3 trillion in 2020, if we can not experience a "cold winter" to stimulate sales, it is estimated that it will be blown out ahead of schedule.

The basic market is still stable.

Although the revenue and profits of fast selling are significantly affected by the season, after all, the underlying market is stable, and the gross profit margins and operating profit margins are relatively stable from the data point of view, which is inseparable from their operational strategies.

The secret of UNIQLO's operation lies in "zero inventory". Of course, it is not really without inventory, but because it is boring in a series of business links such as procurement, production, sales, distribution and so on. The state of rapid turnover is to minimize inventory through upstream and downstream enterprises' cooperative operations.

This is mainly due to the positioning of its products. In the product development mode, it adopts a completely different product development mode to enter the basic funds that can be worn by all age groups and gender, and develops in depth on the basic funds. The other is "quantitative production", that is, the production plan based on the sales volume of the previous period. The advantage is that it can regulate the scope sufficiently and reduce the cost in disguised form.

In addition, its financial fundamentals are relatively stable. We can see that because of its special mode of operation, the revenue share of sales costs has remained stable, but the growth rate of cost expenditure has decreased gradually in the quarter.

Debt, the company's total liabilities amounted to 964 billion 300 million yen, debt ratio was only 48.84%, quarter decline of 1.07 percentage points. Moreover, the cash flow of the company has been relatively stable for a long time. The cash and cash equivalents at the end of this period are 11050 billion yen, and the net cash flow generated by operating activities is 286 billion 200 million yen, up 28 billion 100 million yen compared with the same period last year. The cash used in investment activities and financing activities is 736 and 94 billion 800 million yen respectively, and cash flow generated by business activities can be completely covered. This is even more valuable in the expansion of stores.

Therefore, although the Japanese market is showing signs of weakness and the negative growth of its profit margins, the development space is still very large under the impetus of fast selling strong strength and high overseas growth. Even if small targets are difficult to meet on schedule, there are few competitors in the industry.