On Thursday, Fast Retailing Co., the parent company of Uniqlo, the Japanese clothing giant, reported lower-than-expected third-quarter financial performance, citing weak sales in China. At the same time, the company issued a warning that the upcoming new round of tariffs in the United States will have a significant impact on its business. As a response to cost pressures, they also plan to raise product prices.
According to company data, the operating profit for the three months ending in May was 146.7 billion Japanese yen (about 1 billion US dollars), which was below the average of 150 billion yen estimated by some analysts compiled by Bloomberg; net profit was 105.5 billion yen. Revenue in the Chinese mainland market decreased by approximately 5% compared to the same period last year, with operating profit declining by about 3%.
Finance Chief Takeshi Okazaki pointed out that the sales weakness mainly stems from overall consumer confidence being low, compounded by unusually cold weather at the beginning of May. He added that the company is undergoing a comprehensive reform of its business in China to improve operational efficiency.
Despite pressure in the Chinese market, Uniqlo’s brand operating profit in the Japanese market increased by 4.7% year-on-year, while overseas markets saw a growth of 1.5%, reaching 72.1 billion yen. The company still maintains its full-year operating profit forecast at 545 billion yen and expects to mitigate the impact of tariffs in the short term through early shipments.
However, the new tariff policy that the Trump administration is set to implement on August 1 poses a more serious challenge to Fast Retailing. President Trump announced this week that a 25% “reciprocal tariff” will be imposed on almost all trading partners, including Japan. Fast Retailing stated that its U.S. business will “inevitably be significantly affected” starting this fall and will adjust prices accordingly, but not all products can reflect cost increases. The company plans to focus on establishing a sustainable and profitable business model going forward.
Starting from a single store in Hiroshima, Japan 40 years ago, Uniqlo now has over 2,500 stores globally, selling affordable sweaters and cotton shirts produced mainly in China and other Asian manufacturing centers.
Currently, most of the products sold by Uniqlo in the U.S. come from Southeast and South Asia. President Trump recently announced that goods imported from Sri Lanka will be subject to a 30% tariff, while products from third countries transshipped through Vietnam will face a high tariff of 40%.
Facing a slowdown in the Chinese market, Fast Retailing is actively expanding into the North American and European markets. Currently, Uniqlo has over 900 stores in the Chinese mainland, making it its largest overseas consumer market. Fast Retailing’s stock price has dropped by about 13% so far this year, making it the fourth largest decline among major stocks in the Asia-Pacific region, partly due to the impact of Trump’s tariff policies.
(Source: Bloomberg and Reuters)