$Fast Retailing Co. Ltd.(FRCOF)$ $NASDAQ(.IXIC)$
$Fast Retailing Co. Ltd.(FRCOY)$
The Fast-Retailing Group is a global developer of fashion brands including UNIQLO, GU, and Theory. Driven by its LifeWear concept for ultimate everyday clothes, the Group's pillar, UNIQLO, epitomizes for simple, high-quality clothing which satisifies everyday needs. Meanwhile, their GU brand offers a skillful blend of low prices and fashion fun for everyone. They operate over 3,500 stores (including franchise) spanning across Japan, Greater China, Southeast Asia, Australia, Europe, and the United States. UNIQLO LifeWear can be part of any style, at a price that is affordable to everyone, in keeping with their MADE FOR ALL commitment.
Investment Overview
Optimising store productivity. Fast Retailing targets to optimize store network through the delivery of better located, implementing community-rooted local store management, and development of product range and services to better cater to local demand. The Company hopes to achieve OP margin of 15% through improvement in supply chain, restriction in discount sales and work on minimizing shortages of strong selling items. With the improvement in transportation and smoothening of the distribution system, we can expect Uniqlo to utilize certain discount sales and expect the recovery of operating profits in these regions. Moreover, a main driver of growth for Fast Retailing in the short to medium term will be the improvement in inventory accuracy. The company has acknowledged areas for improvements and targets to improve the stock keeping unit level.
Rapid leap forward for UNIQLO on a global scale. UNIQLO International has overtaken UNIQLO as the earnings contributor to the Group. UNIQLO International enjoys established brand position particularly in Greater China, Southeast Asia, and Oceania. Fast Retailing targets to accelerate new store opening by opening 100 stores in Greater China, and 60-70 stores in S/SE Asia & Oceania every year.
Concerning growth from North America and Europe. Despite only contributing 13.0% of total revenue for UNIQLO international, the growth in North America and Europe has been crucial to the company's performance. With recent market slowdown and inflationary pressures in such markets, both markets could experience headwinds ahead. North America and Europe combine operates 132 stores, compared to 1,033 stores in Greater China region. The company states their plans to further expand the scale of its business in North America and Europe through strengthening its marketing and accelerating new store openings, targeting 30 new stores annually in each area.
Fast Changing Retail Landscape. The strong growth in revenue for UNIQLO in 1H2023 is driven by the launch of Summer ranges, such as AIRism. Whether the momentum continues will also hinge upon the appeal of the next line of goods.
Better than expected control on inventory. Inventory accuracy is crucial in sustainable OP margin through strong control on discounted sales and restocking of best selling items.
The stock is trading at a premium to peers amidst strong outperformance on favourable currency trend to consumers, and a beneficiary of China’s reopening. Will be cautopia moving forward.
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