Fast Retailing’s ‘other brands’ see varied Q1 as GU sales rise, Theory sales fall

We’ve already reported that revenue and profits for Uniqlo owner Fast Retailing soared in Q1 and that’s no surprise given how fast sales at Uniqlo are rising. But it’s important to remember that Fast Retailing is about more than Uniqlo and its other brands are worth studying too.

In its results statement, the company said its GU business segment saw an increase in revenue but a large decline in profit in Q1, with revenue rising 3.1% to ¥90.6 billion (€557m/£467m/$574m) and operating profit down 20.2% to ¥9.8 billion. 

While sales of the new Barrel Leg Jeans launched for AW24 proved strong, GU same-store sales remained close to previous year levels after the operation “failed to generate enough hit products reflecting mass fashion trends that are not influenced by changing temperatures, and shortages of strong-selling items emerged”. 

The gross profit margin declined and the selling, general and administrative expense ratio increased, resulting in that large decline in overall profits. 

The company said the “fact that GU has not yet established a solid brand position for itself either inside or outside of Japan is a key issue. We will reinvigorate GU Japan as a priority by working to strengthen the development of products that reflect mass fashion trends by fortifying global R&D functions, create more accurate numerical plans and sales plans for staple year-round products, reduce shortages of strong-selling items, strengthen the communication of information that illustrates GU’s worldview, and improve the quality of individual store management”.

Meanwhile, the group’s Global Brands unit had the opposite experience to GU, with its revenues down but its profit rising. Revenue dipped 2.4% to ¥35.7 billion while operating profit surged 373.3% to ¥1.8 billion. 

It saw “sluggish sales” at the Theory operation, which was primarily responsible for the decline in revenue. But improved gross profit margins at Theory and all other labels helped boost overall profits.

Theory’s revenue decline came on the back of its “failure to develop sufficient product mixes that satisfied customer needs”, as well as “depressed consumer appetite for apparel in Asia”. 

But its operating profit rise was mainly due to an improvement in the selling, general and administrative expense ratio at Theory USA. 

The Global Brands unit’s PLST label by contrast reported a large increase in revenue “thanks to efforts to determine products for strategic marketing, conduct sufficient marketing, and prepare sufficient inventory”. That pushed operating profit back into the black. 

Finally, Comptoir des Cotonniers reported a decline in revenue due to a one-third reduction in store numbers, but this store rationalisation was clearly a success as it generated double-digit growth in same-store sales “thanks to buoyant sales of items that are now marketed in a more affordable price range”. This resulted in a contraction in its overall losses.