Fast Retailing, the Japanese clothing group owned by Uniqlo, overthrew a giant last week.
The company has surpassed Spain’s Inditex, owner of Zara, to become the world’s most valuable clothing retailer, reports Nikkei. As of this writing, Fast Retailing’s market capitalization stands at $ 105.6 billion, raising Inditex $ 98.2 billion. Other competitors, such as H&M, lag far behind. There are companies with more valuable clothing companies, such as the Nike and the French luxury group LVMH, but their total sales depend a lot on categories other than clothing.
The rapid ascension of Fast Retailing has as much to do with its future as its past. Through sales, Zara and H&M continue to grow, but although their share prices have fluctuated due to the global turmoil caused by Covid-19, Fast Retailing’s share has risen steadily since April. Uniqlo accounts for the bulk of the company’s sales, and investors appear optimistic about where the brand is heading. Part of the confidence appears to be due to the increasing spending power of Asia (payment wall).
Although Uniqlo experienced difficulties in expanding in the US, there were no such problems in Asia and especially China. In 2018, Uniqlo’s sales outside Japan exceeded sales in its housing market for the first time. By August 2020, at the end of the most recent financial year, Uniqlo had 866 stores (pdf) in most of China, including Hong Kong and Taiwan, which had more than its 813 stores in Japan.
Greater China now accounts for about 23% (pdf) of Uniqlo’s overall sales, and at the same time the company is building its presence in other Asian markets, including Southeast Asia. It also began to penetrate India.
This positioning has given an advantage over some of its competitors in the pandemic. China is already the largest fashion market in the world and is taking back faster than Europe and the USA, which is very good for Uniqlo. Zara, on the other hand, acquired more than 60% of its sales from Europe in 2019 (pdf).
Uniqlo also sees a benefit in the longer term. The company regards China, Southeast Asia and India as ‘the world’s economic growth centers’, as described in its 2019 annual report (pdf). According to him, the middle-income population in Asia has been added to increase even more.
In October, Tadashi Yanai, the company’s founder and CEO, told analysts (pdf) that the world’s witnesses a shift from an era dominated by the United States and Europe to an era in Asia . ‘ The pandemic will only accelerate change if the Asian economies recover faster.
Uniqlo’s foothold in Asia is not its only strength. The company’s comfortable, functional clothing is likely to perform better in the coming months than, for example, party dresses, as workers have stayed at home around the world, and collaborations with designers such as Jil Sander are still popular.
Of course, most buyers who buy these items are in countries like Japan and China, and this is probably the most important issue for investors that raises Uniqlo’s value.