Uniqlo to close 50 stores in China this year

Takeshi Okazaki, Chief Financial Officer of the Japanese apparel giant Fast Retailing, disclosed in a recent interview with the Nikkei that the company will adjust its store-opening strategy for its flagship brand Uniqlo in the Chinese market. Okazaki noted that the company's goal is to achieve a similar average store sales in the Uniqlo Greater China region as in Japan within 10 years. To achieve this, Fast Retailing plans to close unprofitable stores in the Greater China region over the next 2-3 years, focusing on opening new stores in high-traffic areas and prime locations. Even in smaller cities, stores will be carefully selected to ensure profitability.

According to the current plan, by the end of the fiscal year in August 2024, Uniqlo will open 80 stores in the Greater China market while simultaneously closing 50 stores, resulting in a net increase of 30 stores. Beyond August 2025, there's a possibility of maintaining a low net increase in store numbers.

Additionally, e-commerce will serve as another major entry point. E-commerce contributes 20% of sales in the Chinese market, higher than the 15% in Japan. Fast Retailing not only fulfills e-commerce orders from warehouses but also ships from stores.

Okazaki stated that the adjustment in the store-opening strategy is mainly due to inadequate profitability of stores and "a considerable number of stores lacking the ability to showcase the brand." Originally, the brand planned to open 100 stores annually in third-tier cities and above in China. However, by the end of the fiscal year in August 2023, including e-commerce, the average annual sales per store decreased by 3% compared to the same period in 2019. Despite having over 1000 stores in China, making it the largest globally, Uniqlo's sales still fall short of the Japanese domestic market.

As of the fiscal year ending on August 30, 2023, Uniqlo reported sales of 890.4 billion yen in the Japanese market, operating profit of 117.8 billion yen, and 800 stores. In the Greater China market, sales were 620.2 billion yen, operating profit was 104.3 billion yen, and there were 1031 stores, with 925 stores in Chinese mainland.

Although the number of stores has surpassed those in Japan, the total sales contribution from the Greater China market accounts for 26.6%, whereas Japan exceeds 38%. Including e-commerce, the average annual sales per store in the Greater China market were 600 million yen (approximately 29 million RMB), compared to 1.1 billion yen (approximately 53 million RMB) in Japan. Additionally, Uniqlo implemented a salary increase plan in China last October, with the highest salary increase for employees being 44%, and the average increase being 28%.

In the first quarter of the fiscal year 2024, ending in November 2023, Fast Retailing's sales increased by 13% year-on-year to 810.8 billion yen, and net profit increased by 27% year-on-year to 107.8 billion yen. Benefiting from the recovery of the Chinese market, Uniqlo's overseas market sales increased by 23% year-on-year.