Fast Retailing, the parent company of Japanese fast fashion giant Uniqlo, currently has a cash balance of 1.12 trillion yen (approximately RMB 71.35 billion), more than three times that of five years ago. However, the group recently stated that it has no plans to use the funds to conduct any new acquisitions.
Fast Retail Group has always existed as an industry disruptor, but as it becomes one of the giants in the apparel industry, the group may become the next Japanese company to “sacrifice capital efficiency to hoard funds.”
In January this year, Fast Retailing Group issued a profit warning after releasing its latest financial report, saying that in the 2020 fiscal year ending in August this year, operating profit will fall by 5% to 245 billion yen, instead of previously expected increased to 275 billion yen.
The quarterly report also pointed out that in the first quarter of this fiscal year from September 1 to November 30, 2019, the group added 28.5 billion yen in cash and cash equivalents, and the book balance exceeded 1 trillion Yen mark.
Hidehiko Aoki, a retail industry analyst at Nomura Securities, pointed out: “Fast Retailing should use this cash to invest in promising targets, if there are (targets), but it would be reasonable to remain unchanged. The choice.”
The “hoarding” of cash flow partly stems from the challenges Uniqlo encountered in its early years – the brand began to expand rapidly after opening its first store, but soon experienced a shortage of operating capital. , all money is “fast in and fast out”.
Tadashi Yanai, chairman and CEO of Fast Retailing, recalled his early experiences: “At that time, we created revenue and profits, but we did not have sufficient cash reserves.”
Later on, Uniqlo grew rapidly, driving Fast Retailing Group’s sales to soar year after year. In the last fiscal year ending on August 31, 2019, the group’s total sales reached 2.3 trillion yen, which was 25 years ago. 70 times that of when the company first went public.
The continuous growth of cash flow also lies in the group’s changing attitude towards large-scale acquisition transactions. At the beginning of the 21st century, Fast Retailing Group purchased several local and overseas brands (including American brand Theory, French brand Comptoir des Cotonniers, etc.). The American high-end denim brand J Brand acquired in 2012 was the last brand acquired by the group.
But so far, the performance of several brands acquired by Fast Retailing has not improved much. Among them, the French fashion brand Comptoir des Cotonniers has suffered asset impairment and serious losses in recent years. A former executive of Fast Retailing Group said: “The fact is that only the performance of the Uniqlo brand has a substantial impact on the group.”
Currently, Fast Retailing Group’s energy and resources are mainly focused on technology development in order to achieve The goal is to generate 30% of sales online, but the group has not considered acquiring Internet brands. “We hope to achieve growth without spending money (acquisitions).” What Yanai Masaru revealed is that Fast Retailing’s future growth strategy is still to open more stores.
Fast Retail pointed out that it plans to add about 100 new stores in the Greater China market every year, and will continue to expand the Southeast Asian market. For Fast Retailing Group, emerging markets will be the main driving force for its annual sales of 10 trillion yen. “The next 100 years will be Asia’s era,” Yanai Masaru said.
However, there are some “deficiencies” in physical stores, which are not only susceptible to the impact of consumers turning more to online shopping, but also vulnerable to force majeure. For example, in response to the recent novel coronavirus pneumonia, Uniqlo was forced to temporarily close nearly half of its stores in mainland China. China is already the market with the largest number of stores for brands outside of Japan. The long-term panic caused by the epidemic is bound to have a negative impact on the group’s performance.
At the same time, more clothing startups (that is, Internet brands, referred to as DTC brands in English) that adopt the direct sales model, play with social networks, are good at collecting and utilizing data, and can quickly adjust production according to consumer demand are becoming more popular. The world continues to emerge, but Tadashi Yanai doesn’t see it as a threat.
“It’s not that simple to make what consumers want. (DTC business model) is entirely out of the entrepreneur’s interest.” Tadashi Yanai said that (DTC) direct selling brands are difficult to develop. To achieve large-scale development, “It is expected that the annual sales of this type of brand can only reach between 20 and 30 billion yen (approximately RMB 1.3 and 1.9 billion).”
Fast Retailing is also using its own Ways to establish closer connections with consumers. For example, the biannual magazine “LifeWear” launched in August 2019 was invited to be the editor of Takahiro Kinoshita, a leader in the Japanese trend media industry, with the intention of promoting timeless and durable products and products. concept to attract more consumers who care about sustainable fashion.
Masa Yanai announced his resignation as an outside director of SoftBank Group last year. At the Fast Retailing shareholder meeting in January this year, he said: “From now on, I will invest 100% in the company.”
Tadashi Yanai, who just turned 71, also said, Out of consideration for the future development of the company, she hopes that a woman will take over her position. “Women are more suitable for this position. They are more tenacious, focus on details, and have good aesthetics.”</p
