Fast Retailing, the parent company of popular clothing brand Uniqlo, has reported higher operating profits in the first quarter of the year. This increase in profits can be attributed to the strong demand for loungewear and jogging pants amid the ongoing pandemic. Additionally, Fast Retailing has benefited from the resurgence of its market in China.

Initially, Fast Retailing faced challenges due to its reliance on China for manufacturing and sales. However, the company has proven to be one of the most resilient retailers during these unprecedented times. Currently, Fast Retailing operates around 800 Uniqlo stores in mainland China, which is equal to the number of stores in its home market of Japan. CFO Takeshi Okazaki expressed confidence in the company’s ability to meet its forecast for the year. However, the unpredictable nature of the pandemic poses a risk of significant fluctuations in the future.

In the three months leading up to November, Fast Retailing’s operating profit rose to ¥113.1 billion ($1.09 billion), representing a 23% increase compared to the previous year. This surpasses the market’s consensus estimate of ¥104.7 billion. However, sales for the quarter experienced a slight decline of 0.6% to ¥619.8 billion, falling short of analysts’ expectations. Despite this, Fast Retailing’s focus on the Chinese and Japanese markets has allowed it to mitigate the impact of the global retail downturn caused by the crisis.

The profit gain in mainland China can be attributed to the strong demand for warm clothing and the growth of online sales. Both Uniqlo and its sister brand GU have benefitted from the increasing popularity of comfortable clothing as more individuals work from home. Additionally, a successful collaboration with German label Jil Sander contributed to improved business in Japan during the quarter, leading to increased spending per customer.

Looking forward, Fast Retailing faces high expectations. Analyst Michael Allen from Jefferies noted that the company’s performance compared to its rivals is not a concern. However, the question lies in how much better Fast Retailing can perform in the coming years. While the pandemic may make this year relatively easier, the following year could prove to be more challenging. The uncertainties surrounding the pandemic continue to cast a shadow of uncertainty over the retail industry.

Useful links:
1. Uniqlo Official Website
2. Fast Retailing Investor Relations