Uniqlo suffers worst overseas sales drop in decade on Hong Kong protests, South Korea boycott
- Japanese clothing retailer suffers 3.6 per cent drop in overseas markets amid Hong Kong protests, consumer boycott in Seoul
- Company lowers full-year operating profit guidance by 11 per cent on unrest, weaker Chinese yuan
Political flare-ups in Asia are putting the brakes on Fast Retailing Co.’s overseas growth momentum, as the operator of Uniqlo apparel stores reported the worst quarterly revenue decline in a decade for its international segment.
Asia’s largest retailer, controlled by Japan’s top billionaire Tadashi Yanai, has long counted on overseas expansion to power growth in the face of a weak Japanese market. Now that strategy is coming up against the political protests in Hong Kong as well as a trade spat between Japan and South Korea.
Hong Kong retail sales suffer record decline amid protests and US-China trade war
Fast Retailing, which recorded a 5.3 per cent sales drop in Japan during the quarter, cut its full-year outlook for operating profit by 11 per cent. It pointed to the unrest overseas as well as depreciation in the Chinese yuan for the lower guidance.
The company’s shares dropped as much as 2.3 per cent in early Tokyo trading on Friday. The stock climbed 15 per cent last year, reaching an all-time high in July.
“The overseas growth comes with higher risk,” Jefferies analyst Mike Allen wrote in a note to investors. “But risk is always difficult to weigh until it hits you in the face.”
The months-long pro-democracy protests in Hong Kong, which have at times turned violent, have left the city’s economy on the verge of its first contraction in a decade. It has caused retail sales to plunge 24 per cent in November, rattling other international brands from Levi Strauss & Co. to Tiffany & Co.
South Koreans call for boycott of Japanese products as ‘trade war’ intensifies
While the situation in Hong Kong has had a broad impact on retailers, the damage Uniqlo is seeing from a trade spat between Tokyo and Seoul has been more unique. Fast Retailing has become one of the biggest targets of a South Korean consumer boycott of Japanese products that began in July.
“The Korean business has continued to decline and there has been a bigger impact on sales,” Chief Financial Officer Takeshi Okazaki said at a briefing in Tokyo Thursday. “Korea is a very important segment for us, and it’s not clear how long this situation will continue.”
Outside Japan, the retailer has the second-largest number of Uniqlo stores in South Korea, after China.
Other overseas markets are holding up. Mainland China, a key driver of growth in the past, performed well, as did Southeast Asia, the company said.
Yanai, chairman of the retail group, has focused expansion on Uniqlo’s overseas locations as an ageing population at home provides fewer opportunities for fast growth. In the last year, the company expanded to new markets including India, Vietnam and Italy.
