The impact of unseasonal weather is eating into the profits of some of the world’s biggest fashion retail groups, including Japan’s Fast Retailing and Sweden’s H&M.
Fast Retailing said Uniqlo’s operating profit fell by almost a third for the first three months to February 29 year on year, as it “didn’t have an adequate strategy in place to deal with warm winter weather” in Japan. It was forced to heavily discount in January and February, causing operating profit to plummet 28.3% to ¥64.1bn (£416m), while gross profit margin fell by 3.5%.
Profits in its international Uniqlo business were also hit by warm winter weather in Greater China, South Korea and the US, but sales were hit especially hard by sluggish economic conditions in Hong Kong, Taiwan and South Korea.
Fast Retailing’s fast fashion fascia, Gu, had the strongest performance, but profits declined at premium brands Theory and Comptoir des Cotonniers, operating losses increased at J Brand, and Princesss Tam Tam’s performance was broadly flat compared with the same period last year.
As a result, the Japanese group’s operating profits fell to ¥23.4bn (£152.7m) for the three months to February and it slashed its full-year forecast for the second time this year to ¥120bn (£779.7m), down 27% on the previous year.
Meanwhile, the H&M Hennes & Mauritz group, which comprises H&M, Cos, Monki, Weekday, Cheap Monday and & Other Stories, reported a 29.5% drop in profit after tax to SEK2,5bn (£221m) for the three months to February 29 last week.
Group sales rose by 8% to SEK50,6bn (£4.4bn), while gross profit edged up 2% to SEK22,7bn (£1.9bn). However, gross margin fell from 55.2% to 52%.
The group said profits were hit by “substantially higher purchasing costs due to the strengthened US dollar and by increased markdowns” caused by warm weather.
“The negative dollar effect continues for purchases made for the second quarter 2016, although the negative effect has begun to gradually decrease due to the start of the annualisation of last year’s strong US dollar exchange rate,” added chief executive Karl-Johan Persson.
“Should today’s exchange rates continue, the effect of the US dollar on purchasing costs for the fourth quarter will be neutral or slightly positive compared to the corresponding quarter the previous year.”
He added: “Our new brands – Cos, & Other Stories, Monki, Weekday and Cheap Monday – represent an increasingly important part of the group, and we are looking forward to launching more new brands further ahead.”
However, H&M is continuing to plough on with its international expansion plans, launching dedicated online sites in Japan, Greece, Canada and South Korea later this year, bringing the brand to a total of 34 online markets by the end of 2016.
The group also plans to open 425 new stores in the current financial year and will open its 4,000th store in the Mall of India in New Delhi this month.
Fast Retailing opened its first international research and development centre for Gu in London at the end of March.
|Major global specialty share retailers of private label apparel|
|Company name||Country||End of||Sales||Sales||Sales||Change (%)|
|(Flagship brand)||Fiscal year||(Trillion of yen)*||(Billions of dollars)||(Billions of pounds)**||(local base)|
|Hennes & Mauritz||Sweden||Nov||2014||2.17||17.94||12.6||17.8|
|Fast Retailing (Uniqlo)||Japan||Aug||2015||1.68||13.87||9.74||21.6|
|PVH (Calvin Klein,Tommy Hilfiger)||US||Feb||2015||0.99||8.24||5.79||0.7|
|Abercrombie & Fitch||US||Jan||2015||0.45||3.74||2.61||-9.1|
|American Eagle Outfitters||US||Jan||2015||0.39||3.28||2.3||-0.7|
|Notes: Compiled from the annual reports of the companies listed above.|
|*Figures calculated in yen using the end of Aug, 2015 foreign exchange rates ($1=¥121.18)|
|**Figures calculated in pounds using the April 11, 2016 foreign exchange rates ($1=£0.70)|
|***Correct as of January 2015; Next full-year January 2016 was £4.15bn)|
|Source: Fast Retailing|