Fast Retailing, a Japanese clothing group that owns Uniqlo, brought down a giant last week.
The company surpassed Spain’s Inditex, which owns Zara, to become the most valuable clothing retailer in the world, Nikkei said. At the time of this writing, Fast Retailing’s market capitalization was $ 105.6 billion, exceeding Inditex’s $ 98.2 billion. Other rivals, like H&M, are far behind. While there are companies with apparel businesses that are more valuable, such as Nike and the French luxury group LVMH, their total sales depend heavily on categories other than clothing.
Fast Retailing’s rise has as much to do with its future as it does with its past. In sales, Zara and H&M are even bigger, but although their stock prices fluctuated during the global turmoil caused by Covid-19, Fast Retailing’s shares have been steadily increasing since April. Uniqlo accounts for the vast majority of the company’s sales, and investors seem optimistic about the direction the brand is taking. Part of that confidence appears due to the growing purchasing power of Asia (paywall).
Although Uniqlo has struggled to expand in the US, it has not had this kind of problem in Asia, and in China in particular. In 2018, Uniqlo’s sales outside Japan exceeded sales in its domestic market for the first time. In August 2020, the end of its most recent fiscal year, Uniqlo had 866 stores (pdf) in Greater China, including Hong Kong and Taiwan, outperforming its 813 stores in Japan.
Greater China now accounts for about 23% (pdf) of Uniqlo’s overall sales, and the company is simultaneously building its presence in other Asian markets, including in Southeast Asia. He also started making inroads in India.
This positioning gave her an advantage over some of her competitors in the pandemic. The biggest fashion market in the world, China is recovering faster than Europe and the US, which bodes well for Uniqlo. Zara, on the other hand, obtained more than 60% of its sales in Europe in 2019 (pdf).
Uniqlo also sees a long-term benefit. The company sees China, Southeast Asia and India as “the centers of global economic growth”, as described in its 2019 annual report (pdf). The middle-income population in Asia, he added, is already large and is expected to get even bigger.
In October, Tadashi Yanai, the company’s founder and CEO, commented to analysts (pdf) that the world is “witnessing a shift from an era dominated by the United States and Europe to an era centered on Asia”. The pandemic will only accelerate change if Asian economies continue to recover more quickly.
Uniqlo’s position in Asia is not its only strength. The company’s casual and functional clothes are likely to do better in the coming months than, say, party dresses, as workers around the world remain homeless and their collaborations with designers like Jil Sander remain popular.
Of course, the majority of buyers of these items are in countries like Japan and China, and this is probably what matters most to investors who keep Uniqlo’s value up.