Uniqlo’s Sister Brand GU Aiming to Take On Markets in US, Europe

Fast Retailing Co., dwelling of the Uniqlo model, needs to ramp up the presence of its different trend label GU within the US and Europe, as Asia’s largest attire maker accelerates efforts to turn into a worldwide retailer with ¥10 trillion ($66.6 billion) in annual gross sales.

“GU has the identical potential as Uniqlo,” chief monetary officer Takeshi Okazaki mentioned in an interview. “We will generate as many GU shops as there are Uniqlo ones.”

The model, pronounced because the letters G and U, sounds the identical because the phrase jiyu, or “freedom,” in Japanese. Whereas GU, with barely decrease costs than Uniqlo and garments aimed toward youthful clientele, has a stable presence in Japan, it’s much less recognized in different main markets. Constructing its presence overseas is a part of Quick Retailing founder Tadashi Yanai’s push to “turn into a real world participant,” by first doubling annual revenue to ¥5 trillion inside just a few years.

That’s set to incorporate about ¥700 billion from GU, Okazaki mentioned. The model has already made an preliminary foray into North America, opening its first pop-up retailer in New York Metropolis’s SoHo district in 2022.

“We wish to make GU a retailer that’s overflowing with stylish merchandise which can be simply reasonably priced, and that makes folks really feel like they wish to take pleasure in trend,” Okazaki mentioned. “To attain this, we are able to’t simply keep inside Japan.”

That’s the large hurdle, in line with Dairo Murata, senior analyst at JPMorgan Securities Japan Co.

“In contrast with Uniqlo, which sells the last word on a regular basis put on to a large age group, GU’s market will probably be restricted by definition as a result of it sells trend to these aged 10 to 30,” Murata mentioned. “To achieve their mid-term purpose of reaching ¥1 trillion in GU gross sales, they must break into abroad markets, which received’t be simple.”

There’s a synergy between GU and Uniqlo that makes it simpler to open GU shops by leveraging what Quick Retailing has already carried out with Uniqlo, in line with the CFO. The corporate will be sure to cater to worldwide preferences, whereas in search of to keep away from a rise within the variety of product varieties they promote, he mentioned.

“If this was 10 years in the past we couldn’t do that, however folks’s info and the tendencies of garments is turning into fairly shared internationally,” Okazaki mentioned. “Generally we now have so as to add a sure factor, however for essentially the most half, we management the general variety of merchandise and make them globally relevant.”

Western rivals who’re already well-established, reminiscent of H&M, Zara and Hole, additionally current an impediment. Hennes & Mauritz AB already has greater than 2,500 shops throughout the Nordics and Europe and greater than 700 in North and South America by its varied manufacturers.

What Bloomberg Intelligence Says

“Quick Retailing must increase its flagship Uniqlo chain globally to spice up income and revenue, we consider, as its progress in Japan is threatened by a shrinking inhabitants. This might restrict Uniqlo’s same-store-sales progress within the nation at the same time as native wages increase. Quick Retailing’s GU label, which focuses on low-priced informal put on, might turn into a second progress engine,” says analysts Catherine Lim and Trini Tan.

Thus far, efforts to increase exterior Japan and Asia are paying off, with gross sales within the US and Europe serving to to ship stronger-than-projected working revenue within the first fiscal quarter, which resulted in November. Quick Retailing is planning on accelerating openings of latest Uniqlo shops to twenty in North America and 10 in Europe every year, in line with its fiscal year-end report.

“Globally, the locations which have management in trend are in fact Europe and America,” Okazaki mentioned.

Thus far, the abroad push has delighted buyers, with the shares outperforming 10 different clothes firms worldwide with a market worth of greater than $10 billion over the previous yr, in line with knowledge compiled by Bloomberg. The inventory has already gained greater than 20 % this yr.

Uniqlo solely has about 0.5 % market share within the US and Europe, in line with Okazaki. Though worldwide gross sales made up greater than half of Uniqlo’s income within the newest fiscal yr, GU has largely solely flourished domestically. Even with its recognition in Japan, GU’s annual gross sales amounted to only ¥295 billion, in contrast with Uniqlo’s ¥2.33 trillion from greater than 2,400 shops throughout the globe.

Quick Retailing isn’t giving up on ambitions in mainland China both, the place it already has greater than 900 shops. Regardless of the nation’s gloomy financial system, Okazaki mentioned the attire retailer continues to be bullish on the area over the medium-to-long time period, and is now specializing in investing within the high quality of shops, slightly than boosting the amount.

“Sooner or later, I see Uniqlo and GU creating a big market collectively of garments made for all folks,” Okazaki mentioned. “We intend to aggressively make the mandatory investments over the subsequent few years to make GU large.”

By Mia Glass and Grace Huang

Study extra:

Uniqlo’s Owner Pushes Deeper Into North America With GU Brand

Quick Retailing Co. will open its first GU retailer within the US, including to its Uniqlo outlets within the nation because the attire maker seeks a larger presence within the North American market.