How Uniqlo became the most valuable clothing company in the world – Quartz

Fast Retailing, the Japanese clothing group that owns Uniqlo, took down a giant last week.

The company surpassed Spain’s Inditex, which owns Zara, to become the world’s most valuable clothing retailer, Nikkei reported. As of this writing, Fast Retailing’s market capitalization is $ 105.6 billion, surpassing Inditex’s $ 98.2 billion. Other rivals, like H&M, lag far behind. While there are companies with clothing businesses that are more valuable, such as Nike and the French luxury group LVMH, their total sales are heavily dependent on categories other than clothing.

The rise of Fast Retailing has as much to do with your future as it does with your past. By sales, Zara and H&M remain larger, but while their share prices have fluctuated through the global turmoil triggered by Covid-19, Fast Retailing’s shares have risen steadily since April. Uniqlo accounts for the vast majority of the company’s sales, and investors seem optimistic about the brand’s direction. Part of that confidence is due to the growing purchasing power of Asia (paywall).

Although Uniqlo has struggled to expand in the US, it has not had such problems in Asia and China in particular. In 2018, Uniqlo’s sales outside of Japan exceeded sales in its local market for the first time. By August 2020, the end of its most recent fiscal year, Uniqlo had 866 stores (pdf) in Greater China, including Hong Kong and Taiwan, outnumbering its 813 stores in Japan.

Greater China now accounts for approximately 23% (pdf) of Uniqlo’s total sales, and the company is simultaneously building its presence in other Asian markets, including Southeast Asia. It has also started to make inroads in India.

This positioning has given it an advantage over some of its competitors in the pandemic. China, already the world’s largest fashion market, is recovering faster than Europe and the United States, which bodes well for Uniqlo. Zara, by contrast, had more than 60% of its sales in Europe in 2019 (pdf).

Uniqlo also sees a longer-term benefit. The company views China, Southeast Asia, and India as “the world’s economic growth centers,” as it described them in its 2019 annual report (pdf). The middle-income population in Asia, he added, is already large and ready to grow even further.

In October, Tadashi Yanai, founder and CEO of the company, told analysts (pdf) that the world “is witnessing a change 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 faster.

Uniqlo’s presence in Asia is not its only strength. The company’s casual and functional clothing is likely to do better in the coming months than, say, party dresses, as workers around the world remain confined to their homes and collaborations with designers like Jil Sander. they are still popular.

Of course, most of the buyers who buy these items are in countries like Japan and China, and that’s probably what matters most to investors who keep Uniqlo’s value on the rise.

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