Uniqlo officially surpassed Zara to become the largest clothing brand in the world
For the first time, Uniqlo surpassed Zara to become the largest clothing company in the world.
The market value of Fast Retailing - the parent company of the Uniqlo clothing brand has just reached 10.87 trillion yen (103 billion USD) by the end of the 3rd session. Thus, Fast Retailing has become a big business in the global clothing industry in terms of market capitalization.
This is the first time Fast Retailing has surpassed Inditex / ph: Uniqlo
This is the first time Fast Retailing has surpassed Inditex - the parent company of Zara brand - which currently has a market capitalization of 81.7 billion euros (equivalent to 99 billion USD) as of the close on Monday and 80.8 billion euros by the close of the 3rd session. Fast Retailing's stock price has increased steadily since August of last year.
Shareholders are now very pleased with Fast Retailing's strategy to focus on Asia, especially China, where the economy has recovered rapidly from a sharp decline due to the epidemic thanks to the government's control efforts.
Fast Retailing currently operates 2,298 Uniqlo stores around the world as of November 2020. 60% of these stores are now in Asia, outside of Japan. With 791 stores, China is currently the second largest market after Japan of Uniqlo with 815 stores.
In the fiscal year ending in August last year, Uniqlo's operating profit margin in mainland China reached 14.4%, exceeding 13% in the Japanese market. Meanwhile, 70% of Zara's stores operate in the US and Europe, which have been through several blockades. Zara only has nearly 20% of stores in Asia.
Investors also appreciate Fast Retailing's efforts with pioneering strategies on the digital front. The company also adopted the concept of "digital consumer retail" in 2016, which involves analyzing data from online purchases and storing it from IC tags mounted on all merchandise. They have also partnered with Google and other outside companies to develop manufacturing infrastructure powered by artificial intelligence.
However, in terms of revenue, Fast Retailing still ranked 3rd with nearly 2 trillion yen (18.9 billion USD) in the previous fiscal year. Inditex led at 28.2 billion euros ($34.1 billion) in the fiscal year ending January 2020, H&M came in third with 187 billion kronor ($22.5 billion) in the fiscal year to November last year.
Looking at the business results of the first few quarters, Inditex reported a profit of 866 million euros ($1 billion), 60% higher than Fast Retailing's $680 million profit.
Fast Retailing's ROE was 9% in the year ending August while that of Inditex's 24%. Fast Retailing's 3-month inventory turnover ratio is 1.5, lower than the same figure of Inditex which is 2.
Most of Inditex's manufacturing facilities are in Spain. They have minimized inventories by making logistics-tailored clothing, and air freight is used to transport goods in a short amount of time. In addition, since the company can sell all the goods without any discount, they earn a high gross profit margin.
Fast Retailing has almost caught up with Inditex in terms of online sales, an area that will shape its growth in the future. In the previous fiscal year, the Japanese company increased the digital share of total revenue to 15.6% from 11.3%. E-commerce accounts for 14% of Inditex's revenue in 2019 but they also plan to increase that to 25% next year.
Analyst Takahiro Kazahaya said Fast Retailing has an advantage over Inditex in terms of future growth rate. He said that in terms of foothold in Asia, Fast Retailing is leading in the medium and long term growth potential.
Inditex operates 467 stores in China. Last October, Zara opened a store in Beijing - the largest store in Asia, with an area of more than 3,000 square meters.
Growth in Asia is likely to determine the future market value of the two companies.
Uniqlo officially surpassed Zara to become the largest clothing brand in the world
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