How Uniqlo became the world’s most valuable clothing company – Quartz

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

The company has overtaken 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 cap is $ 105.6 billion, exceeding Inditex’s $ 98.2 billion. Other rivals, like H&M, lag far behind. While there are companies whose clothing businesses are more valuable, such as Nike and the French luxury group LVMH, their total sales rely heavily on categories other than clothing.

The rise of Fast Retailing has as much to do with its future as its past. In terms of sales, Zara and H&M are even bigger, but while their stock prices have fluctuated due to the global turmoil caused by Covid-19, Fast Retailing’s stock has been steadily increasing since April. Uniqlo accounts for the vast majority of the company’s sales and investors seem optimistic about the direction of the brand. Part of this confidence appears due to the growing purchasing power of Asia (paywall).

Although Uniqlo had difficulty growing in the United States, there were no such problems in Asia, and China in particular. In 2018, Uniqlo’s sales outside of Japan exceeded sales in its home market for the first time. As of August 2020, at the end of its last fiscal year, Uniqlo had 866 stores (pdf) across China, including Hong Kong and Taiwan, outnumbering its 813 stores in Japan.

Greater China now accounts for around 23% (pdf) of Uniqlo’s overall sales, and the company is simultaneously strengthening its presence in other Asian markets, notably Southeast Asia. He also began to make inroads in India.

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

Uniqlo also sees a longer-term benefit. The company regards China, Southeast Asia and India as “the poles of economic growth of the world” as it described them in its 2019 annual report (pdf). The middle-income population in Asia, he added, is already large and is expected to increase further.

In October, Tadashi Yanai, founder and CEO of the company, told 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 faster.

Uniqlo’s presence in Asia is not its only strength. The company’s casual and functional clothing will likely fare better in the coming months than, say, evening dresses, as workers around the world remain confined to home and its collaborations with designers such as Jil Sander remain. 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.