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Aiming High: Fast Retailing Eyes Sales of $54 Billion

Japanese company Fast Retailing, the parent company of Uniqlo, plans to grow its business seven-fold.

Uniqlo's new retail concept for young women at Tokyo's Marui.

TOKYO — Fast Retailing Co. Ltd. wants to be the biggest around.


Tadashi Yanai, chairman of the firm, said Wednesday that the Japanese apparel company aims to grow its annual sales by more than seven times to 5 trillion yen, or $53.7 billion, by the year 2020. And analysts don’t think the goal is that far-fetched.

“We hope to become the biggest maker and retailer in fashion,” Yanai said during a press conference. “The dream will come true if we can grow our business by at least 20 percent each year.”

Yanai outlined the company’s long-range business plan as its Uniqlo chain reported a 5.6 percent spike in August same-store sales for Japan. The fast-fashion chain said consumers snapped up fall items like 3-D fit jeans and faux leather jackets.

The executive reiterated Fast Retailing is eyeing potential acquisitions, especially in Europe, but said there are few attractive companies on the market right now. Even without acquisitions, he said he thinks the company can reach 1 trillion yen, or $10.74 billion, in sales by 2010. Fast Retailing expects to post sales of 682 billion yen, or $7.33 billion, for the fiscal year ending Aug. 31.

In terms of the longer-term 5 trillion yen, or $53.7 billion, target, Yanai said he expects 3 trillion yen, or $32.2 billion, will come from Uniqlo’s business abroad. Uniqlo’s operations in Japan and Fast Retailing’s other brands, which include low-cost chain G.U., lingerie label Princess Tam Tam and Comptoir des Cotonniers, will generate the remainder.

As of June 30, Fast operated 867 stores, 777 of them in Japan.

As for Uniqlo, which will unveil its first collection by German designer Jil Sander in early October, there are many store openings on the horizon. An almost 25,000-square-foot flagship in Ginza will open Oct. 2. Stores in Nagoya, Osaka and elsewhere in Tokyo are also in the works. In 2010, Uniqlo will open its first global flagships in Shanghai and Moscow.

“If anyone can achieve these sort of ambitious growth targets — and they are ambitious — I’d put odds on them,” said Dan Gardenswartz, managing director at the Sage Group LLC, an investment banking firm that advises the retail sector.

Should Fast Retailing achieve Yanai’s projected growth, it could become the world’s largest specialty retailer, at least according to comparisons in 2009 dollars. In a study released last month, Sage’s Apparel and Retail Group placed Fast Retailing 12th in revenues during the last 12 months among publicly traded apparel retailers with sales of $6.97 billion.

 

Macy’s Inc., the highest-charting department store operator in the survey, counted net sales of $23.79 billion, and Gap Inc., the highest-rated pure apparel retailer, achieved revenues of $14.27 billion. However, Gap has a compound annual growth rate of minus 3.4 percent over the last three years, while Fast’s CAGR is 24.3 percent, second only to American Apparel Inc.’s 39.8 percent among the companies studied by Sage.

Fast’s volume objective is within striking distance of the approximately $65 billion sold by Target Corp. in the last 12 months.

Gardenswartz said Fast Retailing’s growth would hinge on its success in burgeoning markets such as Asia, Russia and a reemerging Europe. The firm has a history of moving into “opportunistic geographies” and its ample cash reserves of about $1 billion will help, he said.

“There’s no reason the globe couldn’t support 4,000 Uniqlo stores,” Gardenswartz added. “It’s definitely achievable, but they have little room for mistake.”

That number of units wouldn’t make Uniqlo the biggest in the world by store count. At the conclusion of its last fiscal year, in January, Inditex Group operated 4,280 stores, 1,520 of them under the banner of Zara, its largest division. As of May 31, Hennes & Mauritz AB had 1,822 units in operation, including 29 franchise stores.

Fast Retailing has been increasingly aggressive as far as expansion in the past few years. After initially entering the U.K. market in the Nineties with Uniqlo, but then having to close stores and rethink the strategy, Fast has been pushing rapidly into new markets in North America, Europe and the Far East. It plans to open a 23,000-square-foot store in Paris this fall and has entered Singapore and inked a deal with Mainland China Internet giant Taobao.com to open an online store.

Yanai indicated the scale of his ambitions in unveiling the joint venture with Taobao. “Look at McDonald’s, Starbucks and such, they are all U.S. brands. We hope a Chinese or Japanese brand will become like them,” he said at the launch in May.

Then there is the link with Jil Sander, J+, which could further revolutionize the concept of fast fashion. The legendary and reclusive designer came out of retirement to create the collection for women and men, which will launch in October. “Even when we [do] a simple cotton undershirt, we’re going to have the right look, the right material, the right aesthetic,” she said this spring when the deal was revealed. “The dream is to make a line everybody can buy. We make no exceptions and I’m sure there’s room in the world for a certain aesthetic and a quality product at a reasonable price. So that’s what fascinates me.”

Fast Retailing also has been eyeing acquisitions for the last few years and had bid for Barneys New York before it was bought by Istithmar of Dubai.

And the firm’s success has clearly benefited Yanai — he was ranked as Japan’s richest man by Forbes Asia in April. The magazine estimated the 60-year-old tycoon was worth $6.1 billion. He moved up from sixth-richest in last year’s list and beat out 2008’s richest individual, former Nintendo chairman and president Hiroshi Yamauchi.

Shares of Fast Retailing were down 3.1 percent to 10,500 yen, or $112.82, on Wednesday as Tokyo’s Nikkei 225 fell 2.4 percent to 10,280.46.