TOKYO — Uniqlo is raising its pre-tax retail prices in Japan by an average of about 5 percent this fall to combat rising material costs and the depreciation of the yen.
The move could boost the margins of Fast Retailing, Uniqlo’s parent company, if shoppers embrace the higher prices. Japanese consumers are already in the process of digesting more costly goods and services as the country’s sales tax increased three percentage points to 8 percent in April.
While Fast Retailing has posted significant sales growth in recent years as it opened scores of stores, both in Japan and abroad, its operating profit has not grown at the same pace.
The company posted an operating profit of 132 billion yen, or $1.47 billion, in fiscal 2013 compared to 108 billion yen, or $1.12 billion, in fiscal 2009. That represents an increase of just over 22 percent. Over the same time period, sales grew more than 66 percent to 1.14 trillion yen, or $12.65 billion, from 685 billion yen, or $7.12 billion. Dollar figures are converted at average exchange rates for the periods in question.
A spokesman for Fast Retailing specified that the price hikes are only applicable to Japan. Uniqlo’s prices in international markets will not be affected as they are set on a market by market basis, he said. Although Uniqlo is expanding abroad quickly, particularly in Asia, it still does more than half of its business in its home market of Japan. Uniqlo is expected to post sales in Japan of 715 billion yen, or $7.63 billion, for the year ending this August and sales abroad of 400 billion yen, or $4.27 billion.
The brand’s fall-winter lineup in Japan features Heattech garments ranging in price from 990 yen to 2,990 yen, or $10.57 to $31.92, and cashmere knitwear ranging in price from 5,990 yen to 9,990 yen, or $63.94 to $106.65. Those prices are pre-tax so consumers will have to pay an additional 8 percent at the cash register.
While department stores saw their business slump in April right after the sales tax increase went into effect, Uniqlo seemed relatively insulated from the change. Uniqlo’s Japan same-store sales grew and 3.3 percent in April and 4.1 percent in May.