HONG KONG — Fast Retailing said Monday it will launch its budget brand GU in Hong Kong early next year, part of an expansion in greater China where customers are collectively tightening their purse strings.
The brand is a “more affordable and trendier” younger sister to the Uniqlo line, GU chief executive officer Osamu Yunoki said Monday.
The two shops are planned in Hong Kong for spring, the brand’s first foray into the city. Yunoki said opening GU stores near to an established Uniqlo creates synergies of which the company can take advantage. As a result, one will be located in Tsim Sha Tsui’s Miramar Shopping Centre, where there is already a Uniqlo store in the mall, and the other in Causeway Bay’s Windsor House, just a stone’s throw away from a Uniqlo in Lee Gardens.
The brand’s three-year target is to expand to 50 international stores. It wants to reach sales of one trillion yen, or about $9.6 billion at current exchange rates, Yunoki said. For fiscal 2016, GU reported operating profit of 22.2 billion yen, or about $213 million, on revenue of 187.8 billion yen, or about $1.8 billion.
The budget brand first ventured overseas in 2013. At the end of September, it operated 11 international stores across mainland China and Taiwan, in addition to its e-commerce store on Tmall. In its home country of Japan, GU has 341 locations.
Fast Retailing’s decision to ramp up the GU brand is at a time when Uniqlo’s global expansion looks slightly shaky. On Friday, founder Tadashi Yanai said Fast Retailing would scale back its 2020 growth targets to 3 trillion yen, or $27.5 billion, in sales, down from 5 trillion, or $45.8 billion, after reporting a 56.3 percent slump in full-year net profit.
It identified China as a key growth market but in Hong Kong, retailers are still coming to terms with the loss of luxury tourist shoppers. In mainland China, too, purchases are cooling. This past Golden Week, Chinese consumer spending registered 10.7 percent growth year-on-year according to government data but that was about 2 percentage points lower than what was seen in 2015.