Uniqlo raises salaries again, facing challenges in Chinese market

Uniqlo's parent company, Fast Retailing Group, recently announced that it will adjust its salary structure in Japan starting in Mar to enhance the company's global competitiveness and growth potential, significantly increasing its investment in talent.

Following this adjustment, the monthly salary for new employees will rise from the current 300,000 yen to 330,000 yen, while store managers' monthly salaries will increase from 390,000 yen to at least 410,000 yen.

The group stated that it will review the salary structure in markets outside Japan to maintain global competitiveness in the industry.

Notably, in the fiscal year 2023, the group already implemented salary increases of 4-40% for all employees to help them cope with inflation while investing in talent.

It is important to note that Japan's wage levels have remained relatively stable for 30 years. In this context, Uniqlo's frequent salary increases are significant and are backed by its impressive performance.

From 2006 to 2023, Uniqlo's revenue increased from 448.8 billion yen to 2.78 trillion yen (approximately 138.5 billion yuan), a rise of 6.19 times, while net profit grew from 40.4 billion yen to 296.2 billion yen (approximately 14.295 billion yuan), an increase of 7.33 times.

In the fiscal year 2024, which ended in Aug last year, Uniqlo's parent company reported revenue exceeding 3 trillion yen, a year-on-year increase of 12.2%, with operating profit reaching 500.9 billion yen, a substantial year-on-year increase of 31.4%.

Looking at the data from the last five years, Uniqlo only experienced a decline in revenue and net profit in 2020 due to the pandemic, with decreases of 12.13% and 44.42% respectively. In other years, there has been growth to varying degrees.

In recent years, fast fashion brands have faced significant challenges, with news of store closures and bankruptcies becoming frequent. However, Uniqlo has managed to maintain rapid growth, which is commendable. Yet, Uniqlo does have its concerns.

A closer look at the revenue contributions from different regions reveals that the vast Chinese market is a crucial support for its performance. According to Wind data, in fiscal year 2023, Fast Retailing's overseas revenue from the Uniqlo brand reached 1.44 trillion yen, accounting for 51.95% of total revenue. Specifically, revenue from the Greater China region alone amounted to 620.232 billion yen, representing 22.4% of total revenue and making it the largest source of overseas income.

In terms of store numbers, since 2021, Uniqlo's number of stores in China has surpassed that in Japan. As of the end of Aug 2024, Uniqlo had 1,032 stores in the Greater China region, with 926 located in mainland China, while the number of Uniqlo stores in Japan has dropped below 800.

However, in the past year, Uniqlo's performance growth in China has shown a noticeable "slowdown." Uniqlo's fiscal year 2024 report indicates that as of the end of Aug last year, its revenue in the Greater China region was 677 billion yen (approximately 32.3 billion yuan), a year-on-year increase of 9.2%, with its share of total company revenue declining to 21.8%. Meanwhile, the operating net profit in the Greater China region only grew by 0.5% year-on-year to 104.8 billion yen.