UNIQLO'S Parent Company Sells Quickly And Needs To Catch Up With H&M Parent Company.

To describe the fashion giant H&M with a covetous eye.

The relationship is just right now. Now the company is selling fast and selling to catch up with the H&M parent company.

H&M2016 financial year Q1 reported that its net profit fell 30%, and its competitor UNIQLO net profit plunged 55.1% in the first half of fiscal 2016.

To this end, UNIQLO established the direction of "globalization" and "digitalization". H&M continued to expand its stores by 10% to 15% per year.

Who is better?

Operating profits will shrink by 40%

Recently, H&M released its 2016 fiscal year Q1 earnings report (December 1, 2015 - February 29, 2016). The net profit of the company was 25.5 Swedish billion kronor (about 313 million US dollars), down 30% compared with 3 billion 510 million Swedish kronor (about 430 million US dollars) in the same period last year.

In addition, during the period, H&M pre tax month sales increased by 10%, 7% and 10% respectively, the lowest in nearly three years.

"The negative impact of the US dollar in the first quarter of the 2016 fiscal year has led to an increase in our purchasing costs, coupled with the warmer winter that has led to an increase in the number of clothing stocks in winter, thus increasing the price reduction products."

H&M China Public Relations Manager Fu Xiarong told the Chongqing Youth Daily reporter.

Statistics show that: in the winter of 2015, most of the countries in North America and Europe had mild weather, resulting in a large backlog of H&M clothing in winter. Excessive discount and inventory clearance led to a sharp drop in the gross profit margin of the group in the first quarter of 320 to 55%.

Zhu Qinghua, a light industry researcher at CIC, also said: "H&M, because of the OEM mode of operation, it is difficult to strictly control the quality of products."

Statistics show that H&M, UNIQLO and so on have all failed functional clothing and children's clothing failed.

In November 2015, H&M sales were relatively weak, with a growth rate of only 4%. In January this year, sales growth of H&M was also low, only 7%, lower than 15% of 12 in 2015.

Since its entry into the Chinese market in 2007, H&M has mainly relied on expanding stores to occupy the market.

In fiscal year 2015, H&M added 73 stores to mainland China.

In March 2016, H&M opened its first store in Qinghai, Xining textile department store. At this point, H&M's footprint has spread all over China except Tibet.

As of April 11, 2016, H&M has 318 stores in mainland China, all of which are direct battalions.

H&M set up stores in new markets, including India, South Africa, Peru, Taiwan and Macao in fiscal year 2015.

So far, H&M has opened stores in 61 markets.

The expansion of stores has brought sales growth to H&M. In 2007, H&M's sales growth in China reached 82%, but the growth rate slowed down year by year to 16% in 2015.

At the same time, the profit per unit area decreased almost every year in the same period.

Since 2007, H&M's operating profit per square meter has dropped from 10900 Swedish kronor to 5200 kronor, or more than 50%.

It is estimated that H&M profit will shrink by 40% in 2020, and H&M is at the critical point of development, and profits will face a sharp decline.

UNIQLO net profit decreased by 55.1%

"H&M continues to expand its stores, although it can promote sales, enhance sales radiation and consolidate brand image.

But it will also increase operating costs and create some squeeze on profit margins.

Zhu Qinghua said.

Just as it has been criticized for being too dependent on store expansion, H&M's electricity supplier strategy has always been questioned by the outside world.

Compared with other fast fashion brands such as ZARA, UNIQLO, GAP, FOREVER21, C&A and so on, H&M has not yet been stationed in any electronic business platform, but has developed its own online business through its own website, which opened its website in China in 2014.

In fiscal year 2015, H&M opened 413 new physical stores and 10 new online stores (only 23 in the world).

There are online stores.

Judging from the number of stores, H&M has become the second fastest fashion brand in China, behind only the number of stores in the first place, and the latter in 440 stores.

At present, the two encountered almost the same.

In the first half of fiscal year 2016 (as of February 2016), the sales of global sales of UNIQLO parent company increased to 60 billion 870 million yuan, while operating profit dropped 33.8% to 59.8 billion yuan in the same period, and net profit dropped by 55.1%, with only 47 billion yen (about 2 billion 830 million yuan).

Fast selling said that the decline in profits was mainly due to the unusual warm winter in northern hemisphere at the end of last year, which affected the sales of UNIQLO clothing in winter. This phenomenon was more serious in Japan. The operating profit in the first half of the 2016 year of Japanese UNIQLO was 28.3% lower than that of the same period last year.

The price adjustment also led to a 3.5% decrease in gross profit margin in UNIQLO Japanese business.

Statistics show that due to the rising cost of raw materials, UNIQLO began adjusting commodity prices in the autumn and winter of 2014, up 5% in 2014 and 5% in 2015.

Okazaki Ken, a Fast Retailing CFO, said that the increase in the number of products has led to a failure to focus on it. It has been a major mistake not to convey the added value of different commodities in advertisements and other publicity.

The appreciation of the yen resulted in exchange losses and also led to a decline in its performance.

"UNIQLO's innovation in design has been reduced, and it is hard to satisfy the increasingly discerning eye of consumers."

Zhu Qinghua pointed out another important reason for the collapse of his performance.

On the international market, UNIQLO's total revenue rose 12.7% compared to the same period last year, and its operating profit dropped by 31.4%.

Among them, the Greater China and South Korea are all losing profits due to weak local economic consumption. The US market is dragged down by inventory and closing losses, and the deficit is still expanding.

Establishing "globalization" and "digitalization" direction

The cold performance of UNIQLO has already shown signs.

As of August 31, 2015, net profit fell 28.7% to 733 million US dollars in 12 months, operating profit fell 2.8% to 12.8 billion US dollars, and annual sales increased 21% to 13 billion 610 million US dollars.

In the first quarter of fiscal year 2016, the company's net profit fell sharply by 16.9% compared to the same period last year.

Among them, Japan's domestic performance and overseas market performance based on the Greater China region were not up to standard, and operating profit decreased by 12.4% and 14.2% respectively.

Like H&M, the main brand of Fast Retailing UNIQLO is developed based on shops in cities all over the world.

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In February 2016, UNIQLO launched its own UNIQLO library.

Shopping, to 7-11 convenience stores to pick up services; in addition, recently in the electricity supplier also played a "net red" economy.

So far, UNIQLO has opened more than 1700 stores in 17 markets, including Japan, Australia, Belgium, mainland China, Hongkong, China, Taiwan, France, Germany, Indonesia, Malaysia, Philippines, Russia, Singapore, South Korea, Thailand, the United Kingdom and the United States.

This autumn, UNIQLO will also enter the Canadian market, and plans to open up the Spanish market in 2017.

The number of customers in UNIQLO was reduced by 6.3% due to the increase in pricing, resulting in a 1.9% decline in same store sales.

This prompted UNIQLO to start cutting prices again, with the biggest drop of 30%.

In the future, the company will fix its price in a simple and clear price like "1990 Yen Yen" and "2990 yen".

Fast marketing also said that "globalization" and "digitalization" are its future development directions.

"We will collect and analyze commodity trends around the world through the commodity design center (R&D), further enhance the capacity of commodity development, and strengthen the combination of commodity composition to reduce the impact of climate change.

Last year, the total number of overseas UNIQLO stores exceeded 11 in Japan last year. We expect overseas UNIQLO revenue to exceed Japan's UNIQLO in the coming year or next year.

In addition, we will make use of the Internet to achieve digital innovation, link up planning, production, logistics, sales and other links, and create a new industry.

Shop at a rate of 10% to 15% per year.

Looking at the H&M strategy, Fu Xiarong said: "H&M will continue to expand globally and increase its stores by 10% to 15% per year."

In 2016, H&M plans to open stores in 3 new markets, including New Zealand, Cyprus and Puerto Rico, and plans to add 425 new businesses by November 2016.

Fu Xiarong said: "we also plan to open stores in cities with existing stores and some new cities in China.

In January 2016, H&M has opened four new stores in Chifeng, Yangzhou, Linyi and Suzhou. "

Stubborn H&M will only develop self built electricity supplier.

We plan to launch online store services in the existing markets of the 9 H&M markets, which are Ireland, Japan, Greece, Croatia, Slovenia, Estonia, Latvia, Lithuania and Luxemburg.

It plans to open up electricity providers to 34 markets at the end of this year.

"In the past and in the future, H&M will provide consumers with clothing, shoes, accessories, cosmetics, home furnishing series (Home) -- home textiles and interior decoration products."

Fu Xiarong told the Chongqing Youth Daily reporter.

Zhu Qinghua suggested that H&M could appropriately increase the proportion of mid-range products in the future so as to raise the level of profit.

"H&M business has been in Europe, North America, South America, the Middle East, Asia and Africa, Australia and other markets, and occupies a leading market position in the capital and small and medium-sized cities."

Fu Xiarong believes that this advantage of H&M will help to successfully penetrate every market and expand its business to new countries.

How can UNIQLO sit in such a statement?

It is reported that the fast selling group of UNIQLO parent company reaffirmed its medium-term vision in 2020, to achieve 5 trillion yen (about 2980 billion yuan) revenue in 2020, more than Zara parent company Inditex SA (ITX.MC) and H&M parent Hennes Mauritz AB (HMb.ST) as the world's largest apparel manufacturer and retailer.

In fact, who is more competitive between H&M and UNIQLO?

"The advantage of H&M is that it can find a balance between shipping time and product cost, with low cost and high fashion.

However, the quality of its products needs to be improved. "

Zhu Qinghua said that compared with H&M, the advantage of UNIQLO lies in its higher fabric technology, better product details and better service level.

So the future of UNIQLO is better or better.

Public figures show that UNIQLO and H&M ranked first and second respectively in the number of stores in China.

Zara stores are home to about 160 homes, ranking third, while MUJI, GAP, C&A, NEW LOOK and MANGO occupy fourth to eight places.

However, the declining performance of the fast selling market has made this Asia's largest clothing group far away from its target.

Xun Group expects to record operating profit of 120 billion yen in the 2016 fiscal year ending August, which is 27% lower than the 2015 fiscal year.

Net profit is also expected to slash 45.5% to 60 billion yen from 110 billion yen.

In this sense, H&M seems not to be willing to give up, and the contest between them will continue for some time.