New York – GU, the most experimental and elegant of Fast Retailing’s brand portfolio, has become one of the growth engines of the Japanese group on its own merits.
Often referred to as the cheap Fast Retailing brand - which also owns UNIQLO, Theory and Comptoir des Cottoniers -, GU has become a profit generator. Available at more affordable prices and aimed at younger clients, GU had already achieved an operating profit in nine months of 26,000 million yen (about 242 million dollars), which represents a jump of 75 percent over the previous year, contributing roughly one-tenth of the total operating profit of the group.
GU growth projections offer a diversified revenue stream for the Japanese retail giant at a time when the fast fashion industry is not going through its best moment, Bloomberg notes.
"It will become an important aspect of the Fast Retailing business," JP Morgan Securities analyst Dairo Murata said in a recent market note. Murata expects GU's contribution to Fast Retailing to peak in 13 years. “In the last fiscal year, GU reduced the number of items and began focusing on mass trends. It has really been a change, "concludes Murata.
"Fast Retailing's ability to really refine all its supply chain operations and create faster products will benefit its smaller-scale brands more than Uniqlo," Bloomberg Intelligence analyst Catherine Lim said earlier this week.
And the success of GU is based precisely on the existing strengths of the group, such as its wide supply network and scale.
It should be remembered that GU was broken down as a separate commercial segment for Fast Retailing reports two years ago. While the younger Fast Retailing brand has focused primarily on internal growth, it has opened a handful of stores in Asia in cities such as Taiwan and Hong Kong.
Still, JP Morgan Securities analyst does not expect explosive GU growth at the geographical level: "Retail competition is very fierce in Asia, and GU growth can level off next year after its great recovery period." Other industry experts cited by Bloomberg point out that the brand still needs to adjust its brand identity and target customers.
GU's FY2018 sales topped 200 billion yen, bringing this fun, low-priced fashion brand into the same league as other large apparel firms. FY2018 revenue reached 211.8 billion yen and operating profit 11.7 billion yen.
”While we still have room for improvement, we believe there is great potential for GU. To improve profitability and communicate the GU brand message ‘YOUR FREEDOM’--which emphasizes freedom of expression through clothing--concept we introduced a new product mix with a strong focus on mass trend fashion from the 2018 Fall/Winter season and strengthened TV marketing,” sums up the company in their financial presentation.
Image: Uniqlo website