You'll have to forgive me for not catching this one sooner. A year ago, I wrote about the possibility of Japanese retailer Fast Retailing's Uniqlo business setting up shop in the U.S. and the potential competitive problems that could cause for Gap
Overall, I still believe Uniqlo poses the biggest threat to Gap's namesake stores and its Old Navy shops, because the price point, style, and level of quality are similar. Whether or not Uniqlo ends up being a true threat will take years to play out, and Uniqlo will also need to prove that it will endure in the U.S. and is not just a passing fad. As a customer of Uniqlo for a number of years, I believe the company can compete successfully, largely because the company has had some success in the U.K., Hong Kong, and Korea.
What we do know at this point is that Uniqlo is happy enough with its current results in the U.S. that it has decided to inject another $24 million of capital into its U.S. business. This is on top of the original $6 million that was put into the business to get the first three stores up and running. On Fast Retailing's website (link opens .PDF file), the company cited strengthening the U.S. business and additional store openings as the reason for the capital infusion.
Fast Retailing is not by any means a small company. Although Uniqlo is its largest brand and sports 682 stores in Japan alone, the company also has a number of smaller brands under its umbrella, including the more upscale Theory line. For fiscal 2005, the company reported 383.9 billion yen ($3.3 billion) in sales, and with net profit margins around 10%, that translates into earnings in the neighborhood of $300 million. The company also has a sound balance sheet and has room to take on some debt, if necessary.
To a lesser extent, I also think that American Eagle Outfitters
For more retail Foolishness:
- American Eagle's Ruffled Feathers
- Is Wal-Mart's Patience Golden?
- Gap Launches Growth Initiatives
- Can Coach Keep Up?