UNIQLO fever subsides sales growth for the lowest four years

According to recent reports, the "Uniqlo" chain's current design strategy has led to its slowest sales growth in four years, prompting Asia's largest apparel retailer to revise its profit forecast downward. This shift highlights growing concerns over consumer demand and market performance. In a recent statement, the company announced that it has lowered its expected net income rate from 4.9% to 67.5 billion yen for the end of August 2010. Additionally, annual sales growth is now projected to drop from 2.3% to around 815 billion yen. These adjustments reflect a challenging period for the brand as it struggles to maintain momentum in a competitive retail landscape. This year, Uniqlo's parent company has seen its market value fall by 27%, making it one of the biggest losers in the MSCI Asia Pacific Index. In response, CEO Tadashi Yanai, Japan’s richest man, has implemented deep discounts on key products like HeatTech thermal wear and Bra Top vests to attract customers. These price cuts aim to compensate for the lack of popular items that have historically driven sales. Ogawa Koichi, a portfolio manager at Daiwa Securities, noted that Uniqlo has failed to release products that resonate with consumers this year. He pointed out that while people may seek affordable clothing, they are no longer drawn to the UNIQLO brand exclusively. "It's just normal," he said, emphasizing a shift in consumer behavior. For the quarter ending in May, sales dropped by 4.7%, reaching 188.1 billion yen—the smallest increase since November 2006. The company also announced that its nine-month earnings would be cut in half, signaling further financial pressure. In March, Uniqlo's sales fell by at least 16%, hitting a seven-year low. April saw a 12% decline, but by May, sales rebounded slightly by 3.1% after the company slashed prices on jeans and sweatshirts from 1990 yen to 990 yen in just three days. However, June brought another setback as weak demand for summer products caused a 5.8% drop in sales, pushing the brand back into a slump. These developments underscore the challenges Uniqlo faces as it seeks to regain its footing in a rapidly evolving retail environment.

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