TOKYO, April 11 — The Japanese operator of Uniqlo lowered its second-half underlying profit forecast by 10 billion yen (RM306 million) yesterday on expectations US tariffs will hit the profitability of its fast-growing North American clothing business.
The majority of Uniqlo products sold in the United States are produced in Southeast Asia where garment export hubs were hit with tariffs of up to 49 per cent, though US President Donald Trump announced a 90-day pause on the duties on Wednesday.
However, the reprieve excluded China as Trump increased tariffs on Chinese imports to 125 per cent from 104 per cent, deepening a trade standoff between the world's two biggest economies.
Tadashi Yanai, founder and CEO of Uniqlo operator Fast Retailing, said the expansion of garment production beyond simply China to other Asian countries meant the company can change production sites in response to US tariff policies.
But he said escalating trade wars would be a disaster for many developing countries.
"As for the current tariffs, I think they are unreasonable given the current international situation and probably won't last," Yanai said.
From one store 40 years ago in Hiroshima, western Japan, Uniqlo has grown to more than 2,500 locations worldwide, selling inexpensive fleeces and cotton shirts made primarily in China and other Asian manufacturing hubs.
That business model now stands at odds with the sweeping US tariffs, which have left global markets reeling and prompted retaliation from some trading partners.
Fast Retailing said yesterday that it expected the US tariffs would lead to a 2-3 per cent hit to its consolidated second-half business profit.
"A significant amount of goods have already arrived in the US, so ... we expect the impact of the tariffs to be limited," Fast Retailing CFO Takeshi Okazaki said.
"We will continue to assess the situation from next fiscal year onwards and respond appropriately."
Fast Retailing cited strong sales both at home in Japan and in its international segments in the first half, minimising the impact of contracting revenue and profit in mainland China.
It has in recent years looked to North America and Europe for growth due to a slowing economy in China, its largest overseas consumer market with more than 900 Uniqlo stores on the mainland.
Yanai, Japan's richest man, has long been an advocate of free trade and has defended the company's business with China amid criticism of human rights abuses on the mainland.
— Reuters
