With plans to double its North American footprint next year, Japanese apparel brand Uniqlo is making a play for some of the domain once held by struggling American retailers such as Gap.
“It’s interesting because Uniqlo now is probably what Gap should have been,” Neil Saunders, retail analyst for Global Data, told Retail Brew. “It’s taking market share from incumbent players like Gap.”
Why compare the two? Saunders noted that Uniqlo appears to be in expansion mode, while Gap is shrinking its footprint across the US. They are also a closer match than fast-fashion competitors such as Zara and H&M, he added, as they both focus on what he calls “elevated basics” rather than “highly fashionable” discount options.
- Gap Inc., parent company of Gap, Old Navy, Banana Republic, and Athleta, has notably struggled to find its financial footing. As of the third quarter, net sales had dropped 7% year over year.
Meanwhile, Uniqlo is moving ahead with plans to expand even more outside of its home market in Japan and its large, well-established presence in China. The company currently has more than 2,400 stores worldwide, but just 53 stores in the US and 19 stores in Canada. Earlier this week, the company announced plans to open 20 new locations across the US and Canada in 2024 and is building toward a longer-term goal of opening 200 locations by 2027.
“We couldn’t be more excited to enter the next phase of our North American expansion plan and serve more customers in the US and Canada,” Daisuke Tsukagoshi, CEO of Uniqlo North America, said in a statement.
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American dreams: While Uniqlo has had some presence in the US since 2005, its recent push to expand came in the wake of struggles in existing markets such as China since the onset of the Covid-19 pandemic. In short, severe lockdown measures in the region sunk sales, while Uniqlo’s North American and European businesses continued to grow.
Now China is bouncing back at the same time that momentum is building in western markets. The company reported in its fiscal year 2023 annual report that for the first time its international business accounted for more than half of all revenue.
- The North American portion of that revenue was also among the most profitable. Revenues on the continent were up 43.7% year over year. This is slightly behind India and Europe, but its operating profit was the highest at 91.9%.
“I think Uniqlo is pleased with its US performance,” Saunder said. “They also feel that trends are on their side because Uniqlo is a value retailer. It focuses on value for money and reasonably low price points.”
That being said—and this is arguably good news for would-be American competitors—Saunders pointed out that the scope of Uniqlo’s expansion plans were relatively “modest.”