Tadashi Yanai, Chairman, President and CEO of Fast Retailing—operator of casual fashion brand UNIQLO—is one of the most prominent businessmen on the planet. Recently, while reading an economic magazine, I came to a new realization about this company, or rather President Yanai in particular, and I would like to write about it. Since I wrote about Kazuo Inamori, founder of Kyocera and KDDI, in the October column, I suppose you could consider this is part two of my series on respected senior business leaders.

UNIQLO to Achieve New Record Profit
Underlying strength to maintain customer traffic amidst price increases

An article with the above title appeared in the October 29 edition of Weekly Toyo Keizai, a weekly Japanese economic journal. Let me briefly summarize the piece. In the fiscal year ended August 2022, Fast Retailing set new records for both sales and profits. UNIQLO Japan’s domestic business, despite sales being down, posted essentially the same level of profit as in the preceding year, and although profits declined in mainland China, operations returned to profitability in North America and stabilized in Europe. The impact of the company having raised prices due to higher costs caused by rising raw material prices and a weakened yen was relatively low, and the concept of “good quality at a reasonable price” is gaining acceptance. The company forecasts yet another record high for the fiscal year ending August 2023.

Now, most people who read the article probably just thought, “Oh, I see UNIQLO is doing well.” But the piece made an impression on me, and here’s why.

The company launched operations in North America in 2005. Although it opened stores in high-profile locations such as New York City’s Fifth Avenue, the business remained unprofitable for more than 15 years.

The European business, which has been in operation for more than 20 years, was not tremendously profitable, but did stabilize and is in the black. This was due to the success of aggressively opening of global flagship stores in historic buildings in major cities such as London and Paris. These stores have now grown to where they account for half of UNIQLO Europe’s operating profit.

I was honestly stunned when I read this. “What? They allowed deficits to continue for 15 or 20 years?” Not if you are in so-called “smokestack” industry, but if one business in the apparel retail industry continued to lose money for such a long period of time, the usual reaction would be to withdraw and cut losses. It would be like, “Let’s give up on our operations in the West, with its different races, tastes, and business practices, and do our best in Asia, which is more familiar territory.” What’s more, it is a publicly traded company, so you have shareholders who are looking for short-term returns, and you have internal and external directors who may not have a deep understanding of the owner’s vision. If the term of office of the president is about six years, as is often the case with Japanese listed companies, it means that not only the first president who started the business, but also his or her successor—and possibly the one after that—will fail to achieve profitability. The point is that such a challenge is impossible for a salaried president. And if their efforts are focused solely on ensuring the business turns a profit during their tenure, it’s a certainty that there will be no major breakthroughs in other respects.

In Mr. Yanai’s case, he is the owner of the business, which means he was able to make such a long commitment, but there’s more to it than that. It is not just an owner-operated company, but one backed by massive ambition and drive. If you read his interviews, you will see that Mr. Yanai always talks about “aiming to be the best in the world”. In short, this considerable ambition would not allow him to shy away from the challenge of achieving success in Europe and the US., even if it took time to get there. This was something of an awakening for me, and something I’ve been giving a great deal of thought since then.

Hirotaka Shimizu
Chairman and CEO
Kamakura Shinsho, Ltd.