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Uniqlo to double China stores, but real fight lies online

Country to have more outlets than Japan by 2020

TOKYO/HONG KONG -- Uniqlo has developed into one of Japan's most iconic brands, but by 2020, the casual clothing retailer will operate more stores in China than in its home country. By strengthening overseas operations, the company hopes to achieve a sales target of 3 trillion yen ($27.4 billion).

Uniqlo, which is owned by Fast Retailing, plans to have 1,000 stores in China within the next two and a half years and has introduced a fast-track training scheme to bring enough store managers up to speed within the short time frame.

As of the end of May, it had 540 outlets in roughly 120 Chinese cities. So far, stores have been opened at a rate of about 100 a year, but the company will pick up the pace over the next couple of years, said Group Executive Vice President Pan Ning, who runs Uniqlo's China operations.

Big cities such as Shanghai and Beijing have several stores, while in smaller cities, the company only runs one or two. The Japanese retailer struggled after opening its first outlet in China in 2002. However, with brand awareness now markedly improved, it plans to boost the number of stores in smaller urban areas, particularly in inland provinces.

The number of Uniqlo stores in Japan has remained unchanged at about 840 for a long period of time and overseas sales are expected to overtake those in its home country within a few years.

China is the world's largest clothing market, alongside the U.S. According to British market research company Euromonitor International, the market approached $300 billion last year, and is expected to continue to grow by about 10% a year.

But like in most retail sectors, the main battleground for the apparel industry in China is rapidly shifting to e-commerce. Giordano International, a Hong Kong-based rival which dwarfs Uniqlo with 913 stores in China as of the end of June, is struggling to increase its top line but profiting from the expansion of online sales.

Disclosed on Thursday, the company's results for the first six months of the year show that total sales in mainland China dropped by 1.1% compared with a year earlier to 533 million yuan ($80 million). However, operating profit increased 5.0% to 42 million yuan, primarily owing to growth in e-commerce and its more favorable gross margin.

According to the company, online sales surged 26.6% in China during the period, which now accounts for 16.2% of total mainland sales, 3.5 points higher than the year before.

Peter Lau Kwok-kuen, Chairman and Chief Executive of Giordano, said in a statement that he is "cautiously optimistic" on the outlook for its mainland business, as growth decelerates and the competitive landscape shifts rapidly, bringing new rivals within the online sphere.

E-commerce will continue to be "an integral part for our business expansion in mainland China," he said, adding that "the management will continue to invest in e-commerce and expects that the segment will perform better than the Group's average."

Nikkei deputy editor Kenji Kawase in Hong Kong contributed to this story.

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