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Retail

Uniqlo opens first South Korea shops since flare-up with Japan

Fast fashion retailer's sales in South Korea down about 40% in July

South Korea is one of fast Fast Retailing's biggest operations, third by number of Uniqlo stores after Japan and China.   © Reuters

TOKYO -- Uniqlo owner Fast Retailing opened two new stores in the Suji district south of Seoul on Friday, its first new shops in South Korea since political tensions with Japan spiked in July.

The Japanese company opened a Uniqlo outlet and a store for sister brand GU in Lotte Mall Suji as planned despite talk that its business faces big obstacles in South Korea.

Local reports suggest sales at Uniqlo stores are falling and that the company is considering giving employees paid holidays. At an earnings briefing in July, Fast Retailing Director Takeshi Okazaki acknowledged boycotts are hurting sales, but the company denied a report about the holidays. Another executive said sales in the country were "down about 40% in July" and declined further in August. Many stores have few customers.

In July, public sentiment toward Japan soured in South Korea after the Japanese government removed the country from its list of preferred trade partners. Consumers are shunning well-known Japanese brands, including Uniqlo, camera maker Canon and Asahi, a brewer.

Despite this, Fast Retailing is pressing ahead with its expansion in South Korea. The company has three more store openings planned so far for September, including a third GU store.

South Korea is one of Fast Retailing's most important markets, third by number of Uniqlo outlets behind Japan and China. There were 186 Uniqlo stores in South Korea as of February, out of a total 1,311 overseas shops. In the 12 months ended Aug. 18, the company posted sales of about 140 billion yen ($1.32 billion). Along with the GU brand, Uniqlo has won a following among young Koreans.

Fast Retailing has closed one South Korean outlet since July, and two more are slated for closure. A company representative said the stores are being shut because of expiredleases and a shopping center being closed.

Uniqlo opened its first store in South Korea in 2005 in partnership with Lotte Group. One Uniqlo executive suggested Fast Retailing's founder, Tadashi Yanai, has warm feelings toward South Korea and Lotte because "the country was his first success overseas."

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