TOKYO - The operator of the Uniqlo clothing chain is expected to become the world's second-largest apparel retailer as it pursues a strategy to expand its appeal beyond affordable clothing to distinctive functional wear.
Fast Retailing Co. on Thursday reported record sales of 3.96 trillion yen ($25 billion) for the year ended Aug. 31. Analysts expect the figure to position the Japanese company to narrowly overtake Sweden's clothing retailer H&M Hennes & Mauritz AB to grab the world's No. 2 spot.
Sales at the Swedish company stood at 228.29 billion krona ($22.8 billion) in the year ended November 2025, while the world's leading apparel retailer Inditex SA, the owner of the Zara clothing brand, posted 39.9 billion euros ($44.7 billion) in sales in the year ended January 2026.
Chief Executive Tadashi Yanai has pledged to make his company the world's top clothing company since the beginning of the business.
"Determined to make it definitely happen, we made a plan to achieve it, took action and changed ourselves accordingly," he said at a press conference for the company's latest earnings on Thursday.
Yanai has transformed his father's tailoring and men's clothing shop in Ube, Yamaguchi Prefecture, into a global clothing retailer that some analysts say has established a sophisticated brand and offers value for money.
In its pursuit of the No. 2 position, a decade after it replaced U.S. retail giant Gap Inc. as the world's No. 3, Fast Retailing has pressed ahead with its LifeWear concept of "ultimate everyday clothing" that focuses on high-quality, affordable, tech-driven products such as its HeatTech and Airism innerwear.
The company also emphasizes minimalist design and efficient supply chain management from material procurement, design, production and sales.
Under the strategy, its overseas markets have expanded from Asia to North America and Europe in recent years, particularly after the COVID-19 pandemic sparked sales of its loungewear products amid stay-at-home demand, analysts say.
"The brand has just entered a growth phase" in North America and Europe, Takahiro Kazahaya, senior analyst at UBS Securities, said.
Brand recognition "is spreading through local communities and (it is) increasingly being seen as a 'cool' brand," he said.
Since the company opened its first overseas store in London in 2001 and entered the North American market in 2005, the Japanese retailer had been struggling to build brand awareness.
The pandemic marked a turning point, helping expand its customer base and drive double-digit growth in same-store sales in North America and Europe every year since the year ended August 2022.
The number of its app members in the two regions has more than tripled and the one-year repeat purchase rate rose to about 60 percent from around 40 percent in fiscal 2022, the company said.
"As demand for stay-at-home clothing grew during the pandemic, there was a significant increase in the number of people who had opportunities to experience the brand firsthand," UBS's Kazahaya said.
Its North American and European operations have led growth in overseas markets, having met sales targets for fiscal 2027 -- 500 billion yen in Europe and 300 billion yen in North America -- one year ahead of schedule in the just-ended business year.
Its store opening plans also paid off to make deeper inroads abroad, analysts say. In Europe, Fast Retailing has set up flagship stores in prime locations in major cities to build a positive brand identity and then opened more stores in second- and third-tier cities in France, Britain and Germany.
The Uniqlo brand operator focuses on the concept of daily basics. Such a product strategy sets it apart from fast-fashion rivals, which focus on speed and variety to deliver new styles at low costs.
Jun Kawahara, senior analyst at Daiwa Securities, said that the company's initiatives to promote environmental conservation through Sustainable Development Goals efforts and environmental, social and governance or ESG practices also contribute to building its reputation. Some HeatTech and Airism products are made using recycled materials.
"Uniqlo's durable, long-lasting products set it apart from (rival) fast-fashion brands and helped boost its reputation as a more environmentally friendly option," Kawahara said.
To solidify its positioning in the industry, Fast Retailing could seek to raise prices as it maintains its everyday casual wear brand identity, while the company also could strengthen its other clothing brands such as its PLST business casual brand, said Shoo Okada, associate professor of marketing at Hosei University.
China is expected to play a role in future growth, analysts say. Sales are recovering as the company is in the midst of efforts to reorganize its sales network there by closing outlets with low profitability.
Even North America and Europe have more room to boost sales, given the Japanese retailer commands around a 0.5 percent share of each market, compared with 12 percent of the Japanese market and 5 percent of the South Korean market.
Analysts say that the company has the potential to boost its market shares in the two regions three- or even fourfold.
"Uniqlo could catch up with Inditex within 10 years if the world's leading apparel retailer continues on its current path," Daiwa's Kawahara said.
