Shares of Fast Retailing, the parent company of Uniqlo, fell as much as 4.5% on Monday, following remarks by its chairman, Tadashi Yanai, that Uniqlo does not source cotton from China’s Xinjiang region. The region has been at the center of international scrutiny over alleged human rights abuses, which China denies.
Key Developments:
- Yanai’s comments, made in a BBC interview, have sparked heightened attention on Chinese social media during Uniqlo’s peak winter selling season.
- A Fast Retailing spokesperson stated that the company is “watching the situation carefully” to assess potential impacts on demand or a boycott in China.
- Analysts at Bloomberg Intelligence suggest the scrutiny could delay Uniqlo’s plans to open larger stores in China this fiscal year.
China’s Market Significance
Greater China contributed over 20% of Fast Retailing’s ¥3.1 trillion ($20.7 billion) revenue for the year ending August 2024. With 1,031 stores across mainland China, Hong Kong, and Taiwan, any shift in demand could significantly impact the company’s performance.
Global Implications
Uniqlo’s Xinjiang cotton policy highlights increasing pressure from the US and EU on companies to cut ties with the region. Jefferies analysts predict a “Trade War 2.0” aimed at removing Xinjiang cotton from Asian markets.
This controversy emerges at a critical time for Uniqlo, as winter sales are pivotal for its annual revenue.