TOKYO (UPDATE) - Uniqlo will raise prices for upcoming autumn and winter garments by about 5 percent, a company source said Tuesday, as the apparel chain owned by Fast Retailing Co. tries to offset adverse effects from rising raw material costs and a weaker yen.
The move by the maker of affordable clothing, which has realized low prices with a business model incorporating all production processes from design to final sale, may prompt its competitors to follow suit and suggests Japan is moving toward exiting chronic deflation.
The price hike for new products to be marketed from this summer reflects growing costs of raw materials such as cotton and wool, the source said.
The weakening of the yen, which has dropped against the U.S. dollar and other major currencies since last year on the back of Prime Minister Shinzo Abe's economic stimulus including monetary easing by the Bank of Japan, has also affected Fast Retailing through expensive imports of its own products made in other countries such as China.
The company aims to ease any impact on consumer sentiment from the price rise by upgrading the quality of its products.
It plans to expand the lineups of jeans and other trousers using a stretch fabric as well as outerwear made to retain heat, the source said.
Uniqlo earlier forwent a price hike by rigorously cutting production costs. But it believes higher raw material costs will continue for the time being.
Existing products not subject to the price hike will go on sale at reduced cost.
Fast Retailing logged a 4.1 percent increase in same-store sales of Uniqlo brand in May from the same month a year earlier, the seventh straight monthly growth, on solid demand despite the consumption tax hike from April in Japan, which raised the levy to 8 percent from 5 percent.
The company earlier said it sees little impact from the tax hike on its businesses, an assessment that may have pushed the company to decide on the price rise.
Uniqlo has seen the brisk sales of its UT T-shirt brand. Recently, it launched a new service, UTme!, to let customers design their own T-shirts by using smartphone and tablet computers.
"Suteteko" summer underwear, which revived the traditional long, thin design favored particularly by older Japanese, and AIRism innerwear using advanced fibers to ensure comfort have also seen strong demand, according to the company.
Fast Retailing had 849 Uniqlo stores in Japan and 534 abroad at the end of February. Its group sales stood at 1.14 trillion yen ($11 billion) for the year through August 2013, topping 1 trillion yen for the first time on record.