2002 ANNUAL REPORT   

FAST RETAILING CO., LTD.

PROFILE
FAST RETAILING CO., LTD., is Japan’s leading fashion apparel company, manufacturing and retailing casualclothing under the UNIQLO brand. The mission of the Company is to offer high-quality, fashionable basic casual
wear that can be worn anytime, anywhere, and by anyone. The Company achieves high quality at affordable prices
through its low-cost operations, which integrate control over product planning, production, distribution, and sales.
As of the end of August 2002, FAST RETAILING had 570 UNIQLO stores in Japan and 15 in the United Kingdom.
Moreover, in September 2002, the Company opened two stores in Shanghai in the People’s Republic of China
and, in November 2002, commenced food sales through a newly established subsidiary, FR FOODS CO., LTD.
FAST RETAILING is proud of its products and wants people around the world to wear and enjoy UNIQLO clothing.
Today, the Company is devoting all of its energy to moving toward its next stage of growth.

HIGHLIGHTS OF THE YEAR
• Net sales decreased 17.8% over the previous fiscal year, to ¥344.2 billion, and net income
was down 52.9%, to ¥27.9 billion.
• Annual dividends of ¥55 per share were paid (following adjustment for stock split).
• Opened 77 stores and closed 26 based on our scrap-and-build strategy, to give a total of
570 stores at year-end in Japan.
• Established the UNIQLO Design Studio in April 2002 and aggressively recruited talented
designers and pattern makers from Japan and overseas.
• Launched baby-wear at 74 of our stores in August 2002.
• Opened stores in the United Kingdom in our first expansion overseas (5 stores opened infall 2001, 10 in spring 2002, 6 in fall 2002).
• New business in the food industry was announced (FR FOODS CO., LTD., established on
September 2, 2002).
• Fleeces collected from customers as part of our fleece-recycling program exceeded the
60,000 mark (as of September 2002).

CONTENTSCONSOLIDATED FINANCIAL HIGHLIGHTS ......

1

MESSAGE FROM THE CHAIRMAN...................

2

MESSAGE FROM THE PRESIDENT ..................

4

MERCHANDISE DEVELOPMENT ......................

6

PRODUCTION STRATEGY................................

8

STORE OPENING STRATEGY .......................... 10
OVERSEAS STRATEGY .................................... 11
NEW BUSINESSES ........................................... 12
CORPORATE CITIZENSHIP .............................. 13
UNIQLO’S BUSINESS MODEL.......................... 14
FACTORS UNDERLYINGUNIQLO’S HIGH PROFITABILITY ..................... 15
CORPORATE HISTORY .................................... 16

FORWARD-LOOKING STATEMENTS

FINANCIAL SECTION ........................................ 17

Statements in this annual report, other than those of historical fact, are forward-looking statements about the future performance of FASTRETAILING that are based on management’s assumptions and beliefs in light of information currently available, and involve known andunknown risks and uncertainties. Actual events and results may differ materially from those anticipated in these statements.

INVESTOR INFORMATION ................................ 38
CORPORATE INFORMATION............................ 39CONSOLIDATED FINANCIAL HIGHLIGHTSFAST RETAILING CO., LTD. and consolidated subsidiary
Fiscal years ended August 31

Millions of yen except per share data

Thousands of
U.S. dollars
except per share data

% change

2002

2002 vs 2001

2002

2001

2000

Net sales ........................................................

¥344,171¥ 418,561¥ 228,986$2,787,938–17.8%

Operating income ...........................................

50,418102,081

60,628408,408–50.6

Net income .....................................................

27,851

59,192

34,514

225,606

–52.9

2.18

–75.9

ROE (%) ..........................................................

23.2%

65.3%

70.2%

Per share data (yen and U.S. dollars):
Net income .................................................

¥ 269.54¥1,119.28¥1,303.35$

Cash dividends:
Adjusted ..................................................

55.0

60.0

37.5

0.45

–8.3

Unadjusted ..............................................

90.0

120.0

150.0

0.73

–25.0

Cash and cash equivalents .............................

¥ 107,263¥ 157,379¥ 99,670$ 868,878–31.8

Total assets ....................................................

210,922249,766

151,607

1,708,562–15.6

Shareholders’ equity .......................................

123,632

116,476

64,7551,001,474+6.1

Number of issued and outstanding shares ......

106,073,656

53,036,828

26,518,414

Total number of stores ....................................

585

519

433

Note: U.S. dollar amounts have been translated for convenience only at the rate of 123.45=US$1, the approximate exchange rate prevailing on
August 31, 2002.

Net Sales

Net Income(Billions of yen)
500

(Billions of yen)
60

(%)
80

45

60

Shareholders’ Equity(Billions of yen)
150

400
100
300
30

40

15

20

200
50
100

0
FY

’98

’99

’00

’01

’02

0
FY

0
’98

’99

’00

’01

’02

0
FY

’98

’99

’00

’01

’02

ROE (right scale)

1MESSAGE FROM THE CHAIRMAN

Toward the Next Phase of Growth
In the fiscal year ending August 31, 2002, the Company posted its

this goal, we will first work to achieve high profitability from net

first drop in revenue and income since listing. As a result, we disap-

sales of ¥300 billion for the current fiscal year. In my opinion, once

pointed our customers and shareholders.

a company’s sales have tripled, it cannot advance to the next

There were two reasons for this downturn. First, we placed too

stage of its development unless all of its fundamental structures aremuch emphasis on basic casual clothing in our merchandise mix.

rebuilt. Regrettably, while FAST RETAILING has cleared the ¥100

Our line-ups lacked a sense of fashion, and customers felt little

billion hurdle, it has yet to break through the ¥300 billion barrier.

incentive to buy our products. Therefore, from now on, we will

The management team’s mission is to get the Company throughdevelop a range of products that also have fashion appeal. Further-

this ¥300 billion barrier and put it back on track for new growth as

more, we will put together a fresh merchandise mix for each season.

soon as possible.

We will also shorten lead times from product planning, to produc-

The last year has seen the appointment of four key executives fortion, to actual delivery in order to respond quickly to market trends.

the FAST RETAILING GROUP. First of all, I have every confidence

The second reason for our disappointing sales was the after-in the drive and management capabilities of our newly appointed

effect of the so-called UNIQLO boom. In only two years, our net

President & COO, Genichi Tamatsuka. At our subsidiary in thesales climbed from ¥100 billion, to ¥400 billion. However, during

United Kingdom, Masatoshi Morita has assumed the post of CEO.

the year under review, we fell short of our sales target of approxi-

Although the UK subsidiary’s results for the fiscal year under review

mately ¥500 billion and we had to devote a lot of resources to count-

were disappointing, he will improve profitability in the current fiscal

ering this downturn.

year. Makoto Hayashi became CEO of our subsidiary in China,

Nevertheless, we remain firmly committed to becoming theworld’s number-one casual clothing company. In order to reach2

which successfully launched two new stores in Shanghai on
September 30, 2002. And, Osamu Yunoki has taken up his post

as the President of FR FOODS CO., LTD., which was establishedon September 2, 2002. I am convinced that this food productbusiness will make an important contribution to the FASTRETAILING GROUP in the long term.
In Japan as a whole, I think that there is a great shortage of young
executives who are equipped to lead the way in the coming era.
I want FAST RETAILING to aim to be a company that produces

We remain firmly committed to
becoming the world’s number-one
casual clothing company.

many such talented individuals with excellent management skills.
And, these human resources will become the driving force thattransforms FAST RETAILING into a truly global company.

November 2002

Tadashi Yanai
Chairman & Chief Executive Officer

3

MESSAGE FROM THE PRESIDENT

A Crucial YearThe current fiscal year will be crucial as we work to put the Company

the first two initiatives. Through these new initiatives, one of ourback on track for growth. In order to achieve renewed growth,strategies for the future is to develop our women’s clothing

I intend to do two things. First, we will reinforce those features ofbusiness into an engine that will drive the Company toward recov-

FAST RETAILING that have weakened and must be preserved.

ery. Later in this report, we will cover our development of thisSecond, we will actively tackle new initiatives.

category in more detail.

To clarify those characteristics the Company must preserve, we

Our nonconsolidated net sales target for the fiscal year ending

should return to the roots of UNIQLO’s growth. I think these essen-

August 31, 2005, is ¥450 billion. We aim to have sales of ourtial elements are:women’s category account for ¥180 billion, or 40%, of this amount.

1) management philosophy;

Given that sales of our women’s category for the fiscal year under2) highly efficient operations;review were ¥94 billion, or about 28% of net sales, our plan3) outstanding value for money;

involves doubling sales of this category over three years.

4) primacy of customers and stores; and5) disciplined management.
We began to lose sight of these qualities during the process of

I believe that a strong line-up of women’s apparel is essential for
UNIQLO to become an international brand. Consequently, I wantto rapidly improve our women’s collection, which I would give

rapid growth. My mission is to re-emphasize these basic traits by

pretty low marks at present. I am confident that if we enhance thisfurther strengthening the commitment of all of our employees.

category, we can win a substantial share of the huge market for

Our new initiatives can be separated into three major themes.

women’s clothing.

These are: enhancing our merchandising, bolstering our selling

My mission as President is to take a hands-on approach to ourpower, and strengthening our business infrastructure to underpin

operations, and give our employees the leadership and support4

they need to develop the resilience to win against global competition. The management of FAST RETAILING has reached a newstage—shifting from the entrepreneurial era of Tadashi Yanai to amore team-oriented management. This shift is essential for our
success in an environment of global competition. As the leader of thismanagement team, my mid-term targets on a nonconsolidated
basis for the fiscal year ending August 31, 2005, are to achieve net

I believe that a strong line-up of
women’s apparel is essential for UNIQLO
to become an international brand.

sales of ¥450 billion and operating income of ¥90 billion with anoperating income margin of 20%. I am committed to achieving
these numerical targets by reinforcing our foundations over thecurrent fiscal year and by doing my utmost to put FASTRETAILING back on a growth track from the fiscal year ending
August 31, 2004.

November 2002

Genichi Tamatsuka
President & Chief Operating Officer

56MERCHANDISE DEVELOPMENT

Creating Fashionable Basics
The number of customers visiting our existing stores during the fiscal year under review
fell 24%. We believe that our decline in sales resulted from our overly narrow definition of

A NEW PRODUCT CATEGORY“basic casual wear.” Mindful of this, we have started creating fashionable basics by re-In August 2002, we launched sales of our new baby-

evaluating all of our products to reflect the popular colors and designs in each season.

wear products at 74 stores. This new line has proved

Our aim is to have the season’s most attractive products on the shelves of UNIQLO

extremely popular, with sales at levels approximately

stores. To develop fashionable basic casuals, we will rigorously select the best colors,

twice as high as our original targets. We plan todesigns, styling, and materials.

increase the number of stores offering baby-wear toFirst, in order to reflect the latest fashion trends, we will speed up our product planning
cycles from three to six times a year, which will enable us to reassess our stores and140 by spring 2003. And, we intend to aggressively workon other new UNIQLO categories, such as footwear.

merchandise mix every two months and plan products closer to their actual retailseason. We are confident that these line-ups—featuring a large number of fashionable
basic items—will give customers a real sense of the change in our products when they
visit our stores.
In particular, we are bolstering our line-up of fashionably styled products in our women’s
clothing category. We had boosted this category at 70 of our large-type UNIQLO stores,
as of the end of August 2002. In other words, we are expanding the selection of items,
sizes, and colors that we offer in women’s clothing. Given that the market for women’s
clothing is huge, we believe that making UNIQLO’s offerings in this category more fashionconscious could greatly increase sales. With this in mind, our medium-term target is tohave the women’s clothing category account for 40% of net sales.
In April 2002, we established the UNIQLO Design Studio in Tokyo, which we aim to
make the center of our product development. We have transferred 50 staff members tothis Studio to enhance their independence and creativity. At present, we are actively
recruiting talented designers and pattern makers at home and abroad.
UNIQLO’s baby-wear

7

8

PRODUCTION STRATEGY

Shortening Lead Times
The key to producing fashionable basic casual wear lies in shortening lead times fromproduct planning to sales. In order to shorten lead times and incorporate fashionable

TAKUMI PROJECT

designs, it is essential to improve the level of integration of our business model, which

FAST RETAILING is directly involved in production

is a coordinated system from production to sales. To achieve better integration, wemanagement at our factories in China. At the heart ofmust enhance the accuracy of demand forecasts, improve the management of inventory

this management is a group of employees that we callrisk, and create closer links between sales and production at factories in the People’s

the Takumi team. Each of the Japanese technicalRepublic of China.

experts in this group has 30 to 45 years of experience inStrengthening our partnerships with plants in China is an indispensable aspect ofa broad range of specialist fields, including the selection

these efforts. During the year under review, we scrutinized the factories we work withof raw materials, spinning, dying, knitting, sewing, andand selected those plants that combine substantial production capacity with the ability

plant management. The instruction and commitment of

to raise or lower production levels flexibly. As a result of this evaluation, we havethese technical experts, who really know what it takes toreduced the number of factories we deal with by approximately 20% and we are now
bolstering our partnerships with 50 companies that operate a total of 60 factories. For
example, we regularly hold factory conventions in Shanghai at which we outline andproduce garments, ensures the world-class quality of
UNIQLO’s apparel. In this way, they are also passing
their expertise on to the next generation.

share our basic direction and approach with our partner factories.
We are further improving the flexibility of our production system by speeding up thetransmission of production plans from Japan to factories in China, which can alter theirproduction levels accordingly. We are currently developing a fully interconnected
network system that will allow us to make production adjustments for size and color.
Although some of the production lots for fashionable basic casual wear are smaller
than average, this will not lead to a rise in production costs. By using the same raw
materials, we are able to reduce production costs to the minimum. The Company’sbusiness model, which assumes 100 percent of the risk from procurement to sales
and sells all products by the end of retail seasons, is what makes FAST RETAILING ahighly profitable company.
9

STORE OPENING STRATEGY

Aiming for 1,000-Store Network
During the fiscal year under review, FAST RETAILING opened 77 new stores and closed
26, based on our scrap-and-build strategy, giving a net increase of 51 stores and a totalof 570 stores at year-end. We shifted the focus of our store openings from stores inurban areas, which had been intended to ease store congestion, to road-side stores inJapan
Direct-run stores: 558

16Franchise stores: 12

Hokkaido

Total:

570

regions lacking a UNIQLO presence. There is still a lot of potential for store expansion in

519
(12)

the Japanese market. We aim to establish a solid position as a national chain store by
expanding our network to 1,000 stores within the next several years. We also intend toincrease the number of large-size stores through our scrap-and-build strategy.
We have begun a variety of trials at our “prototype” stores in order to assess new sales

368
(11)

336
(11)

570
(12)

433
(12)

33
Tohoku

225
1998

1999

2000

2001

2002

( ) = Franchise stores

techniques, store layouts, fixtures, and methods of displaying products. For example, at85

our store in Shinjuku-sanchome, which opened in September 2002, we have doubled
the amount of women’s clothing to more than 50% of total products. In addition, thismore on displaying products. We will work steadily on the conversion our existing stores
into these new-look stores by spring 2003.

10

Chubu

48

store has more clothing-coordination displays than our conventional stores. Throughthese prototype stores we will enhance our women’s clothing sales areas and focus

Kanto

103

55
KyushuChugoku/
ShikokuKansai5
Okinawa(As of August 31, 2002)

OVERSEAS STRATEGY

Expanding Overseas Markets
In September 2001 the Company opened its first overseas store in London. As of theend of November 2002, we had 21 UNIQLO stores in the United Kingdom. Our high-

United Kingdom(As of November 30, 2002)

quality basic casual wear has been very well received by the British public, confirming
North West

4

Midlands

5

the huge potential of this market.
Unfortunately, FAST RETAILING (UK) LTD. (FRUK) posted a deficit of ¥3.6 billion for
the fiscal year under review. This was due to costs associated with advertisement andpromotion expenditures, which were aimed at heightening recognition of the UNIQLO
brand name, and prior investments for new store openings. Our goal for the current fiscal
year is to strengthen FRUK’s operating infrastructure and improve profitability.
In the People’s Republic of China, we opened two UNIQLO stores in Shanghai on

South East 12

September 30, 2002. Just before they opened, lines of approximately 500 people
formed outside these stores. In our view, our sales in China, which has the largest
market potential in the world, could even surpass our sales in Japan.

People’s Republic of China(As of November 30, 2002)

Our Regent St. store in London

Launch of our Shanghai stores

Shanghai

2

11

NEW BUSINESSES

Food Business
On September 2, 2002, FAST RETAILING spun off its food products project to establish
FR FOODS CO., LTD. The new company operates under the brand name SKIP, which

THE NAGATA CULTIVATION METHOD

expresses a sense of delight and fun. The mission of FR FOODS is to deliver tasty, safeThis is a cultivation technique that Terukichi Nagata

food to customers at affordable prices by applying UNIQLO's integrated production-to-

has spent more than 50 years developing. The main

sales model.

feature of this method is that crops are grown in poor

The techniques of the Nagata cultivation method (see right) will be used to growsoil using as little water and fertilizer as possible invegetables, fruit, and rice. We will also produce milk and eggs by using animal feedorder to stimulate the natural vitality of plants. The

made by the Nagata cultivation method. Initially, we will sell approximately 60 vegetableprocess of struggling to absorb nutrients produces

items, 30 fruit items, rice, milk, and eggs. In addition to launching Internet sales on

delicious crops with highNovember 15, 2002, FR FOODS has begun mobile sales using temporary stalls andsugar and nutritionaldelivery trucks. We are aiming for sales of ¥1.2 billion in our first year of operations.

levels. Moreover,Despite the low profit margins in Japan’s retail sector, FAST RETAILING successfully
achieved high profitability and rapid growth in its development of UNIQLO. This wasmade possible by our creation of a business model that fully controls operations fromproduction to sales.
We will aggressively take on challenges in new business sectors, if we see that there isan opportunity to leverage our business model. While the decision whether to go ahead
with any such ventures will be based upon an assessment of investment efficiency, we
believe that there are many fields in which the UNIQLO model can be applied.

e-skip.com
12

because the plants are
hardy, pesticides can be
kept to a minimum level.

CORPORATE CITIZENSHIP

Social and Environmental Activities
Whatever its performance, a company must con-Seto Inland Sea Olive

Initiatives for People with Disabilities

sider more than just business. As well as always

Foundation

FAST RETAILING supports the Special Olympics

giving our best in business, we also make positive

Teshima, an island situated inJapan, which promotes the participation of people

contributions to society.

the Seto Inland Sea, haswith disabilities in sports and in society as a whole. In

lost a great deal of its

August 2002, 250 of our employees and executives

Fleece Recycling

greenery due to contami-

took part as volunteers in the Third Special Olympics

We collect and recycle used UNIQLO fleeces from ournation from illegal dumping

Japan Summer National Games held in Tokyo.

customers. As of October 2002, we had collectedof toxic industrial waste.

more than 60,000 fleeces. These are then made into

Kohei Nakabo, an attorney, and Tadao Ando, an

450 people with disabilities. According to Japanesesuch products as thermal insulation materials, sound-architect, established the Seto Inland Sea Olive Foun-law, at least 1.8% of a company’s workforce must

proofing materials, and sheets for construction sites.

dation with the aim of planting one million trees, mainlycomprise employees with disabilities. As of August

FAST RETAILING is not just about making and selling.

olive, on Teshima and other islands of the Inland Sea.

2002, employees with disabilities made up 6.8% of

We strive to take our manufacturing and retailing

Given the distinguished individuals that had launched

UNIQLO’s staff. As a company seeking to create

operations one step further by thinking ahead. We will

the fund and its admirable goals, FAST RETAILING

clothes that everyone can wear, we also want tocontinue developing recycling methods for clothing

was only too pleased to participate. We have set up

create a workplace in which everyone can work.

products other than fleeces.

donation boxes at all UNIQLO stores and we match

In addition, the Company employs approximately

the amount of money collected and donate the total
amount to the foundation. We will continue our workfor this foundation to ensure that in five or ten years
time, the whole of the Seto Inland Sea will once again
become an area in which people can live in harmony
with a bountiful natural environment. We want to help
make this a beautiful area we can be proud to pass onto the next generation.

13

UNIQLO’S BUSINESS MODEL

60 Factories in China

Factory

Factory

Share Sales andProduction Information

FAST RETAILING

Products

570 Stores in Japan
Conventional-Type Stores
New Large-Type Stores

FAST RETAILING
Raw
Materials

15 Stores in UK

Shanghai, Guangzhou Offices
Production Management
Quality Control

Takumi Team

Customers
Direct Sales
Catalog & Internet Sales

Customer Center

Material
Manufacturers

Direct Contact

Headquarters
Merchandising
Promotion & Marketing
Distribution & Inventory Control
Store Operation Support
UNIQLO Design Studio

14

FACTORS UNDERLYING UNIQLO’S HIGH PROFITABILITY

Operating =IncomeNet Sales

Net Sales(1.standard prices – 2.discount)–

Purchasing Costs(3.raw material costs + 4.sewing and knitting costs + other purchasing costs)–

SG&A Expenses(5.personnel + 6.rents + other SG&A expenses)

1. standard prices

Most prices are set at ¥1,000, ¥1,900 or ¥2,900, and we will maintain these as our standard prices. For example: T-shirts;¥1,000, fleece jackets; ¥1,900, chino pants; ¥2,900 etc.

2. discountWe have two types of discount sales: a) limited-period sales, b) clearance sales.

a) limited-period
sales“Limited-period sales” are price reductions aimed at attracting customers. These discounts are only offered for specified periods
such as “weekends only.” Following this discount period, prices return to standard.

b) clearance sales“Clearance sales” are price reductions aimed at reducing slow-moving inventories. We take on 100% of the risk for products
ordered from factories in China. Our flexible production management system allows us to increase or decrease productionlevels to reflect sales information. Consequently, we are able to minimize the deterioration of the gross profit margin resulting
from clearance sales.

Purchasing Costs 3. raw material costs

We are able to minimize raw material costs through the economies of scale represented by our 570-store network in Japan—
the largest in the industry. In addition, we are able to reduce materials costs by guaranteeing 100% purchase of raw materials
ordered. For example, by industry standards, sales on a scale of 100,000 items for one product would be classified as a major
hit product. However, this figure does not represent large-scale sales for FAST RETAILING; 100,000 items is less than 10 items
per store on an SKU (Stock Keeping Unit) basis:
100,000 items ÷ 570 stores ÷ (5 colors X 4 sizes) = 8.8 items
Furthermore, our size enables us to conduct direct price negotiations with major international textile manufacturers. It also
allows us to aggressively pursue joint development of new materials such as highly functional “air-tech” material.

4. sewing and knitting
costs

We minimize sewing and knitting costs by improving efficiency and taking on 100% of the risk for production at consignment
factories. We actively transfer technology to consignment production factories in China, which we view as long-term partners.
The “Takumi team” at our offices in Shanghai and Guangzhou is a group of Japanese technical experts who are highly
experienced in areas such as sewing and plant management. These employees go directly to consignment production factories
and pass on the textile technology expertise they have acquired in Japan over 30-45 years to young Chinese technicians.
Through such hands-on initiatives, we are working to improve the product quality and efficiency of consignment production
plants.

5. personnel

Part-time employees at stores account for most of personnel expenditure. We have been able to standardize store operations
as a result of our stores’ uniform layout, displays, shelves, and fitting rooms and our limited store types (conventional-type:500m2, new large-type: 800m2). This allows us to run UNIQLO stores with minimum numbers of personnel.

6. rents

Since the majority of our stores are stand-alone outlets in suburban areas, the ratio of rents to sales is kept low. And, when we
open stores in urban areas or in shopping centers, we conduct detailed preliminary sales simulations to ensure that we avoid
excessive rent burdens.

SG&A Expenses

15

CORPORATE HISTORY

March 1949

April 1997

October 2000

• Men’s Shop Ogori Shoji founded as a private enterprise in
Ube City, Yamaguchi Prefecture.

• The Company’s stock listed on the Second Section of theTokyo Stock Exchange.

• Internet online sales business launched to foster new sales
channels and improve customer convenience.

May 1963

November 1997

April 2001

• Ogori Shoji Co., Ltd., established, with capital of ¥6 million,
as a successor to the original business.

• The Company’s sales network grew to more than 300
direct-run stores (309) and 11 franchise stores.

June 1984

February 1998

• Joined with the Japanese Olympic Committee in an official
sponsorship.
• The Company’s sales network grew to more than 500
direct-run stores (507) and 12 franchise stores.

• The first UNIQLO store, specializing in casual clothing,
opened in Hiroshima City (UNIQLO Fukuromachi store;
closed in August 1991).

• Head Office newly constructed in Yamaguchi City,
Yamaguchi Prefecture, to further enhance central
management functions and operational efficiency.
• To strengthen in-house merchandise development, Osaka
Office and Tokyo Office closed and integrated into a single
office set up in Shibuya.

September 1991
• The Company’s name changed from Ogori Shoji to FASTRETAILING, a name which succinctly expresses its
business philosophy.

March 1994
• To maximize efficiency, central management functions,previously dispersed, transferred to the Company’s newly
constructed Head Office in Ube City, Yamaguchi
Prefecture.

August 2001
• Established FAST RETAILING (JIANGSU) APPAREL CO.,LTD., a 71.43% equity subsidiary, as the cornerstone of
future business development in China.

September 2001
November 1998
• The first downtown store opened in the fashionable
Harajuku district of Tokyo.

• Opened four stores in the United Kingdom, in
Knightsbridge, Wimbledon, Uxbridge, and Romford.

April 2002
February 1999
• The Company’s stock listed on the First Section of theTokyo Stock Exchange.

• To bolster product development capabilities, UNIQLO
Design Studio established as an independent organization
with approximately 50 designers and pattern makers fromFAST RETAILING.

April 1994

April 1999

• The Company’s sales network grew to more than 100
direct-run stores (109) and seven franchise stores.

• Shanghai Office established to further enhance production
management operations.

July 1994

September 1999

• The Company’s stock listed on the Hiroshima Stock
Exchange (the Exchange was abolished in 2000).

• Guangzhou Office established.
• Trial-run of catalog sales conducted to explore thedevelopment of new sales avenues.

• Spun off food products project to establish FR FOODS
CO., LTD.
• Opened Shinjuku-sanchome store, with a strong emphasis
on women’s clothing.
• Began operations in China by opening two stores inShanghai.

April 2000

November 2002
• Started full-fledged operation of food business under the
SKIP brand name.
• Opened large-type store in Sannomiya, Kobe, which will
become the Company’s flagship store in western Japan.

• The Company’s sales network grew to more than 200
direct-run stores (205) and 10 franchise stores.

• The Company’s sales network grew to more than 400
direct-run stores (417) and 12 franchise stores.
• To promote merchandising and marketing and to carry out
operations more efficiently, new Tokyo Office established in
the West Wing of Mark City, a shopping and office complex
in Shibuya, integrating merchandising functions from the
Yamaguchi Prefecture Head Office and the Tokyo Design
Office.

November 1996

June 2000• Tokyo Office opened in Shibuya, Tokyo, to reinforce theCompany’s in-house product planning and development
capabilities.

• Established FAST RETAILING (U.K.) LTD.
• Prepared to set up shops in train stations, through a tie-up
with East Japan Railway Co. and its related KIOSK stores.

September 2002

February 1996
• FAST RETAILING entered into a joint venture with Nichimen
Corp., and local capital in Shandong Province, China.
FAST RETAILING took a 28.75% equity interest in theventure, with the aim of securing a reliable supply of
products.

March 1996

16

FINANCIAL SECTION

SIX-YEAR FINANCIAL SUMMARY ............................................................. 18
MANAGEMENT’S DISCUSSION AND ANALYSIS ..................................... 19
CONSOLIDATED BALANCE SHEETS ....................................................... 24
CONSOLIDATED STATEMENTS OF INCOME ........................................... 26
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY .............. 27
CONSOLIDATED STATEMENTS OF CASH FLOWS .................................. 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .......................... 29
INDEPENDENT AUDITORS’ REPORT ....................................................... 37

17

SIX-YEAR FINANCIAL SUMMARY
FAST RETAILING CO., LTD. and consolidated subsidiary
Fiscal years ended August 31
2002

For the year:
Net sales ..............................................................................................
Operating income .................................................................................
Net income ............................................................................................
ROE (%) .................................................................................................
Per share data (yen):
Net income ......................................................................................
Shareholders’ equity .......................................................................
Cash dividends:
Adjusted .....................................................................................
Unadjusted.................................................................................
Dividends payout ratio (%) ..............................................................

2001

Millions of yen except per share data and other data
2000
1999

1998

1997

¥344,171
50,41827,851
23.2%¥418,561
102,081
59,192
65.3%¥228,986
60,62834,51470.2%¥111,082
14,344
6,817
22.9%¥83,121
6,840
2,924
11.9%

¥75,021
5,866
2,704
12.2%

¥ 269.54
1,215.43¥1,119.28
2,203.45¥1,303.35
2,446.34¥ 259.51
1,270.47¥111.49991.58¥113.38
978.59

55.00
90.00
17.7%

60.00
120.0010.7%

37.50
150.00
11.5%

6.75
27.00
10.5%

2.50
10.00
9.0%

2.27
10.00
8.8%

Net cash provided by (used in) operating activities* .........................
Net cash used in investing activities* ..............................................
Net cash used in financing activities* ..............................................
Depreciation and amortization .............................................................
Capital expenditures .............................................................................

¥(19,361)(9,927)(20,431)
1,942
11,020¥80,581(13,199)(10,955)
1,571
13,474¥68,790(5,085)(3,766)
805
6,218

—
—
—
741
3,363

—
—
—
653
6,127

—
—
—
416
5,141

At year-end:
Cash and cash equivalents ..................................................................
Total assets** ........................................................................................
Total shareholders’ equity** .................................................................
Equity ratio (%) ......................................................................................
Long-term debt .....................................................................................
Debt-equity ratio (%) .............................................................................

¥107,263
210,922
123,632
58.6%
4,000
4.7%

¥157,379
249,766
116,476
46.6%
7,000
6.0%

¥ 99,670
151,60764,75542.7%
10,00015.4%¥39,768
73,552
33,61845.7%
10,00030.6%¥14,204
47,84826,00954.4%——¥14,467
41,65523,335
56.0%——

Other data:
Number of shares outstanding ............................................................. 106,073,656
Total number of stores ........................................................................
585
Direct-run stores in Japan ........................................................
[558]
Franchise stores in Japan ........................................................
[12]
Overseas stores ......................................................................
[15]
Total sales floor space (m 2)...................................................................
305,504m2
Number of regular employees .............................................................
1,853

53,036,828
519
[507]
[12]
[—]
263,713m2
1,598

26,518,414
433
[421]
[12]
[—]
186,801m2
1,265

26,461,005
368
[357]
[11]
[—]
157,424m2
1,055* Statements of cash flows are disclosed from the fiscal year ended August 31, 2000.
** Due to changes in regulations relating to financial statements, treasury stock, which was recorded in “Investments and other assets” in balance sheets
until the previous fiscal year, will be recorded as a deduction item in “Shareholder’s equity” from this annual report onward.

18

26,229,924
23,845,386
336
276
[325]
[265]
[11]
[11]
[—]
[—]
143,487m2
116,003m2
950
798

MANAGEMENT’S DISCUSSION AND ANALYSISThe financial information included in the following section is based on the

Total sales floor space at fiscal year-end rose 41,791 square meters, or 15.8%, toconsolidated financial statements presented in this annual report, which have

305,504 square meters. Due to our efforts to make existing stores larger, the aver-been prepared in accordance with accounting principles generally accepted inage sales floor space per store increased 56 square meters, or 11.7%, to 535 squareJapan. In addition, to reflect the start of operations at our first consolidated

meters.

subsidiary, FAST RETAILING (U.K.) LTD., in August 2001, we have presented
consolidated financial statements this year, and will continue to do so henceforth.

Stores openings and closures in Japan
2002

2001

2000

1999

1998

Basic Strategy

Stores opened ................................. 77
Stores closed ................................... (26)Net increase of stores ................... 51

111
(25)
86

67
(3)
64

38
(6)
32

78
(18)
60

We will aggressively open new stores, with a view to establishing a 1,000-store

Note: The above figures are for direct-run stores only.

2002

2001

2000

1999

1998

11
28
6
5
0
1
0
51

7
54
9
11
3
1
1
86

5
41
5
10
1
0
2
64

4
16
2
10
1
(1)
0
32

15
9
5
9
3
8
11
60

STORE NETWORK

network in Japan within the next several years. These efforts will not simply involve
expanding our network. Our aim is for each store to be the number-one store in its

Net increase in stores in Japan by region

area. To achieve this we will increase the size of stores so that they can handle our
expanded line-ups such as women’s clothing, children’s clothing, and baby-wear.
This will entail opening large-type stores with sales floor space of approximately 800
square meters, rather than the conventional stores of 500 square meters that wehave opened in the past. We will increase the ratio of large-type stores in our networkby closing stores under 500 square meters as part of our scrap-and-build strategy.
During the year under review, we changed our store opening strategy. Up until theprevious fiscal year—UNIQLO’s phase of rapid growth—we focused on opening

Hokkaido–Tohoku ............................
Kanto ...............................................
Chubu..............................................
Kansai..............................................
Chugoku ..........................................
Shikoku............................................
Kyushu–Okinawa .............................
Total .............................................

Note: The above figures are for direct-run stores only.

stores in urban areas where we already had stores to ease customer crowding atthese outlets. However, during the year under review, we adopted a strategy of mainly

Breakdown of Total Storesby Region

Total Number of Storesopening stores in suburban areas where UNIQLO had yet to establish a presence.
In addition, our overseas expansion continues. In September 2001, we began
operations in the United Kingdom and in September 2002, we opened our first600

UK: 15
Hokkaido–Tohoku: 49

500

UNIQLO stores in the People’s Republic of China.
Kanto: 225

400

Store Openings and Closures

Japan: 570

300

Chubu: 85

In Japan, we opened 77 stores and closed 26 during the year under review, giving
us 558 direct-run stores and 12 franchises, or a total of 570 stores at fiscal yearend. Overseas, we opened four stores in London in September 2001. We subse-

200

Kansai: 103

100

Total Stores
585

quently opened a further 11 stores in the United Kingdom and had a total of 15
stores overseas at fiscal year-end.

0
FY

’98

Chugoku: 31
Shikoku: 17
Kyushu–Okinawa: 60(As of August 31, 2002)

’99

’00

’01

’02

19

RESULTS OF OPERATIONS

addition, sales of our women’s clothing category, which was the driving force

Net Sales

behind our rapid growth in the previous fiscal year and accounts for 22.1% of our

For the fiscal year ended August 31, 2002, net sales decreased ¥74.4 billion, or

sales, also recorded a 23.5% decrease. These disappointing results were due to

17.8%, to ¥344.2 billion. Despite new store openings, which gave a net increase of

our overemphasis on basic clothing products. Going forward, we will offer more

51 stores at year-end, domestic sales were down 18.4% compared to the previous

fresh products for each retail season by developing fashionable basic clothing

year, to ¥341.6 billion. This was due to a 28.6% fall in sales in our existing stores,

products.

caused by a 24.7% decrease in the number of customers visiting our stores and a
5.2% drop in average sales per customer. This decline in customer numbers re-Sales by product category

customer was mainly the result of price discounts required for inventory adjustments, which lowered the price of individual items. The average net sales per store
were down 26.1%, from ¥0.8 billion in the previous year, to ¥0.6 billion. Starting in
September 2001, our first year of operations in the United Kingdom recorded net
sales of ¥2.5 billion.
Sales by Product Category
With the exception of our outerwear category, which posted solid results in the firsthalf of the fiscal year under review, sales of all other categories were below thelevels of the previous fiscal year. Sales of our cut & sewn category, which includes
fleeces and T-shirts and represents 25.2% of our sales, saw a 20.8% downturn. In

2001

2000

Children’s clothing ....................................... ¥19,818
Women’s clothing........................................
76,077National brand.............................................
–
Outerwear ...................................................
26,017
Sweaters .....................................................
15,665
Cut & sewn..................................................
86,666
Shirts...........................................................
22,934
Slacks (pants) ..............................................
32,783
Accessories.................................................
59,182
Subtotal ................................................... 339,142
Products supplied to franchise stores ..........
3,676
Administrative charges ................................
1,087
Fees from in-store alterations ......................
266
Net sales.................................................. ¥344,171¥23,701
99,411–
24,79918,498109,495
28,162
36,94372,539413,548
4,280
584
149
¥418,561¥14,929
51,272
83
15,302
10,911
54,203
18,54822,65637,981
225,885
2,689
352
60
¥228,986

Notes: 1.
2.
3.
4.

Year-on-Year Sales Change
for Existing Stores in JapanNet Sales(Billions of yen)
500

200

Millions of yen
2002

flected the diminishing appeal of our products. The decrease in average sales per

Figures for products supplied to franchise stores represent sales of merchandise to franchises.
Administrative charges are royalty income received from franchises.
Fees from in-store alterations comprise income from fitting and mending, such as hemming.
The above figures do not include consumption tax.

(%)

Gross Profit Margin
400

The gross profit margin was down 4.0 percentage points, to 43.7%. In the first half

150of the year, the gross profit margin fell 4.7 percentage points compared to the same
300

period of the previous fiscal year, to 44.3%. This decline was due to sales that were100

substantially lower than we had expected, which forced us to discount prices to200

dispose of surplus inventory. In the second half, although we downwardly revised
50

sales targets and reduced initial production volumes, the gross profit margin deterio-

100

rated 3.6 percentage points year-on-year, to 42.8%. This was primarily due to a
0
FY

20

’98

’99

’00

’01

’02

0
FY

’98

’99

’00

’01

’02

strong tendency for customer spending to concentrate on limited-period-discountproducts, as well as a stepping up of the pace of summer clothing inventory dis-Breakdown of SG&A expenses

posal to avoid carrying over stock to the next season.

2002
Millionsof yen

% of
sales

2001
%
changeMillionsof yen

% of
sales

2000
%
changeMillionsof yen

% of
sales

%
changeSG&A Expenses

Personnel ............ ¥36,452 10.6% –3.8% ¥37,891

9.1% +79.3% ¥21,128

9.2% +86.8%

SG&A expenses were up ¥2.2 billion, or 2.3%, to ¥100.0 billion. This increase,

Advertisting andpromotion cost...

19,6705.7+3.1

19,083

4.6+90.2

10,036

4.4+51.3

Rents ..................

21,754

6.3+21.7

17,872

4.3+72.7

10,347

4.5+29.4

together with a significant fall in net sales, led to a deterioration of 5.7 percentage
points in the ratio of SG&A expenses to net sales, to 29.1%. Personnel costs were
down ¥1.4 billion, to ¥36.5 billion; however, the ratio to net sales decreased 1.5

Depreciation andamortization .......

1,931

0.6

+22.9

1,571

0.4

+95.0

806

0.4

+8.7

percentage points, to 10.6%. In addition, despite decreased net sales, advertising

Others .................

20,1805.9–5.4

21,324

5.0 +123.3

9,550

4.2

+84.4

and promotion costs were ¥19.7 billion—approximately the same level as the

Total.................... ¥99,987 29.1% +2.3% ¥97,741 23.4% +88.4% ¥51,867 22.7% +62.8%

previous fiscal year. In our view, a reduction in advertising and promotion at a time
when sales were in a downward phase would have risked triggering further falls in

Operating Income and Net Income

sales. However, we will consider reassessing the cost-effectiveness of our spending

Operating income decreased 50.6%, to ¥50.4 billion, or 14.6% of net sales. In

on advertising and promotion, while paying close attention to sales trends. Rents

addition, income before income taxes was down 50.8%, to ¥50.4 billion. Income

rose ¥3.9 billion, to ¥21.8 billion, due to costs associated with new store openings

taxes were ¥22.6 billion, compared with ¥43.3 billion in the previous fiscal year. As

and the scrap-and-build strategy aimed at enlarging existing stores.

a result, net income decreased 52.9%, to ¥27.9 billion, or 8.1% of net sales. ROA
was 12.1% and ROE was 23.2%.
LIQUIDITY AND FINANCIAL CONDITION
Assets, Liabilities, and Shareholders’ Equity
In the consolidated balance sheets, while fixed assets and shareholders’ equity

Gross Profit Margin

Operating Income(%)
50(Billions of yen)120

increased, current assets and current liabilities fell sharply. Consequently, total
assets decreased ¥38.8 billion, or 15.6%, to ¥210.9 billion.
Total current assets were down ¥45.8 billion, or 21.6%, compared to theprevious fiscal year, to ¥166.6 billion. Cash and marketable securities at year-end

100

decreased ¥50.1 billion compared to the previous year-end, to ¥107.3 billion. This45

80

was primarily due to the payment of ¥52.1 billion in income taxes and ¥12.4 billion
used in stock buyback operations for 2 million shares in January and February

60

2002. Although our store network increased by 51 stores, inventory levels remained
40

40

approximately the same, edging up ¥0.6 billion from the previous year-end, to¥31.0 billion. This was mainly due to the steady progress we made in inventory

20

adjustments for summer products and our reduction of initial production volumes
0
FY

’98

’99

’00

’01

’02

0
FY

’98

’99

’00

’01

’02

for the fall/winter season.
21

Total current liabilities decreased ¥43.0 billion, or 34.2%, to ¥82.6 billion. This

¥19.4 billion net cash used in operating activities. Since the amount of interim income

was attributable to a ¥15.4 billion fall in accounts payable, to ¥48.1 billion,

taxes paid was determined based on the Company’s profit levels in the previous year,

associated with lower sales. As a result, the current ratio was 201.7%, comparedexcess income taxes were paid due to the substantial decrease in the Company’swith 169.2% in the previous fiscal year.

income during the year under review. We therefore anticipate that our income tax bur-Meanwhile, net property and equipment rose ¥2.6 billion, or 19.7%, to ¥15.9

den will be reduced considerably in the fiscal year ending August 31, 2003.

billion, which was mainly due to a ¥3.7 billion rise in buildings and structures. Invest-

Net cash used in investing activities was ¥9.9 billion, primarily associated with in-ments and other assets were up ¥3.6 billion, or 15.2%, to ¥27.6 billion, which was

vestments of ¥1.2 billion in our subsidiary in China and investments of ¥10.4 billion

primarily attributable to increased lease deposits and construction fund receivables.

for store openings.

These increases were associated with 92 new store openings in Japan and the

In cash flows from financing activities, net cash used in financing activities wasUnited Kingdom. Despite the purchase of ¥12.4 billion of treasury stock, shareholders’¥20.4 billion, due to repayments of long-term debt amounting to ¥3.0 billion,

equity was up ¥7.2 billion, or 6.1%, to ¥123.6 billion, as a result of a ¥20.1 billion

purchase of treasury stock of ¥12.4 billion, and dividends paid of ¥6.7 billion. As arise in retained earnings. Consequently, the stockholders’ equity ratio rose fromresult, cash and cash equivalents at end of year decreased ¥50.1 billion, to ¥107.3

46.6% in the previous fiscal year, to 58.6%.

billion.

Further, the Company implemented a two-for-one stock split on April 19, 2002,
for its shareholders as of the end of February 2002, which resulted in a total of

DIVIDEND POLICY

106,074 thousand shares issued at year-end.

Until the previous fiscal year, our dividend payout ratio was approximately 10%. Ourbasic dividend policy is to enhance this to more than 15% from the fiscal year ended

Cash Flows

August 31, 2002. We paid a dividend of ¥20 per share for the second half of the

In cash flows from operating activities, although income before income taxes wasyear ended August 31, 2002. As a result, dividends paid per share for the full year

¥50.4 billion, income taxes paid of ¥52.1 billion and other cash outflows resulted indecreased by ¥5 compared to the previous fiscal year, to ¥55 (following adjustment

Total Assets

Shareholders’ Equity(Billions of yen)
300

(Billions of yen)
150

(%)
90

200

100

60

100

0
FY

50

’98

’99

’00

’01

’02

0
FY

Dividend Payout Ratio(Billions of yen)
160

(%)
20

120

15

80

10

40

5

30

0

0
’98

’99

’00

Equity Ratio (right scale)

22

Cash and Cash Equivalents

’01

’02

FY

’98

’99

’00

’01

’02

0
FY

’98

’99

’00

’01

’02

for stock split). The nonconsolidated payout ratio improved 7.0 percentage points, toConsolidated outlook for fiscal year ending August 31, 2003

17.7%. Furthermore, for the year ending August 31, 2003, we anticipate a dividend

AnnualYear-on-year% change

First
half

Year-on-year% change

Secondhalf

Year-on-year% change

Net sales ..................... ¥309.5 –10.1%
Gross profit.................. 139.1–7.5
SG&A expenses........... 101.8+1.8
Operating income ........
37.3 –26.0
Net income .................. ¥ 20.2 –27.5%
Store openings(net increase) .............. 113 (74)¥159.9
70.4
52.3
18.1
¥ 9.6

–21.9%
–22.4
0.0
–52.8
–55.7%¥149.6
68.7
49.5
19.2
¥ 10.6

+7.4%
+11.5
+3.7
+59.5
+69.2%

Billions of yen

payout of ¥40 per share and a payout ratio of 17.0%.
OUTLOOK
For the fiscal year ending August 31, 2003, in addition to FAST RETAILING (U.K.),
two more subsidiaries—FAST RETAILING (JIANGSU) APPAREL and FR FOODS—
will be included in consolidation. FAST RETAILING (JIANGSU) APPAREL opened

53 (29)60 (45)two stores in Shanghai in September 2002 and will open a further five stores during
the current fiscal year for a total of seven stores. FR FOODS was established in
September 2002 to develop our food business and began full-fledged operations
from November 2002. For the fiscal year 2003, we forecast net sales of ¥309.5
billion, operating income of ¥37.3 billion, and net income of ¥20.2 billion.
Separate forecasts for the parent Company and its subsidiaries are as follows.
With regard to the parent Company, which is responsible for UNIQLO operations inJapan, we anticipate decreased sales and profit, with net sales of ¥300.0 billion,
operating income of ¥41.0 billion, and net income of ¥24.0 billion. However, we
expect that the impact of enhanced merchandise and expansion of our store
network will lead to an increase in sales and profit in the second half. Further, we
forecast unavoidable deficits in the first year of operations of our subsidiaries FR
FOODS and FAST RETAILING (JIANGSU) APPAREL, due to substantial expenseburdens associated with store openings, advertising and promotion, and priorinvestments. While we anticipate that, continuing from the fiscal year under review,
FAST RETAILING (U.K.) will again post a deficit in the current fiscal year, our target

Nonconsolidated outlook for fiscal year ending August 31, 2003
AnnualYear-on-year% change

First
half

Year-on-year% change

Secondhalf

Year-on-year% change

Net sales ..................... ¥300.0 –12.2%
Gross profit.................. 135.0–9.7
SG&A expenses...........
94.0
–1.6
Operating income ........
41.0 –24.1
Net income .................. ¥ 24.0 –23.9%
Store openings(net increase) ..............
94 (55)¥156.5
69.0
48.5
20.5
¥ 12.0–23.3%
–23.6
–3.9
–48.6
–48.0%¥143.5
66.0
45.5
20.5
¥ 12.0

+4.4%
+11.5
+1.0
+45.0
+42.2%

Billions of yen

44 (20)50 (35)

Nonconsolided numerical targets for fiscal year ending August 31, 2005
Billions of yen (% of net sales)
2002

2003

2004

2005

Net sales................ ¥341.6 (100.0) ¥300.0 (100.0) ¥370.0(100.0) ¥450.0 (100.0)
Gross profit ............ 149.5 (43.8) 135.0 (45.0) 170.0 (45.9) 207.0 (46.0)
SG&A expenses ..... 95.5 (28.0)
94.0 (31.3) 110.0 (29.7) 117.0 (26.0)
Operating income... ¥ 54.0 (15.8) ¥ 41.0 (13.7) ¥ 60.0 (16.2) ¥ 90.0 (20.0)

is to strengthen its operating infrastructure and lay the groundwork for a profitableorganization.
Furthermore, from the fiscal year ending August 31, 2004, we aim to put theCompany’s operations in Japan on track for renewed growth. On a nonconsolidated
basis, our targets for the year ending August 31, 2005, are net sales of ¥450.0
billion and operating income of ¥90.0 billion. We also aim to achieve profitable
operations at FAST RETAILING (U.K.) in the fiscal year ending August 31, 2004, andat FAST RETAILING (JIANGSU) APPAREL and FR FOODS in the fiscal year ending
August 31, 2005.
23

CONSOLIDATED BALANCE SHEETSFAST RETAILING CO., LTD. and consolidated subsidiary
August 31, 2002 and 2001

2002

2001

Thousands of
U.S. dollars (Note 2)
2002¥ 67,772
39,491
3,143
(5)
3,138
30,995294
19,2295,678
166,597¥ 46,035
111,344
3,685
(12)
3,673
30,416
2,637
16,4191,904
212,428$ 548,983
319,895
25,460(41)
25,419251,073
2,382
155,763
45,995
1,349,510

Less—Accumulated depreciation .....................................................................................................
Net property and equipment .......................................................................................................

2,052
18,916390
317
21,675(5,765)
15,9102,052
15,228188
502
17,970(4,674)
13,296

16,622
153,228
3,159
2,568
175,577(46,699)
128,878

Intangible assets ...................................................................................................................................

784

56

6,351

Investments and other assets:
Investments in securities (Note 4) ....................................................................................................
Investments in subsidiaries and affiliates .........................................................................................
Lease deposits ..................................................................................................................................
Construction assistance fund receivables (Note 14) .......................................................................
Deferred tax assets (Note 6) .............................................................................................................
Other .................................................................................................................................................
Total investments and other assets ............................................................................................
Total assets ............................................................................................................................

64
1,332
11,156
14,310139
630
27,631¥210,922

72
1,147
9,554
12,876140
197
23,986¥249,766

518
10,79090,369115,917
1,126
5,103
223,823$1,708,562

Millions of yen

ASSETS
Current assets:
Cash (Note 3) .....................................................................................................................................
Marketable securities (Notes 3 and 4) ..............................................................................................
Trade notes and accounts receivable ..............................................................................................
Less—Allowance for doubtful accounts ...........................................................................................
Net trade receivables ..................................................................................................................
Inventories (Note 5) ...........................................................................................................................
Deferred tax assets (Note 6) .............................................................................................................
Forward exchange contracts ............................................................................................................
Other ..................................................................................................................................................
Total current assets .....................................................................................................................

Property and equipment:
Land .................................................................................................................................................
Buildings and structures ...................................................................................................................
Furniture and equipment ...................................................................................................................
Construction in progress ..................................................................................................................

See accompanying notes to consolidated financial statements.

24Millions of yen

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:
Short-term debt (Note 7) ..................................................................................................................
Accounts payable ..............................................................................................................................
Accrued income taxes (Note 6) ........................................................................................................
Net of deferred unrealized gain on forward exchange contracts ....................................................
Other ..................................................................................................................................................
Total current liabilities ..................................................................................................................

2002

¥

2001

—
63,53330,50016,41915,110125,562

Thousands of
U.S. dollars (Note 2)
2002

1,809
48,146—
19,22913,40382,587¥$

14,654390,004—
155,763
108,570668,991

Long-term liabilities:
Long-term debt (Note 8) ...................................................................................................................
Accrued pension liability (Note 9) .....................................................................................................
Other ..................................................................................................................................................
Total long-term liabilities ................................................................................................................
Total liabilities ................................................................................................................................

4,000
—
703
4,703
87,290

7,000
106
622
7,728
133,290

32,402—
5,695
38,097707,088

Shareholders’ equity:
Capital (Note 10) ...............................................................................................................................
Additional paid-in capital ..................................................................................................................
Retained earnings (Note 11) .............................................................................................................
Net unrealized holding gain on securities .........................................................................................
Foreign currency translation adjustments ........................................................................................
Treasury stock, at cost (Note 12) ........................................................................................................
Total shareholders’ equity .............................................................................................................

3,274
11,579124,686
181(67)(16,021)
123,632

3,274
11,579104,570700—(3,647)
116,476

26,521
93,795
1,010,012
1,466
(543)
(129,777)
1,001,474¥210,922¥249,766$1,708,562

Commitments and contingencies (Note 14)

Total liabilities and shareholders’ equity ...................................................................................

25

CONSOLIDATED STATEMENTS OF INCOME
FAST RETAILING CO., LTD. and consolidated subsidiary
For the Years Ended August 31, 2002, 2001 and 2000

2002

Millions of yen
2001

2000

Thousands of
U.S. dollars (Note 2)
2002

Net sales ............................................................................................................................
Cost of sales .....................................................................................................................
Gross profit ...................................................................................................................

¥344,171
193,766
150,405¥418,561
218,739
199,822¥228,986
116,491
112,495$2,787,938
1,569,591
1,218,347

Selling, general and administrative expenses ..............................................................
Operating income .........................................................................................................

99,98750,41897,741102,081

51,86760,628809,939
408,408

677
353
(407)
(65)
(709)
—
—
—
—
179
28
50,446

1,062
—
(137)
(52)
(75)
(439)
—
—
—
93
452
102,533

618
—
(159)
(8)
(42)
—
(509)
(295)
(122)
(109)
(626)
60,002

5,484
2,859(3,297)(527)(5,743)
—
—
—
—
1,451
227
408,635

19,8782,717
22,595¥ 27,851

44,151(810)
43,341¥ 59,192

27,346(1,858)25,488¥ 34,514

161,020
22,009183,029$ 225,606

2002

Yen
2001

2000

U.S. dollars (Note 2)
2002¥ 269.54—¥1,119.28—¥1,303.35—

Other income (expenses):
Interest and dividend income .......................................................................................
Exchange gains .............................................................................................................
Interest expenses .........................................................................................................
Store closure cost ........................................................................................................
Loss on disposal of fixed assets ..................................................................................
Loss on termination of lease ........................................................................................
Loss on sale of marketable securities ..........................................................................
Liquidation loss of a subsidiary ....................................................................................
Retirement benefits for directors ..................................................................................
Other, net .......................................................................................................................
Income before income taxes ..................................................................................
Income taxes (Note 6):
Current ..........................................................................................................................
Deferred ........................................................................................................................
Net income ..............................................................................................................

Per share data:
Net income:Basic ........................................................................................................................
Diluted .....................................................................................................................
See accompanying notes to consolidated financial statements.

26

$2.18
—

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITYFAST RETAILING CO., LTD. and consolidated subsidiary
For the Years Ended August 31, 2002, 2001 and 2000
Millions of yen
CapitalBalance at August 31, 1999 .............................................................
Exercise of warrant ........................................................................
Net income .....................................................................................
Cash dividends (Note 11) ...............................................................
Directors’ bonuses (Note 11) .........................................................
Decrease (increase) in treasury stock (Note 12) ...........................
Balance at August 31, 2000 .............................................................
Cumulative effect of changes in accounting principle ..................
Net income .....................................................................................
Cash dividends (Note 11) ...............................................................
Directors’ bonuses (Note 11) .........................................................
Decrease (increase) in treasury stock (Note 12) ...........................
Balance at August 31, 2001 ..............................................................
Effect of newly consolidated subsidiary ........................................
Net income .....................................................................................
Cash dividends (Note 11) ...............................................................
Directors’ bonuses (Note 11) .........................................................
Net change during the year ...........................................................
Decrease (increase) in treasury stock (Note 12) ............................
Balance at August 31, 2002 .............................................................

¥3,174
100
—
—
—
—
3,274
—
—
—
—
—
3,274
—
—
—
—
—
—
¥3,274

Additional
paid-in capital

Retainedearnings¥11,460119———¥ 18,984—
34,514(1,852)(90)—
51,556—59,192(5,818)(360)—
104,570(354)
27,851(6,732)(649)——¥124,686

11,579—————–
11,579——————¥11,579

Net unrealized
holding gain
on securities

Foreign currencytranslation
adjustments

¥ —
—
—
—
—
—
—
700
—
—
—
—
700
—
—
—
—
(519)
—
¥ 181

¥—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(67)
—
¥(67)

Treasury
stock

¥

—
—
—
—
—
(1,654)(1,654)————(1,993)(3,647)—————(12,374)¥(16,021)

Thousands of U.S. dollars (Note 2)

Balance at August 31, 2001 ..............................................................
Effect of newly consolidated subsidiary ........................................
Net income .....................................................................................
Cash dividends (Note 11) ...............................................................
Directors’ bonuses (Note 11) .........................................................
Net change during the year ...........................................................
Decrease (increase) in treasury stock (Note 12) ...........................
Balance at August 31, 2002 .............................................................

CapitalAdditional
paid-in capital

Retainedearnings$26,521——————$26,521$93,795——————$93,795$ 847,063(2,868)
225,606(54,532)(5,257)——$1,010,012

Net unrealized
holding gain
on securities

Foreign currencytranslation
adjustments$5,670————(4,204)—$1,466

$ —
—
—
—
—
(543)
—
$(543)

Treasurystock$ (29,542)
—
—
—
—
—
(100,235)$(129,777)

See accompanying notes to consolidated financial statements.

27

CONSOLIDATED STATEMENTS OF CASH FLOWSFAST RETAILING CO., LTD. and consolidated subsidiary
For the Years Ended August 31, 2002 and 2001
Thousands of
U.S. dollars (Note 2)

Millions of yen

2002

2001

2002

¥ 50,446¥102,533$ 408,635

Interest and dividend received .............................................................................................................................
Interest paid ..........................................................................................................................................................
Income taxes paid ................................................................................................................................................
Net cash provided by (used in) operating activities ......................................................................................

1,942
(3)
(106)
(677)
407
(95)
—
709
541
(647)
(2,312)(15,367)(1,733)(649)
32,456677(421)(52,073)(19,361)

1,571
(21)
106
(1,062)
137
(87)
85
75
(1,862)(9,770)(512)
20,6994,777(360)
116,309
1,062(139)(36,651)
80,581

15,731(24)(859)(5,484)
3,297
(770)
—
5,743
4,382
(5,241)(18,728)(124,480)(14,038)(5,257)
262,9075,484(3,410)(421,814)(156,833)

Cash flows from investing activities:
Purchase of investment securities .......................................................................................................................
Purchase of property and equipment ..................................................................................................................
Payments for lease deposits ................................................................................................................................
Collections of lease deposits ...............................................................................................................................
Payments for construction assistance fund receivables .....................................................................................
Collections of construction assistance fund receivables ....................................................................................
Purchase of intangible fixed assets .....................................................................................................................
Investments in subsidiaries ..................................................................................................................................
Other, net ..............................................................................................................................................................
Net cash used in investing activities ..............................................................................................................

—(5,151)(2,291)633(2,938)1,505(640)(1,215)170(9,927)(865)(6,456)(3,024)220(3,993)
840
(14)
—
93
(13,199)—(41,725)(18,558)
5,127(23,799)
12,191(5,184)(9,842)
1,377(80,413)

Cash flows from financing activities:
Increase in short-term debt ..................................................................................................................................
Repayments of long-term debt ............................................................................................................................
Purchase of treasury stock ..................................................................................................................................
Proceeds from sales on treasury stock ...............................................................................................................
Dividends paid ......................................................................................................................................................
Other .....................................................................................................................................................................
Net cash used in financing activities ..............................................................................................................
Effect of exchange rate changes on cash and cash equivalents .......................................................................
Net change in cash and cash equivalents .............................................................................................................
Cash and cash equivalents at beginning of year (Note 3) ...................................................................................
Cash and cash equivalent of newly consolidated subsidiary .............................................................................
Cash and cash equivalents at end of year (Note 3) .............................................................................................

1,809(3,000)(12,365)—(6,732)(143)(20,431)(867)(50,586)
157,379
470¥107,263—(3,000)(2,251)258(5,818)(144)(10,955)
1,282
57,70999,670—¥157,379

14,654(24,301)(100,162)—(54,532)(1,159)(165,500)(7,023)(409,769)
1,274,840
3,807$ 868,878

Cash flows from operating activities:
Income before income taxes ................................................................................................................................
Adjustments to reconcile income before income taxes to net cash provided by (used in) operating activities:
Depreciation and amortization .......................................................................................................................
Decrease in allowance for doubtful accounts ...............................................................................................
Increase (decrease) in accrued pension liability ............................................................................................
Interest and divided income ...........................................................................................................................
Interest expenses ...........................................................................................................................................
Exchange gains ..............................................................................................................................................
Write-down of investment securities .............................................................................................................
Loss on disposal of fixed assets ....................................................................................................................
(Increase) decrease in trade receivables .......................................................................................................
Increase in inventories ....................................................................................................................................
Increase in other assets .................................................................................................................................
Increase (decrease) in trade payables ...........................................................................................................
(Decrease) increase in accrued expenses and other liabilities .....................................................................
Bonuses to directors ........................................................................................................................................

See accompanying notes to consolidated financial statements.

28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FAST RETAILING CO., LTD. and consolidated subsidiary

1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

risk of changes in value, with maturities of generally three months or less whenpurchased, to be cash equivalents.

(a) Basis of Presentation

The accompanying consolidated financial statements have been prepared from the(d) Short-Term Investments and Investments in Securities

accounts maintained by Fast Retailing Co., Ltd. (“the Company”) in accordance

Effective September 1, 2000, the Company adopted “Accounting Standards forwith the provisions set forth in the Japanese Commercial Code and in conformity

Financial Instruments” issued by the Business Accounting Deliberation Council.

with accounting principles and practices generally accepted in Japan, and its

Under this standard, securities are to be classified into one of the following three

foreign subsidiary in conformity with those of the country of its domicile. These may

categories and accounted for as follows:

differ in some material respects from accounting principles and practices generally• Securities that the Company held with the objective of generating profits on short-

accepted in countries and jurisdictions other than Japan.
The consolidated financial statements, including the notes to the consolidated

term differences in price are classified as trading securities and measured at fairvalue, with unrealized holding gains and losses included in earnings.

financial statements presented herein have been compiled from the consolidated• Securities that the Company has the positive intent and ability to hold to maturity

financial statements filed with the Ministry of Finance as required by the Security

are classified as held-to-maturity securities and measured at amortized cost.

and Exchange Law of Japan (“the MOF Report”) and certain reclassifications have

• Securities classified as neither trading securities nor held-to-maturity securities are

been made in the MOF Report, and additional information which is not requiredclassified as available-for-sale securities and measured at fair value, with either

under accounting principles generally accepted in Japan is included for the

unrealized holding gains and losses excluded from earnings and reported as net

convenience of readers outside Japan.

unrecognized holding gain (loss) in a separate component of stockholders’ equity
until realized, or with unrealized holding losses included in earnings and unrealized(b) Basis of Consolidation

gains excluded from earnings and reported as unrecognized holding gains in a

The consolidated financial statements include the accounts of the Company andseparate component of stockholders’ equity until realized.

its wholly owned subsidiary, Fast Retailing U.K. Limited (“FRUKL”). FRUKL was

The Company measured available-for-sale securities at fair value and reported

established in June 2000 as a casual clothes retailing company in the U.K. The

unrealized holding gains and losses as “Net unrealized holding gain (loss) on

results of FRUKL have been included in the Company’s consolidated financial

securities” in a separate component of stockholders’ equity. Available-for-salestatements since September 1, 2001. Prior year financial statements were notsecurities without fair values are carried at cost. In computing realized gain or loss,

restated because FRUKL’s results of operations, financial position or cash flows

cost of available-for-sale securities was principally determined by the moving-

did not have a significant impact on the Company’s financial statements. Allaverage method.

the significant intercompany accounts and transactions have been eliminated inconsolidation.

Previously, marketable securities were stated principally at the lower of cost or
market, cost determined by the moving-average method. Investments in other thanmarketable securities were stated at cost.

(c) Cash and Cash Equivalents

As a result of application of this standard, net income for the year ended August

Effective September 1, 2000, the Company adopted “Statement of Cash Flows”

31, 2001 decreased by ¥85 million compared with the previous accounting

issued by the Business Accounting Deliberation Council. For the purpose of thetreatment.

cash flows, the Company considers all highly liquid investments with insignificant

29

(e) Inventories

Deliberation Council. Under this standard, retirement and severance benefits forInventories are stated at cost, cost being determined by specific identification

employees is provided based on the projected benefit obligation and the pension

method.

assets.

(f) Property and Equipment

severance benefits had been made for the estimated accrued liability to which

Property and equipment is stated at cost. Depreciation is computed by theemployees were entitled if they were to voluntarily retire or sever immediately at the

declining-balance method over the following estimated useful lives of the respectivebalance sheet date, and under the funded defined benefit pension plan, annual

assets.

contributions had been charged to income when paid.

Previously, under the unfunded defined benefit pension plans, retirement andBuildings and structures

10 to 50 years

As a result of the application of this standard, operating income and income

Furniture and equipment

5 to 8 years

before income taxes decreased by ¥48 million and ¥106 million compared with theprevious accounting treatment. The transition difference of ¥58 million arising from(g) Leases

the adoption of the new accounting standard is charged to expenses for the year

Under Japanese accounting standards “Accounting for Leases”, finance lease that

ended August 31, 2001.

transfers ownership of the property to the lessee by the end of the lease term shallbe classified as capital lease and shall record a capital lease as an asset and an(j) Foreign Currency Translation

obligation, and other than such finance lease is permitted to classify as an operating

Effective September 1, 2000, the Company adopted the revised “Accounting

lease. The Company classified all other finance leases as operating lease, and lease

Standards for Foreign Currency Transaction” issued by the Business Accounting

expense is charged to expense over the lease term as it becomes payable.

Deliberation Council. Under this standard, foreign currency transactions aretranslated into yen on the basis of the rates in effect at the transaction date or, if(h) Income Taxes

only the relation between foreign currency transactions and related firm forward

Deferred income taxes are accounted for under the asset and liability method in

exchange contracts meets the criteria of hedge accounting as regulated inaccordance with “Accounting Standards for Deferred Income Taxes” issued by the“Accounting Standards for Financial Instruments”, those covered by firm forward

Business Accounting Deliberation Council. Under the asset and liability method of

exchange contracts can be translated at such contract rates. At year-end,

the standard, deferred tax assets and liabilities are recognized for the expected

monetary assets and liabilities denominated in foreign currencies are translated into

future tax consequences attributable to differences between the financial statement

yen at the rates of exchange in effect at the balance sheet date, except for those,carrying amount of existing assets and liabilities and their respective tax bases.

as described above, translated at related contract rates. Gains or losses resulting

Deferred tax assets and liabilities are measured using enacted tax rates expected tofrom the translation of foreign currencies, including gains and losses on settlement,

apply to taxable income in the years in which those temporary differences areare credited or charged to income as incurred.

expected to be recovered or settled.

The financial statements of the consolidated foreign subsidiaries are translated
into the reporting currency of yen as follows: all assets and liabilities are translated(i) Retirement and Severance Benefits

at the rates of exchange in effect at the balance sheet date; stockholders’ equity

Effective September 1, 2000, the Company adopted “Accounting Standards foraccounts are translated at historical rates; income and expenses are translated at

Retirement and Severance Benefits” issued by the Business Accounting

an average of exchange rates in effect during the year; and a comprehensive

30

adjustment resulting from translation of assets, liabilities and stockholders’ equity is(l) Net Income Per Sharereported as “Foreign currency translation adjustments”, a separate component of

Net income per share is based on the weighted average number of shares ofstockholders’ equity.

common stock outstanding during the respective years. On a diluted basis, bothPreviously, foreign currency transactions were translated into yen on the basis of

net income and shares outstanding are adjusted to assume the exercise of warrant.

the rates in effect at the transaction date, except for those covered by firm forward
exchange contracts which were translated at such contract rates. At year-end,(m) Reclassifications

monetary current assets and current liabilities denominated in foreign currencies

Certain reclassifications have been made in prior years’ financial statements towere translated into yen at the rates of exchange in effect at the balance sheet date,conform to classification used in the current year.

and other monetary assets and liabilities denominated in foreign currencies weretranslated into yen at historical rates, however, material unrealized translation losses
on other monetary assets and liabilities had to be computed using the rates of
exchange in effect at the balance sheet date. The adoption of this standard did not

BASIS
OF FINANCIAL
STATEMENT
TRANSLATION
of Financial
Statement
Translation
2Basishave a material effect on net income for the year ended August 31, 2001.
The accompanying consolidated financial statements are expressed in yen and,(k) Derivative Financial Instruments

solely for the convenience of the reader, have been translated into U.S. dollars at

Effective September 1, 2000, the Company adopted “Accounting Standards forthe rate of ¥123.45=$1, the approximate exchange rate prevailing on the Tokyo

Financial Instruments” issued by the Business Accounting Deliberation Council.

Foreign Exchange Market as of August 31, 2002. This translation should not be

Under this standard, in principle, net assets and liabilities arising from derivative

construed as a presentation that any amounts shown could be converted into U.S.

financial transactions are measured at fair value, with unrealized gain or loss

dollars.

included in earnings. Hedging transactions, that meet the criteria of hedge
accounting as regulated in “Accounting Standards for Financial Instruments,” areaccounted for using deferral hedge accounting, which requires the unrealized gains
or losses to be deferred as a liability or asset until gains or losses relating to the

CASH
EQUIVALENTS
3Cash
andAND
CashCASH
Equivalents

hedge is recognized.
Previously, forward exchange contracts were accounted for as foreign currencytransactions. Such contracts were translated at contract rates, and interest rate

Cash and cash equivalents as of August 31, 2002 and 2001 consist of thefollowing:

swap transactions were accounted for as if interest rates under the interest rate
swap transactions were originally applied to underlying borrowings and debentures.
As a result of the application of this standard, there was no effect on net income forthe year ended August 31, 2001.

Millions of yen
2002
2001

Cash ........................................................................ ¥ 67,772
Marketable securities ...............................................
39,491
Cash and cash equivalents ...................................... ¥107,263¥ 46,035
111,344¥157,379

Thousands of
U.S. dollars
2002$548,983
319,895$868,878

31

Investments
and Investments
in Securities IN SECURITIESSHORT-TERM
INVESTMENTS
AND INVESTMENTS
4Short-term

Taxes
INCOMETAXES
6IncomeInvestments in securities as of August 31, 2002 and 2001 are classified as

The Company and subsidiary are subject to a number of taxes based on income.

available-for-sale securities. A summary of cost, unrealized holding gross gains,

The aggregate normal tax rate for the Company was approximately 41.8% for the

unrealized holding gross losses and aggregate fair value by major type of securities

years ended 2002, 2001 and 2000.

is as follows:

Reconciliations between the normal income tax rate and the effective income tax
rate as a percentage of income before income taxes are as follows:
Millions of yen
2002
Cost

Available-for-salesecurities:
Equity securities ¥63
Mutual funds
39,491¥39,554

2001

Gross
gains

Gross
losses

¥7
–
¥7

¥(6)
–
¥(6)

Aggregate
fair value

Cost

¥
64 ¥
63
39,491 111,344¥39,555 ¥111,407

Gross
gains

Gross
losses¥10–¥10Aggregate
fair value¥(1) ¥
72– 111,344¥(1) ¥111,416

Normal income tax rate ............................................
Change in valuation allowance ..............................
Other.....................................................................
Effective income tax rate ...........................................

2002

2001

2000

41.8%
2.1
0.9
44.8%

41.8%
–
0.5
42.3%

41.8%
–
0.7
42.5%

The tax effects of temporary differences that give rise to significant portions of the

Cost

Available-for-salesecurities:
Equity securities $510
Mutual funds
319,895$320,405

deferred tax assets and liabilities as of August 31, 2002 and 2001 are presented

Thousands of U.S. dollars
2002
Gross
Gross
Aggregate
gains
lossesfair value

$57
–
$57

below:
Millions of yen
2002
2001

$(49) $
518
– 319,895$(49) $320,413

Total gross deferred tax assets:
Inventories.............................................................
Accrued business tax ............................................
Accrued bonus......................................................
Operating loss carryforward ..................................
Other.....................................................................

INVENTORIES
5Inventories

Valuation allowance...................................................

Inventories as of August 31, 2002 and 2001 are summarized as follows:

Total gross deferred tax liabilities:
Refundable business tax .......................................
Net unrealized holding gain on securities ...............

Merchandise ............................................................
Supplies ...................................................................

32

Millions of yen
2002

2001

Thousands of
U.S. dollars
2002¥30,699296¥30,995¥30,097319¥30,416$248,676
2,397$251,073

Net deferred tax assets .............................................

Thousands of
U.S. dollars
2002

¥

233
–
291
1,199
217
1,940
(1,199)
741

¥ 200
2,619
229
–
231
3,279
–
3,279

$ 1,887
–
2,357
9,713
1,759
15,716(9,713)
6,003

(178)
(130)
(308)
¥ 433

–
(502)
(502)
¥2,777(1,442)(1,053)(2,495)$ 3,508

Net deferred tax assets as of March 31, 2002 and 2001 are reflected in theand Severance
Benefits BENEFITSRETIREMENT
AND SEVERANCE
9Retirement

consolidated balance sheets under the following captions:
The Company had a defined benefit pension plan (tax qualified pension plan) toMillions of yen
2002
2001

Deferred tax assets — current ..................................
Deferred tax assets — noncurrent ............................
Net deferred tax assets ............................................

¥294
139
¥433

¥2,637140¥2,777

Thousands of
U.S. dollars
2002

provide retirement and severance benefits to substantially all employees. At August$2,382
1,126$3,508providing a defined contribution plan. Defined benefits were not provided under the31, 2002, the Company terminated a defined benefit pension plan throughsuccessor plan.
The funded status of the Company’s pension plan as of August 31, 2001 wassummarized as follows:
Millions of yen
2001

Debt DEBT
SHORT-TERM
7Short-Term
Unsecured bank borrowing as of August 31, 2002 amounted to ¥1,809 million

Projected benefit obligation ..........................................................
Plan assets at fair value ................................................................
Amount recognized in the consolidated balance sheet ..................

¥(488)
382¥(106)($14,654 thousand).
The weighted average interest rate on short-term debt outstanding as of August
31, 2002 was 4.29%.

Net periodic benefit cost for the defined benefit pension plan for the years ended
August 31, 2002 and 2001 consists of the following:
Millions of yen
2002
2001

Service cost .............................................................
Interest cost .............................................................
Expected return on plan assets ................................
Amortization of transition obligation ..........................
Amortization of actuarial loss ....................................
Net periodic pension cost .....................................

Debt DEBT
LONG-TERM
8Long-termLong-term debt is summarized as follows:
Millions of yen
2002
2001

Unsecured loans from Japanese banks
1.88% to 1.95% interest, due 2003 .......................

¥4,000¥7,000Thousands of
U.S. dollars
2002$32,402

¥126
15
(8)
–
58
¥191

¥98
11
(6)
58
35
¥196

Thousands of
U.S. dollars
2002$1,021
122
(65)
–
469
$1,547The entire transition difference of ¥58 million arising from the adoption of the new
accounting standard was amortized in the year ended August 31, 2001, andamortized cost was included in “Other income (expenses)—Other.”

The aggregate annual maturities of long-term debt after August 31, 2002 are as
follows:
Year ending August 31

2003

Thousands ofMillions of yen U.S. dollars¥4,000$32,402

33

Actuarial assumptions used to determine costs and projected benefit obligations

Legal
Reserveand Dividends
LEGAL
RESERVE
AND DIVIDENDS
11

are principally as follows:
The JCC had provided that an amount equal to at least 10% of appropriations of
Discount rate ............................................................
Expected rate of return on plan assets ......................

2002

2001

3.0%
2.0%

3.0%
2.0%

retained earnings to be paid in cash, such as cash dividends and directors’
bonuses, be appropriated as a legal reserve until such reserve equals 25% of statedcapital. The legal reserve is not available for dividends but may be used to reduce acapital deficit by resolution of the shareholders’ meeting or may be transferred tocapital by resolution of the Board of Directors.

CommonStock
COMMON
STOCK
10

Effective October 1, 2001, the JCC was amended to require an amount of equal
to at least 10% of appropriations of retained earnings to be paid in cash be

The Japanese Commercial Code (JCC) had required that at least 50% of the issue

appropriated as a legal reserve until the total of additional paid-in capital and legal

price of new shares, with minimum of the par value thereof, were designated as

reserve equals 25% of stated capital. In addition to reduction of a deficit andstated capital. Proceeds in excess of the amount designated as stated capital aretransfer to stated capital, either additional paid-in capital or legal reserve may becredited to additional paid-in capital.

available for dividends by resolution of the shareholders’ meeting to the extent that

Effective October 1, 2001, the JCC was amended to eliminate the provision ofcommon stock par value resulting in all common stock being recorded with no par

the amount of total additional paid-in capital and legal reserve exceeds 25% ofstated capital.

value. Under the amended JCC, at least 50% of the issue price of new shares isCash dividends and appropriations to the legal reserve charged to retained

designated as stated capital, and proceeds in excess of the amount designated as

earnings during the years ended August 31, 2002 and 2001 represent dividends

stated capital are credited to additional paid-in capital.

and directors’ bonuses paid out during those periods and the related appropriations

The Company has authorized for issuance 200 million shares of common stock

to the legal reserve. The accompanying consolidated financial statements do notwith no par value as of August 31, 2002. Issued and outstanding shares andinclude any provision for the semiannual dividend of ¥20 ($0.16) per share,change in shares for the years ended August 31, 2002, 2001 and 2000 are

aggregating ¥2,034 million ($16,476 thousand), or related appropriations forsummarized as follows.

directors’ bonuses amounting to ¥145 million ($1,175 thousand). These
appropriations were approved at the general shareholders’ meeting held on
Issued andoutstanding
sharesBalance as of August 31, 1999 .....................................................................
Exercise of warrant ....................................................................................
Balance as of August 31, 2000 .....................................................................
Issued upon stock split ..............................................................................
Balance as of August 31, 2001 .....................................................................
Issued upon stock split ..............................................................................
Balance as of August 31, 2002 .....................................................................

34

26,461,005
57,40926,518,414
26,518,414
53,036,828
53,036,828
106,073,656

November 27, 2002 in respect of the year ended August 31, 2002.

Treasury
StockSTOCKTREASURY
12

Stock
OptionPlan PLANSTOCK
OPTION
13

The JCC had imposed certain restrictions on acquisition and disposal of treasury

The shareholders’ meeting held on November 26, 1999 approved that thestock.

Company may purchase 50,600 shares of common stock within the period from

Effective October 1, 2001, the JCC eliminated the provisions of these restrictions

November 26, 1999 to the closing of the next ordinary shareholders’ meeting withand allowed repurchase of treasury stock to the extent of distributable funds approp-

an aggregate purchase cost cap of ¥2,500 million for the stock option plan. Certain

riated by resolution of the shareholders’ meeting.

officers and certain other employees may be granted options to purchase common

In addition, the shareholders may request the Company to repurchase theirstock at an exercise price of lower of 102.5% of the average purchase cost or

shares less than a trading unit (100 shares) upon request pursuant to the provisionmarket price at the grant date. Eligible persons can exercise 50% of the grantedof the JCC. The shares less than a trading unit cannot be publicly traded and have

options from November 27, 2001 to November 26, 2002 and can exercise 100%

not been given to exercise its voting rights.

from November 27, 2002 to August 31, 2004. In accordance with the shareholders’approval, the Company purchased 48,200 shares for ¥1,654 million in 2000.

The change in shares of treasury stock for the years ended August 31, 2002 and2001 are summarized as follows.

The shareholders’ meeting held on November 28, 2000 approved that theCompany may purchase 88,500 shares of common stock within the period from
November 28, 2000 to the closing of the next ordinary shareholders’ meeting with

SharesBalance as of August 31, 1999 ................................
–
Repurchase of common stock .............................
50,300Treasury stock issued ...........................................
(2,100)
Balance as of August 31, 2000 ................................
48,200
Repurchase of common stock .............................
88,200Treasury stock issued ...........................................
(8,800)
Two-for-one common stock split ..........................
48,200
Balance as of August 31, 2001 ................................ 175,800
Repurchase of common stock ............................. 2,002,479
Two-for-one common stock split .......................... 2,176,963
Balance as of August 31, 2002 ................................ 4,355,242

Millions of yen

¥

–
1,733
(79)
1,654
2,169
(176)
–
3,647
12,374–
16,021Thousands of
U.S. dollars$–

an aggregate purchase cost cap of ¥4,000 million for the stock option plan.
Certain officers and certain other employees may be granted options to purchasethe common stock at an exercise price of lower of 102.5% of the average purchasecost or market price at the grant date. Eligible persons can exercise 100% ofgranted option from November 29, 2002 to August 31, 2005. In accordance withthe shareholders’ approval, the Company purchased 88,200 shares for ¥2,169

29,542100,235–
129,777

million in 2001.
At the shareholders’ meeting held on November 29, 2001, a stock option plan
was approved. Under this plan, certain directors and certain employees may be
granted option to purchase common stock of 106,100 shares in total at an exercise
price of higher of 102.5% of market price at the date of grant or the average market
price of the preceding month. Those eligible can exercise the option when themarket price exceeds 150% of the exercise price for at least 20 business days
within the term of exercise, which is from November 30, 2003, to August 31, 2006.

35

Commitments
and Contingencies
COMMITMENTS
AND CONTINGENCIES
14

Financial
Instruments
FINANCIALINSTRUMENTS
16

The Company has the following contingent liabilities as of August 31, 2002.

The Company is exposed to market risks arising from fluctuations in foreign
currency exchange rates. The Company entered into forward exchange contracts

Year ending August 31, 2002

Loan guarantees for:Affiliates........................................................................................
Employees’ benefit society ...........................................................

Thousands ofMillions of yen U.S. dollars

¥19
11

$154
89

for the purpose of hedging these risk exposures. Forward exchange contracts are
utilized to manage foreign currency exchange rate risk from receivables, payables
and forecasted transactions which are denominated in foreign currency.
The Company has no derivative financial instruments for trading purposes. In

Construction assistance fund receivables represent an interest free loan granted

addition, the Company may be exposed to losses in the event of nonperformance

to real estate owners to construct stores that will be leased by the Company. The

by counterparties to financial instruments, but it is not expected that any

Company transferred the construction assistance fund receivables to a trust bankcounterparties will fail to meet their obligations, because most of the counterparties

during 1999. This transfer contains a recourse provision that the Company has an

are authentic financial institutions. The Company has also developed hedging

obligation to repurchase the transferred construction assistance fund receivables if

policies to control various aspects of derivative financial transactions including

the landowner fails to repay. The total outstanding transferred construction

authorization levels, transaction volumes and counterparty credit guidelines.

assistance fund receivables to a trust bank amounted to ¥1,829 million ($14,816
thousand) as of August 31, 2002.

LEASES
Leases15

Lease payments relating to finance lease accounted for as operating lease for theyears ended August 31, 2002, 2001 and 2000 amounted to ¥3,866 million($31,316 thousand), ¥2,717 million and ¥1,626 million, respectively.
Future minimum lease payments relating to finance lease accounted for as
operating lease as of August 31, 2002 are as follows:Year ending August 31

2003 ..........................................................................................
Thereafter ...................................................................................

36

Millions of yen¥ 3,968
10,06914,037

Thousands of
U.S. dollars$ 32,143
81,563
113,706

INDEPENDENT AUDITORS’ REPORTThe Board of Directors and Shareholders
FAST RETAILING CO., LTD.

We have audited the consolidated balance sheets of FAST RETAILING CO., LTD. as of August 31, 2002 and 2001, andthe related consolidated statements of income and shareholders’ equity for each of the three years in the period ended
August 31, 2002, and the consolidated statements of cash flows for each of the two years in the period ended August
31, 2002, all expressed in yen. Our audits were made in accordance with auditing standards, procedures and practices
generally accepted and applied in Japan and, accordingly, included such tests of the accounting records and such otherauditing procedures as we considered necessary in the circumstances.
In our opinion, the accompanying consolidated financial statements, expressed in yen, present fairly the financial
position of FAST RETAILING CO., LTD. and its subsidiary as of August 31, 2002 and 2001, and of the results of theiroperations for each of the three years in the period ended August 31, 2002, and their cash flows for each of the twoyears in the period ended August 31, 2002, in accordance with accounting principles generally accepted in Japan.
As described in Note 1 to the accompanying consolidated financial statements, FAST RETAILING CO., LTD. has
adopted new accounting standards for pension plan, financial instruments and foreign currency transactions in the
preparation of the consolidated financial statements for the year ended August 31, 2001.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended August
31, 2002 are presented solely for the convenience of the reader. Our audit also included the translation of yen amounts
into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 2 to thefinancial statements.

Tokyo, Japan
November 27, 2002

See Note 1 to the consolidated financial statements which explains the basis of preparing the consolidated financial statemens of FAST RETAILING CO., LTD.
under Japanese accounting principles and practices.

37

INVESTOR INFORMATION(As of August 31, 2002)

Adjusted Stock Price

Stock Information(Yen)

Number of shares authorized ............................................................. 200,000,000
Number of issued and outstanding shares ......................................... 106,073,656
Number of shareholders (include treasury stocks) ..............................
14,609* A stock split on a two-for-one basis was carried out on April 19, 2002, for shareholders as ofFebruary 28, 2002.

9,000

8,455
7,450

7,210
6,750

6,600

6,410
6,000

5,675
5,225

5,000

3,940

Principal Shareholders
3,190
Number ofsharesTadashi Yanai ............................................................... 28,297,284
Kazumi Yanai................................................................ 9,531,808
Koji Yanai .................................................................... 8,390,600
The Chase Manhattan Bank, N.A. London.................... 4,548,640
Japan Trustee Services Bank, Ltd. (Trust Account)....... 4,453,300
FAST RETAILING CO., LTD. ......................................... 4,355,242
State Street Bank and Trust Company ......................... 3,206,942
The Master Trust Bank of Japan, Ltd. (Trust Account) .. 2,953,700
UFJ Trust Bank Limited (Trust Account “A” )................. 2,916,900
Teruyo Yanai ................................................................ 2,327,848

Percentage of
total shares in issue

26.68%
8.99
7.91
4.29
4.20
4.11
3.02
2.78
2.75
2.19

3,000

3,440

3,550

3,420

3,330

3,170

2,595

2,430

2,550

5

6

7

3,150

2,905
2,280

2,270

2

3

2,960

0

2001.910

11

12

2002.1

4

8

Trading Volume
Shares (Thousands)
30,00029,201

20,000Shareholder Breakdown
Number ofshareholders

Individual and others .................................. 13,945
Foreign investors ........................................
319
Other financial institutions ...........................
109
Companies and corporations .....................
186
Securities companies .................................
50
Total ....................................................... 14,609

Numbr of shares(Thousands)

58,832
22,614
21,894777
1,957
106,074

Percentage of
total shares in issue

55.47%
21.31
20.65
0.73
1.84
100.00%12,195
10,047

9,873
10,000 8,545

8,191
6,624

7,844

7,450

6,667

6,559

4,282

0

2001.910

11

12

2002.1

2

3

4

5

6

7

* A stock split on a two-for-one basis was carried out on April 19, 2002, for shareholders as ofFebruary 28, 2002.

38

8

CORPORATE INFORMATION

Corporate Data (As of August 31, 2002)

Board of Directors and Auditors (As of November 30, 2002)

FAST RETAILING CO., LTD.

Tadashi Yanai

Head Office717-1 Oaza Sayama, Yamaguchi City,
Yamaguchi 754-0894, Japan

Chairman & Chief Executive Officer

Genichi Tamatsuka
President & Chief Operating Officer

Tokyo Office
Shibuya Mark City West, 12-1, Dogenzaka 1-chome,
Shibuya-ku, Tokyo 150-0043, Japan

Yuji Horibata

EstablishedMay 1, 1963

Nobuo Domae

Paid-in Capital¥3,274 million

Masatoshi Morita

Senior Managing Director

Managing Director (FAST RETAILING (U.K.) LTD. CEO)

Regular Employees (parent company only)
1,631

Naoki Otoma

Settlement Date
August 31

Makoto Hayashi

Transfer Agent
The Mitsubishi Trust & Banking Corp.
2-11-1, Nagata-cho, Chiyoda-ku, Tokyo 100-8212,
Japan
Number of Shares per Trading Unit
100

Consolidated Subsidiaries (As of November 30, 2002)

Genichi Tamatsuka

Yuji Horibata

Nobuo Domae

Masatoshi Morita

Shuichi Nakajima

Naoki Otoma

Makoto Hayashi

Managing Director & Chief Information Officer

Line of Business
Retail chain operator specializing in in-house designed
casual clothing for men, women, and children of allages. Operates stores under the name of UNIQLO.

Annual Shareholders’ Meeting
End of November

Tadashi Yanai

Shuichi Nakajima
Director

Director

Director (FAST RETAILING (JIANGSU) APPAREL CO., LTD. CEO)Toshiharu Ura
Standing Corporate Auditor

Kiyomi Iwamura
Standing Corporate Auditor

Takaharu Yasumoto
Corporate Auditor

Soroku Matsumoto
Corporate Auditor

FAST RETAILING (U.K.) LTD.
24 Britton Street, London EC1M 5UA, U.K.
FAST RETAILING (JIANGSU) APPAREL CO., LTD.
1 Zhaofeng Road, Kunshan Caoan Development Area,
Jiangsu, China
FR FOODS CO., LTD.
Shibuya Mark City West, 12-1, Dogenzaka 1-chome,
Shibuya-ku, Tokyo 150-0043, Japan
39

www.uniqlo.co.jp/english

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