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Stock of Uniqlo’s Parent Down Most in 9 Weeks After Xinjiang Remarks

(Bloomberg) — Shares of Fast Retailing ( FRCOY ) declined as much as 4.5%, the most since Sept. 30, after a spokesperson said the company is concerned about Chinese demand following comments from its chairman that the retailer is not using cotton from Xinjiang.

Tadashi Yanai said Fast Retailing’s flagship clothing chain Uniqlo does not source cotton from China’s Xinjiang region, where the US has restricted trade over human rights concerns, in a BBC interview last week.

A representative for Fast Retailing told Bloomberg on Nov. 30 that the company was “watching the situation carefully” to see whether Yanai’s remarks would lead to a fall in demand for, or boycott of, its products in China.

Yanai’s comments have “elevated mainland Chinese social media scrutiny” of Uniqlo’s operations in Xinjiang during the label’s peak winter selling period, said Catherine Lim, a senior analyst at Bloomberg Intelligence. “This could prompt the firm to delay the opening of larger-sized stores in China this fiscal year,” she said.

In late morning trade on Monday, Fast Retailing was the biggest drag on Japan’s benchmark Topix Index, which was up 0.7% as of 11:30 a.m. Tokyo time.

Stock of Uniqlo’s Parent Down Most in 9 Weeks After Xinjiang Remarks

Greater China accounted for more than 20% of Fast Retailing’s ¥3.1 trillion ($20.7 billion) in revenue in the year ended August 2024, according to filings. Uniqlo was operating 2,509 stores globally as of the end of September, including 1,031 in Hong Kong, Taiwan and mainland China.

US and European companies have been under pressure to pull out of factories that make clothes and other products in Xinjiang, where workers’ groups have documented alleged forced labor camps and other poor conditions. China disputes the claims.

Uniqlo’s decision not to use Xinjiang cotton indicates US and EU governments are also pushing Japanese companies to pull out of the region, wrote Jefferies analysts including John Chou in a note. “We believe ‘Trade War 2.0’ has started, aimed at removing Xinjiang cotton from Japan and other Asian markets,” they wrote.

—With assistance from Momoka Yokoyama.

(Updates with analyst comment, background)