Uniqlo's 'Unprecedented' High Dividend... Dividend Exceeds Annual Net Profit

Dividend Size Larger Than Net Profit by Over 50 Billion Won for 2nd Year
Dividend Beneficiaries Are Japanese Headquarters and Lotte Shopping

The domestic operator of Uniqlo has implemented a high dividend payout for the second consecutive year, significantly exceeding net profit. The shareholders receiving the dividends are the Japanese headquarters and Lotte Shopping. This high dividend was made despite Uniqlo's performance not yet returning to the level before the boycott movement.

[Image source=Yonhap News]

According to the Financial Supervisory Service's electronic disclosure system on the 11th, the dividend for the 2022 fiscal year (September 2022 to August 2023) of FAL Korea, the domestic operator of the Japanese brand Uniqlo, was 180 billion KRW. This amount is 52.8 billion KRW more than the net profit of the same year. The company also paid out 140 billion KRW in dividends in the 2021 fiscal year, which was 50.9 billion KRW more than its net profit.

The dividends were distributed to the Japanese headquarters and Lotte Shopping. FAL Korea is a joint venture established in 2004 by Lotte Shopping and Japan's Fast Retailing, the parent company of Uniqlo, with respective stakes of 49% and 51%. Of the 180 billion KRW dividend last year, Lotte Shopping received 88.2 billion KRW, and Fast Retailing received 91.8 billion KRW. Looking at Lotte Shopping's shareholding structure, the largest shareholder is Lotte Holdings with 40%, and Lotte Chairman Shin Dong-bin holds 10.23%.

Typically, companies distribute a portion of the profits generated from business activities in a year to shareholders, so paying dividends exceeding net profit for two consecutive years is unusual. Moreover, FAL Korea's performance sharply declined after becoming the target of a boycott in Korea following Japan's semiconductor export restrictions imposed in July 2019, and it has not yet fully recovered.

The company's sales dropped from 1.3781 trillion KRW in 2018 to 629.8 billion KRW in 2019, then recovered to 921.9 billion KRW last year. Operating profit also fell from 199.4 billion KRW in 2018 to a loss of 88.4 billion KRW the following year, before returning to a profit level of around 140 billion KRW last year. Net profit is also around 120 billion KRW. Debt increased again during the high dividend period. Total liabilities rose from 145.1 billion KRW at the end of August 2021 to 208.8 billion KRW at the end of August last year, and further increased to 230.1 billion KRW at the end of August this year.

FAL Korea's dividend payout last year was 141.5% of net profit, and 157.1% the previous year. The company did not pay dividends in the 2019 fiscal year when it became the target of the boycott, but paid 10 billion KRW the following year.

A representative of FAL Korea stated that the reason for the high dividend was "a decision of the board of directors." The FAL Korea board consists of eight members: one CEO each from Lotte Shopping and Fast Retailing, who receive the dividends, and three directors each.