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There Is An Even Cheaper Uniqlo Offshoot And It's Coming to the US

GU will be opening its first store in the US in 2023.

It is not uncommon for the U.S. to lag behind a trend that is already huge in Asia -- before popularity with American teens brought in record profits and whispers of looming IPOs, social media platform TikTok and fast fashion site Shein already had billions of users in China.

Fast Retailing's  (FRCOF)  Uniqlo was also a popular store in Japan several decades before the first American location opened in New York's SoHo in 2006.

In the fifteen years that followed, the casual clothing brand expanded to over 60 stores across the U.S. and Canada and over 1,500 worldwide. 

Items like the puffy foldable jacket have also become a mainstay in many people's closets.

You've Heard Of Uniqlo, But Not of GU

But despite Uniqlo's popularity, few North Americans know that it has an even more casual and affordable offshoot.

GU (pronounced "gee-you" and sounding like the word for "freedom" in Japanese) started out in South Korea in 2018 and is also owned by Fast Retailing.

While Uniqlo clothes are known for their minimalist aesthetic, GU sells more playful  clothes at even lower prices -- when adjusted for currency, logo and band-style t-shirts can sell for as low as $5 while its most popular product is a pair of bell bottom jeans that sells for 999 yen or roughly $7.50 U.S. 

Bloomberg first reported that GU plans to open its first American location in Manhattan's SoHo by the summer of 2023.

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While it will be a pop-up rather than a permanent storefront, the location near the original American Uniqlo indicates that Fast Retailing is hoping to recreate its original strategy of diving into the American market at full speed. The company hopes to go from 100 stores in 2022 to over 200 (although not all in the U.S.) by the end of next year.

"By opening a pop-up shop in the center of Soho, we will be able to reach a wide range of customers, including New York residents as well as tourists," Osamu Yunoki, chief executive officer of GU business, said in a statement to media outlets on Thursday.

Cheap Sells, Especially During Inflation

GU has been expanding fast in Asia. In 2021, it brought in over 249 billion yen (roughly $1.9 billion U.S.). That makes up around 12% of Fast Retailing's total revenue.

Brands like Uniqlo and, on the European side, H&M  (HNNMY)  and Inditex  (IDEXF) 's Zara, got as popular as they are due to a business model of offering clothing in presently popular styles at the lowest possible prices.

While still more affordable than the next alternative, this model has been feeling some strain as supply chain disruptions and rising cost of materials have pushed both brands to raise their prices.

On June 7, Fast Retailing announced that it would be raising the prices on some Uniqlo jackets by as much as $7.54 each and then announced further prices hikes in a few weeks.

Zara, H&M, and Dublin-based casual fashion chain Primark have all introduced similar price increases in the last six months, but are still seeing high sales despite them.

"We have reached a point where we have no choice but to raise prices of some products," Uniqlo Chief Financial Officer Takeshi Okazaki said in a Tokyo press conference in June.