Tags: Japan | Billionaire | Global | Crew

Japanese Billionaire's Global Drive Fuels J. Crew Talks

Sunday, 02 March 2014 02:11 PM

Fast Retailing Co.’s Tadashi Yanai, who built his father’s tailor shop into Asia’s biggest clothing retailer and in the process became Japan’s richest man, is stepping up his push into the U.S. market.

The Japanese owner of Uniqlo is in talks about a potential acquisition of J. Crew Group Inc., the U.S. retailer owned by TPG Capital and Leonard Green & Partners LP, two people with knowledge of the matter said Friday. The deal may be valued at as much as $5 billion, one of the people said earlier last week.

Yanai, 65, has said he wants to turn Fast Retailing into the world’s biggest clothing retailer, a goal made all the more challenging by Japan’s declining population. To achieve that aim, he’s pushing the low-priced casual wear company into new markets, hiring executives from global retailers and weighing acquisitions to increase overseas sales and compete with Zara owner Inditex SA and Hennes & Mauritz AB.

“Uniqlo has expanded overseas by opening stores and acquiring and absorbing businesses that have designing power and brand image,” said Mikihiko Yamato, deputy head of research at JI Asia in Tokyo. “Having J. Crew would help as it’s the brand people know and that can attract a lot more customers than doing it alone.”

The Yamaguchi-based company targets boosting overseas Uniqlo sales to greater than domestic revenue by the year ending in August 2016. It aims to quadruple receipts to reach 5 trillion yen ($49 billion) by 2020 with a fifth coming from the U.S., Chief Financial Officer Takeshi Okazaki said in Hong Kong last week.

English, M&A

J. Crew’s talks with Fast Retailing are at an early stage and other potential bidders have also expressed an interest in the company, a person with knowledge of the matter said. Buyout fund Advent International Corp. is also interested in J. Crew, two other people said. The U.S. retailer is weighing an initial public offering later this year, people familiar with the situation said earlier last week.

Aldo Liguori, a Fast Retailing spokesman, declined to comment on the talks.

As part of Yanai’s plan to develop Fast Retailing into a global company, his company uses English as an official language and employs international staff. Its several acquisitions include the Theory brand sold in department stores including Bloomingdale’s Inc. and Nordstrom Inc.

Roadside Roots

The company traces its roots to a roadside menswear shop that Yanai’s father started more than 60 years ago in the city of Ube in Yamaguchi Prefecture, located near the western tip of the country’s main island of Honshu.

The son of a tailor and a housewife in southern Japan during the U.S. postwar occupation, Yanai began his career selling kitchenware and men’s clothing at a Jusco supermarket in 1971. After a year, he quit and joined his father’s business.

By 1991, he changed the name of his father’s company Ogori Shoji to Fast Retailing, reflecting the apparel chain’s expansion strategy. It soon became the fastest-growing retailer in Japan and later made Yanai Japan’s richest individual with a net worth of $17.6 billion today, according to Bloomberg Billionaires Index.

Yanai is no stranger to tough decision-making. His book “Throw Away Your Success in a Day,” published in 2009, cites his move into vegetable stores in Japan in 2002 and losing money until he pulled the plug two years later. He expanded Uniqlo overseas in 2001, first to the U.K., and to stem losses ended up closing 16 of 21 stores about two years after opening them.

Global Design

Fast Retailing recently hired executives from global retailers to speed decision-making at his business outside of Japan. It appointed LeAnn Nealz, formerly a president at Juicy Couture known for its velour sweatsuits and whimsical feminine designs, as chief creative officer for Uniqlo Global Design.

In 2011, it opened a glass-fronted corner store on Fifth Avenue, one of the world’s priciest retail streets and another on New York’s 34th Street.

In 2012, it opened an outlet in Tokyo’s Ginza, the city’s most expensive fashion district, and last year the world’s largest Uniqlo debuted in Shanghai as Fast Retailing seeks to shift away from the image of a low-price chain that built its reputation on cheap clothing.

There are now more than 500 Uniqlo overseas stores from China to France and Fast Retailing is entering Australia and Germany this year as part of plans to open as many as 300 outlets overseas annually.

In the U.S., where it entered in 2005 and had 17 outlets as of November, the company aims to open between 20 and 30 stores annually to reach 100 in the next few years, the billionaire said last year. Yanai said he plans to stay on in the role of Fast Retailing president as the company is in the middle of international expansion.

Higher End

In a 2011 interview, he also said the company may buy a bigger rival in the U.S. or Europe. Fast Retailing may be able to use J. Crew to appeal a different kind of consumers than the traditional Uniqlo buyers.

With prices hovering above fast-fashion brands such as Zara and H&M and below designer lines such as Alexander Wang and Thom Browne, J. Crew has found a lucrative niche as an aspirational destination for younger shoppers and the go-to store for wealthy customers seeking wardrobe staples. The ethos of J. Crew is design plus value; the cashmere is made in Italian mills and costs less than at Bloomingdale’s.

The New York-based retailer, whose customers include U.S. First Lady Michelle Obama, may help the Japanese apparel maker to add sheen to its brand, JI Asia’s Yamato said.

“Uniqlo’s origin is a discounter, but it has acquired higher-end brands and Uniqlo’s design has kept improving,” Yamato said. “In the past, people thought if they are found wearing Uniqlo, that’s embarrassing, but less people think so these days.”

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Fast Retailing Co.'s Tadashi Yanai, who built his father's tailor shop into Asia's biggest clothing retailer and in the process became Japan's richest man, is stepping up his push into the U.S. market.
Sunday, 02 March 2014 02:11 PM
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