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Fast Retailing, the public Japanese clothing retailer, is interested in acquiring companies and brands domestically and abroad with sales over JPY 100bn (USD 850m), a spokesperson said. This comes after the company, best known for its Uniqlo retail stores, acquired several Japanese and French companies. According to the spokesperson, Fast Retailing is looking to invest up to JPY 400bn (USD 3.4bn) to acquire apparel-related companies with potential future sales of over JPY 100bn and ordinary income ratio in excess of 10%. The spokesperson added that Fast Retailing is targeting companies that can provide know-how within a specific market segment, make a good portfolio addition in terms of its products, and have an established global brand.
Although the spokesperson declined to name targets, the company will ”definitely continue to plan to expand through M&A in Europe, in countries such as Spain. In the US, though, our main focus is Uniqlo.” The spokesperson went on to say that US acquisitions are “certainly possible” in the near term, adding that the company may be interested in clothing retailers like J. Crew.
An analyst covering the company said that there is a chance that Fast Retailing will acquire a larger company, such as one of its competitors, which include the brands Gap, its separate label Banana Republic, and J. Crew. A second analyst agreed that an acquisition of a bigger company is possible. “If J. Crew were up for sale the company would definitely be interested,” the same analyst said. The analyst cited US market share as the main reason that Fast Retailing should be interested in J. Crew, since the Japanese retailer has less than a 1% share in the US.
A US-based private equity player however thought an acquisition of J. Crew unlikely. The company that went public on the NYSE last year is trading well at the moment, the private equity player said. Furthermore, he said, it was doubtful Millard Drexler, CEO of J. Crew, would agree to work for someone, adding, that without Drexler no one would buy J. Crew. The New York-based retailer is backed by Texas Pacific Group (TPG). The private equity firm reduced its stake from 36% to 21% recently.
A TPG spokesperson declined to comment on why the firm decided to do this. The private equity firm has held a stake in J. Crew for over a decade, the spokesperson said. A J. Crew spokesperson said the company has gone through a secondary offering last month, but declining to comment on anything else. The US-based private equity player said Fast Retailing is basically after a brand. The Japanese company is looking for a global brand much like its 2003 acquisition of Theory. He named James Perse, Tory Burch, Nanette Lepore, Calypso or Betsy Johnson as companies which could interest Fast Retailing. All the companies mentioned have been reported to be up for sale.
Fast Retailing has financed most of its past acquisitions with cash and loans, so the company will probably do the same for future acquisitions, the first analyst added. The recently acquired casual clothing brand, Comptoir des Cotonniers, and lingerie retail chain, Petit Vehicule, “are well established global brands in France, which are good for our group,” the spokesperson for Fast Retailing said. Fast Retailing recently acquired Comptoir des Cotonniers from French apparel maker Nelson Finances for JPY 26bn (USD 221m) and acquired a 95% stake in Petit Vehicule for JPY 8bn (USD 68m). The company last year failed in its attempt to merge with Giordano International, a Hong Kong-based retailer.
Fast Retailing has a market capitalization of JPY 961bn (USD 8.2bn).
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