J. Crew holds sale talks with Japan’s Fast Retailing

‘THEY’RE HOT’::The retailer is looking for capital to expand, and may fetch as much as US$5 billion, which is almost twice the value of its buyout three years ago


Sun, Mar 02, 2014 - Page 13

J. Crew Group Inc, the retailer owned by TPG Capital and Leonard Green & Partners LP, is in talks about a potential sale to Uniqlo owner Fast Retailing Co, two people with knowledge of the matter said.

The talks are at an early stage and other potential bidders have also expressed an interest in the company, one of the people said, asking not to be identified discussing confidential information.

Buyout fund Advent International Corp is also interested in J. Crew, two other people said.

The retailer is weighing an initial public offering later this year, people familiar with the situation said earlier this week.

J. Crew’s priority is gaining access to funds it can use to expand, Miami-based Retail Systems Research managing partner Paula Rosenblum said.

An initial public offering would have J. Crew chief executive officer Millard “Mickey” Drexler returning the company to public markets just three years after its buyout.

“They’re hot, and they obviously want to expand more so they’re looking for capital,” she said in an interview. “The debate of whether to go public or resell to somebody else is endless. Drexler does know the public markets, he’s been there before.”

J. Crew may fetch a valuation of as much as US$5 billion, one of the people said earlier this week. That is almost twice the US$2.64 billion value of J. Crew’s buyout by TPG and Leonard Green three years ago.

Fast Retailing, which has said it aims to be the world’s top clothing maker, has been opening Uniqlo stores overseas as sales in Japan slow. The company’s billionaire chief executive officer Tadashi Yanai said in 2011 that Fast Retailing could acquire a rival in the US or Europe. J. Crew offers Fast Retailing a network of 451 stores and about US$2.4 billion in annual sales.

Sales at Fast Retailing, which also owns the Theory brand, rose 22 percent to ¥389 billion (US$3.8 billion) in the three months ended in November last year, according to a January statement. Theory has about 425 stores, mostly in the US and Japan, and is sold in department stores including Bloomingdale’s Inc, Nordstrom Inc and Macy’s Inc. Uniqlo has 17 stores in the US with more openings planned and about 1,300 stores globally.

J. Crew, whose customers include US first lady Michelle Obama, has been expanding overseas, with stores in London and Hong Kong.

J. Crew estimated that its revenue increased 9 percent to US$2.43 billion in the year through Feb. 1, according to a regulatory filing, and forecast that its adjusted earnings before interest, taxes, depreciation and amortization rose to between US$369 million and US$371 million, from about US$360 million a year earlier.

The company operates 330 stores under the J. Crew, Crewcuts and Madewell brands, in addition to 121 factory stores, the latest filing showed.

New York-based spokeswomen for J. Crew and Fast Retailing declined to comment on the talks, which were first reported by the Wall Street Journal.