WSJ: UNIQLO Parent Company wants J. Crew
According to the Wall Street Journal, UNIQLO’s parent company and J. Crew are in the very beginnings of talks that could lead to J. Crew selling itself to the Japanese based clothing giant for as much as $5 billion.
Fast Retailing is the name of UNIQLO’s parent company, and the chairman, president, and CEO is Japan’s wealthiest man. He’s also said that he wants Fast Retailing to become the world’s largest clothing retailer, and to do so, goals have been set to quintuple revenue by 2020. That’d push them past Inditex (Zara), H&M, and GAP inc.
Fast Retailing gets a lot of its revenue from Japan (77% as of last year), and if they want to be #1 world wide, that means they have to get huge in other markets. From the side of Fast Retailing/Uniqlo, acquiring J. Crew to expand their reach probably makes sense. But on the consumer side, it could be a bit of a mash-up.
UPDATE: As fey mentions in the comments below, Fast Retailing isn’t a 100% inexpensive clothing company. They own Theory, J. Brand, and have their fingers in a few other higher-quality clothing pies. But UNIQLO appears to the be sales engine.
In the U.S., UNIQLO seems to be seen as a place to go for plain, but usually well executed basics at very low prices. J. Crew has grown into a pushing-the-price-envelope, style risk taking (especially on the women’s side) brand. They’re different enough that as a consumer, it’s awfully easy to wonder if one would start to influence the other after joining forces. And not necessarily in a good way.
Imagine, J. Crew’s blazers get cheaper, but the fabric and construction quality drops… all while the jacket tails (brace yourselves) somehow manage to get even shorter than what the Ludlow offers now.
Yet maybe this potential new union could make a basic button up shirt that retails for less than $65.
Or they could just leave it all the hell alone.
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I bet it stays the same.
I’m fine as long as they don’t skimp on quality. But I’ll believe it when I see it.
I bet it stays the same or they learn from each other. How to achieve high quality through a network of manufacturing efficiencies.
Why J. Crew would be a good buy for Uniqlo:
1. Uniqlo is trying to break into higher end clothing and be seen as more than just a shop for socks and t-shirts, J. Crew can help them do that.
2. Uniqlo wants a larger market share in the US
3. Uniqlo has several Billion in cash lying around and investors are getting antsy (seriously)
Why J. Crew is not a good buy for Uniqlo:
1. The brand culture and styles are very different.
2. in 2012, J. Crew had a huge jump in net income and earnings, thus relative to two years ago, J. Crew is expensive. Granted, their income has been falling since then.
3. Some of J. Crews draw is that you can buy things there that are made in the USA and sold by an American company, once they are owned by a Japanese brand, this appeal may be lost on new company as costs-cutting takes hold.
Good for us (consumer)
Maybe cheaper clothes
Bad for us (Consumer)
J. Crew has (more recently) positioned itself as a gap brand (forgive the pun) between retailers like Banana Republic and designers stores like Barney’s. It has done this both by raising its prices, as well as partnering with premium clothing makers to sell their products in J. Crew Stores. As far as I can tell, this has been a good partnership for both members, Uniqlo will probably not maintain these partnerships, with J. Crew pushing the companies to make more contemporary clothing and the designers gaining access to a larger market. Uniqlo will probably not continue these partnerships.
Probably will be a “wholly-owned subsidiary” scenario, allowing JCrew to do it’s own thing.
Against it, but for a different reason. Competition in the marketplace is usually better for the consumer. If we end up with some ultra-brand like Tadashi Yanai wants to build, it will be like Anheuser-Busch InBev in the beer world or Luxottica with sunglasses. The former controls over 50% of US market share and the former basically vertically owns the sunglasses market to the point where markups are huge and its hard not to purchase sunglasses from them. If you have never heard of Luxottica, its for a reason. They keep a low profile for their parent brand because they like to provide consumers the illusion of choice.
Honestly, I’m not sure a change in corporate ownership will result in any noticeable differences from the consumer’s standpoint. J.Crew has got a pretty good thing going and I doubt Uniqlo wants to mess with that much.
I understood this, but voted against it for a different reason than the poll stated. There were only two options, and knowing about Fast Retailing’s other businesses does not make me “for” the acquisition.
Amazon Zappos style? I think there’s a good chance of that. But if they’re pushing, hard, to quintuple revenues, there may be tweaking?
Help me out here then, because I gotta be missing something. The chart,
https://dappered.com/wp-content/uploads/2014/03/UNIQLO-breakdown.jpg
from over here: http://www.fastretailing.com/eng/ir/financial/summary.html sure seems to indicate that the UNIQLO side accounts for the lionshare of revenue?
I don’t want to support a company whose main goal is stated to simply become “the largest retailer in the world.”
This is where I’m at too. Voted “All for it” but it’s more “Wait and see” for me.
100%
I think you’re both right. Uniqlo is the vast majority of their revenue (look at the jump in their international business. That’s what opening up in the US will do for you) But their other global brands are higher end, what that means for J Crew remains to be seen. People are making a lot of good points for both sides.
Yeah, updated the post above. But J. Crew seems to be a slightly different animal. Maybe that’s just the clouded perspective on this end, or, perhaps that’s precisely what Fast Retailing is looking for. A tweener (in terms of price/quality) line. Something that’s accessible but still feels/looks like a step above. Yet not super high end. As zaphod (below) calls it, a “gap” brand.
i can’t argue with how successful uniqlo is for them. i was just pointing out that they do currently maintain high end brands.
And totally worth pointing out. Thanks for that. Added it to the post above. But Ford once owned Jaguar. Yet Tata now owns them, and the F-Type looks pretty sweet.
Uniqlo will be their Old Navy and J. Crew will be their Banana Republic. Moving to Uniqlo’s model/style would totally destroy the following and brand image that they have built up over the past following years. Remember, J. Crew has been around a long time… they have not been a leader in fashion up until ‘recently’ in terms of brand heritage and they’ve worked hard to establish that. They are the affordable gateway into high end (which is why you see J. Crew pieces at Mr Porter and such). There is a reason people salivate over vintage Banana Republic catalogs and not vintage J. Crew ones. Banana Republic did move away from its roots after Gap bought them, and time went on, but I think that had more to do with the market dictating style and they kept their comparable ‘affordable high-end’ style.
I lived through the purchase of Brooks Bros. by the clueless Marks & Sparks louts. Never Again!
Oh, there will certainly be some tweaking. Working for a “wholly-owned subsidiary” company that was recently purchased, it definitely can have benefits all around. Supply chains get linked, and material/shipping costs come down when you buy in bulk. So long as you don’t interrupt positive sales growth, there *shouldn’t* be a down side.
Ford also owned Aston Martin and Land Rover at the time, and those were absolute shit boxes.
Jaguar, Aston Martin, and Land Rover have all since prospered away from the pre-2008 Ford umbrella.
Exactly what I was thinking – J crew will be their “Banana”, while Uniqlo will remain on the cheaper side.
Great post. Unfortunately I think this is where we are headed.
Agree with this. he’s still got good lieutenants in there though, Jenna Lyons, Frank Muytjens, etc.
Tata Motors, a company that produces the cheapest cars in the world, purchased Jaguar and Land Rover a few years ago, and the result was NOT a lower quality product. Perhaps the same idea applies here.
That’s because Ford didn’t just set the bar low, they took it off and threw it away.
Yep, that’s what I was getting at.
Yet they still don’t have an LA store 🙁
Dang, still thought all of those were owned by Ford… that explains alot.
Just don’t let Uniqlo’s web design team anywhere near Jcrew, please.
Don’t forget Volvo.
http://www.cnbc.com/id/101466668
Not so fast: http://online.wsj.com/news/articles/SB10001424052702304747404579447633540074064?mod=djemTEW_h&mg=reno64-wsj