J Brand’s planned acquisition by a big Japanese retailer could allow the downtown L.A. premium denim company to grow into a lifestyle brand, open retail stores and move into new international markets.
Yamaguchi-based retail giant Fast Retailing Co. last week agreed to acquire an 80 percent share of the jeans company for about $290 million.
Paul Zaffaroni, a director at Newport Beach investment bank Roth Capital Partners LLC, said that price is high, but so is the potential for J Brand to grow.
“It’s a very strong brand,” he said. “They’ve got great product, and they’re beginning to expand beyond denim into other categories. It has the potential to become a huge global lifestyle brand.”
J Brand, founded in 2004, first made a name for itself selling skinny jeans to women.
Jeff Rudes, co-founder and chief executive of J Brand, first sold a controlling stake of the company to L.A. private-equity firm Star Avenue Capital LLC in 2010 for an undisclosed amount. The capital infusion allowed the jeans company to begin expanding into apparel categories outside denim, specifically sportswear.
Today, the company makes and sells a variety of denim and sportswear items for men and women. The clothing is sold at specialty retailers and high-end American department stores such as Barneys New York and Bergdorf Goodman, Selfridges in London and Bon Marche in Paris. The company reported sales of about $124 million in 2011.
Rudes, who will stay on as chief executive along with the rest of his management team, said in a statement that the acquisition gives J Brand “the potential to generate great expansion opportunities in all major markets around the world.”
Zaffaroni said that if anyone can help J Brand realize the profit potential it has by transforming it in to a full-line lifestyle brand, it’s Fast Retailing.
“It’d be hard for a private-equity firm to unlock that, but with its experience, and given how big they are and what they’re good at, Fast Retailing can afford to pay that higher price,” he said.
Zaffaroni said the acquisition also opens up the opportunity for J Brand to begin opening its own retail stores, something it has so far shied away from.
Fast Retailing is a Japanese public company best known for its casual clothing chain Uniqlo, which boasts 845 stores in Japan and an additional 292 elsewhere, including on Fifth Avenue in New York. The company also owns New York fashion label Theory.
J Brand declined to comment for this article; partners at Star Avenue, as well as executives at Fast Retailing, could not be reached for comment.
The deal is awaiting regulatory approval and is expected to close before the end of the year.
“We look forward to our next phase of growth,” Rudes said.
