Tadashi Yanai, chairman and CEO of Uniqlo Co. and its holding company, Fast Retailing Co., strongly believes a business must keep growing and changing to survive, and is now acting aggressively on this belief.
Yanai, who turned his father’s small clothing store in Ube, Yamaguchi Prefecture, into Japan’s largest apparel empire with about 790 Uniqlo stores worldwide, knows it is time to take a new leap in the global market.
“We can’t expect much growth from the Japanese market anymore. We must go to markets that are growing,” Yanai said in a recent interview at Fast Retailing’s Tokyo headquarters. “Unless we become global, we can’t keep growing and beat our rival companies overseas.”
After advancing into Britain, the United States, China, Hong Kong and South Korea, Fast Retailing opened a global flagship store with 3,300 sq. meters of floor space in New York last November. It also has French lingerie brand Princesse Tam-Tam, French women’s wear chain Comptoir Des Cotonniers and Italian tailor Aspesi under its wing. But the company’s latest move — a bid to take over upscale department store chain Barneys New York — is raising eyebrows.
The Jones Apparel Group, which owns Barneys, said Wednesday that Fast Retailing had updated its $900 million (about ¥106 billion) cash bid for Barneys and that it intends to accept it.
Jones Apparel had previously agreed to sell the chain to Istithmar, a Dubai-based private equity group, for $825 million. If Jones takes Fast Retailing’s offer, it will be obliged to pay Istithmar a $22.7 million termination fee. Istithmar has three days to counter the bid.
“If we were to do business in New York, Barneys would be a good company,” Yanai told The Japan Times while declining further comment on the ongoing deal.
Yanai, a 58-year-old Yamaguchi native, has already made it clear he intends to turn Fast Retailing into a corporate powerhouse with consolidated sales of ¥1 trillion by 2010, and his strategy of focusing on mergers and acquisitions appears increasingly important in achieving this goal.
Fast Retailing reported sales of ¥448.8 billion in the 2006 business year, which ended last August, and has said it plans to spend ¥300 billion to ¥400 billion on M&A deals in the coming years. But only ¥60 billion has been spent so far, the company said.
The company’s aggressive stance toward M&As, especially in the U.S., however, is not merely aimed at achieving economies of scale, Yanai claimed.
“The retail industry is a labor-oriented business, and efficiency and worker motivation are very important. Under such circumstances, we can’t manage business there only through a Japanese management team,” he said. “That’s why we need to buy companies. Engaging in M&As does not only mean merely acquiring the company, it also means doing business with excellent local management teams.”
Yanai described the U.S. as “a market full of chances and risks” because it involves a variety of ethnicities and income levels, in addition to a culture of settling disputes through litigation.
“It also has severe competition, but it is a very interesting market to challenge,” he said.
Ever since the first Uniqlo was opened in 1984 in Hiroshima, the store has made a name for itself selling basic but affordable clothing. But the past 20-plus years of Yanai’s life have been filled with both success and failure.
Uniqlo made its first foray into the heart of Tokyo in fall 1998, opening a store in the trendy Harajuku shopping district. Its colorful fleece jackets became an instant hit as their high quality and ¥1,900 price tag proved irresistible.
Thanks to the high-profile fleece campaign, sales surpassed ¥100 billion in 1999, vaulted to ¥228.9 billion in 2000 and ¥418.5 billion in 2001.
After the boom waned, however, Yanai was unable to find a another hit and sales dropped to ¥341.6 billion in 2002.
“When our sales figures were doubling every year, I got worried because I thought the boom would not continue forever. I was also concerned that our employees and managers might get the wrong idea,” he recalled. “Having said that, I still think we did quite well because such rapid growth was unprecedented in our industry.”
Fast Retailing also suffered huge losses in Britain after it entered in 2001 and rapidly opened 21 stores in about a year. It also failed at a vegetable sales business it launched in 2002 and had to exit the business in 2004.
“We didn’t know much about the food industry,” Yanai said. “If we want to change the distribution system, we have to change the production process. But if we really wanted to do that, we would have had to put up too much money and human resources.”
Yanai’s speed-oriented management style may have been shaped by these various experiences, but the charismatic founder of Fast Retailing said he actually doesn’t have much time because he wants to retire between age 60 and 65.
“That’s almost two to seven years from now. . . . Before my retirement, I want to nurture a good management team that can succeed me,” he said. “If we can’t create such a management team, we may even become a buyout target in the future.”
Although he likes golfing in his free time, when asked about his retirement plans, the billionaire smiled and said, “I want to be an investor, and I hope to invest in companies that have potential.”