With Uniqlo owner Fast Retailing in talks with J Crew over a joint venture it could mark an interesting shift as J Crew transitions from being a cult brand to a powerful global fashion force.

With Uniqlo owner Fast Retailing in talks with J Crew over a joint venture between the Japanese and American companies, this could mark an interesting shift as J Crew transitions from being a cult brand to a powerful global fashion force.

J Crew is already well-established in the US and opened a UK standalone last year. However the brand has acquired a strong following in Japan over the last few years, where it offers extended shipping privileges to online customers. Its effortlessly edgy aesthetic attracts fashionable under-thirties with the confidence to pull off its pared-down prints.

New ownership under Fast Retailing could mean several things for J Crew. Firstly, it could help turn J Crew into a super-brand, with the backing of the Japanese conglomerate. This would help take expansion further and faster, giving it the funding it needs to secure international premises and develop its product range. Furthermore, the shared costs it would enjoy as a sister company of Uniqlo would no doubt be welcome, especially in the Asia-Pacific region where J Crew has just announced its first opening, in Hong Kong.

Secondly, with the vested interests of a holding company that has a significant portfolio of heavily female-orientated brands, we could see J Crew focusing its gender-specific offer. The brand has a loyal following from both the male and female audience in America, which would sit well in line with Uniqlo’s multimarket offer. Yet as a young company with greater scope for developing the product offer than more established brands, J Crew could help to remedy a gender imbalance in Fast Retailing’s target market by shaping developments around menswear, a rapidly growing market. This is an approach J Crew has already taken in the UK, establishing its first British standalone as a menswear-dedicated store on Lamb’s Conduit Street.

A merger with Fast Retailing would also align J Crew with a portfolio of brands that would reinforce its unusual position in the fashion market. Despite offering a number of largely casual lines, with original collections described as a ‘reinvention’ of denim wear, the retailer operates mainly at the premium end (it was first available here through luxury Etailer Netaporter.com). Fast Retailing’s Uniqlo fascia offers affordable, high quality casualwear but also maintains a number of designer labels, including Theory and Comptoir des Cottoniers. With these in mind, Fast Retailing would be a good fit for J Crew’s casual aesthetic, without compromising its premium credentials.

The main barrier to the merger at the moment is the price tag proffered by J Crew’s current private equity owners TPG Capital and Leonard Green & Partners. Commentators have already noted that chief executive Tadashi Yanai will be reluctant to accept the $5bn price tag. It has paid far less for acquisitions in the past, but these have come without the expansive network that J Crew has across the US and internationally. Fast Retailing would be paying for a company that already has a well-established domestic infrastructure, with an experienced leadership that is committed to growing the company. It’s highly unlikely that Fast Retailing would be making a loss-making investment, but it would take certainly take a while to see a return, even in the light of J Crew’s enviable sales growth.

Given its strong record for sales growth and brand transmission, it won’t be the end of the world for J Crew if Fast Retailing doesn’t bite. The fact is, it has other options. Speculation over a merger with Fast Retailing could already raise expectations for an IPO if J Crew chooses to float, whilst South Korean fashion group E. Land is also thought to be courting it. This places Fast Retailing under considerable pressure to make a decision. Whilst Fast Retailing may, understandably, object to the hefty asking price, J Crew is clearly a highly coveted brand with obvious potential that could easily prove attractive to one of Fast Retailing’s rivals.

Anusha Couttigane is a consultant at retail consultancy Conlumino