Tommy Hilfiger, J. Crew emerge as players

2 retailers possibly putting selves up for sale

August 19, 2005|By Becky Yerak | Becky Yerak,CHICAGO TRIBUNE

In the retail industry's latest game of musical chairs, Tommy Hilfiger Corp. and J. Crew Group Inc. emerged yesterday as the latest players to possibly put themselves up for sale, taking advantage of financial markets in which buyers are flush with cash.

Fashion designer Hilfiger reportedly plans to put itself on the auction block, and retailer J. Crew, currently controlled by a private equity firm, said it plans to raise about $200 million in an initial public stock offering.

"The capital markets are so liquid, despite some of the increase in borrowing costs, that they create wonderful choices for consumer companies like Tommy Hilfiger and J. Crew to go private," said Richard Hastings, senior retail analyst for Bernard Sands LLC. Or, the retailers can "break themselves into pieces, gobble someone else's pieces or just try to raise money to get bigger."

Since early 2004, the retail industry has been consolidating rapidly, with more than a dozen deals either announced or rumored.

But while Hilfiger and J. Crew may join the party, both have been on different trajectories.

Women's Wear Daily reported yesterday that Hilfiger was being shopped around to potential buyers. Citing anonymous sources, the publication said Hilfiger hired JPMorgan Chase as its investment adviser. Hilfiger's shares rose 10.9 percent to $17.87 on speculation about a buyout.

Hilfiger has struggled with its wholesale business, which has been described as "troubled." Last year it bought the more upscale Karl Lagerfeld brand.

The asking price for Hilfiger is at least $1.82 billion, Women's Wear Daily reported.

Meanwhile, J. Crew, which has 200 U.S. stores is on an upswing, retail observers say, led by Chairman and Chief Executive Officer Millard "Mickey" Drexler.

Before becoming J. Crew CEO in January 2003, Drexler, 61, had been CEO of Gap Inc. from 1995 until September 2002 and president from 1987 to 1995. He owns 15 percent of J. Crew.

"Drexler has done a brilliant job there, and very quickly," said Robin Lewis, publisher of Robin Reports and former executive editor of Women's Wear Daily. "Too bad Tommy didn't get Mickey Drexler."

Under Drexler, J. Crew has made strides with both its merchandise and with the shopping experience in its stores, another retail observer said yesterday.

J. Crew has filed for a listing on the New York Stock Exchange under the proposed ticker symbol JCG.

Texas Pacific Group, which is also planning to buy a stake in luxury retailer Neiman Marcus Group Inc., owns 51 percent of J. Crew, the filing said.

The Chicago Tribune is a Tribune Publishing newspaper.

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