("Uniqlo Lease Signals Fifth Avenue Ambitions" at 9:38 am EDT
incorrectly stated the year of Hennes & Mauritz's entry to
Fifth Avenue. A corrected version follows.)
By Ayai Tomisawa and Elizabeth Holmes
On tony Fifth Avenue, there's a new tenant that will sell you a
shirt for less than $25.
But while Uniqlo pegs its prices low, its ambition is
vaulting.
The move into an address vacated by preppy menswear company
Brooks Brothers sees Uniqlo's parent, Fast Retailing Co. (9983.TO,
FRCOY), break New York City retail lease records to lay down its
marker in one of the world's most storied shopping strips as it
rolls out global expansion that's already taken in Oxford Street in
London and rue Scribe in Paris.
What's set to be Uniqlo's biggest store in the world, with a
whopping 90,000 square feet of space in total between 52nd and 53rd
streets, is a clear statement of intent. Fast Retailing president
and chief executive officer Tadashi Yanai--Japan's richest man,
according to Forbes--is determined that the Uniqlo name will become
as ubiquitous elsewhere as it is in Japan. At home, Uniqlo's
network stretches to nearly 800 stores, many of them small. It
operates 125 stores outside Japan, mostly in Asia.
As well as extending its existing store network, Yanai has
already said Fast Retailing could spend up to 1 trillion yen ($10.8
billion) on acquisitions to bolster the global presence of Japan's
biggest apparel retailer by sales.
Fast Retailing will pay roughly $312 million over the next 15
years for its Fifth Avenue megastore, according to C. Bradley
Mendelson, of Cushman & Wakefield who represented the landlords
in the deal. The company's only other store in the U.S.--for
now--is at 546 Broadway in Manhattan's downtown SoHo district.
Though a significant ramp-up in U.S. strategy for Uniqlo,
observers say the route uptown is a well-trodden path for foreign
retailers.
Sweden's Hennes & Mauritz AB (HM-B.SK), operator of H&M
stores, used its Fifth Avenue location to build its brand
recognition throughout the U.S, says Faith Hope Consolo, chairman
of Prudential Douglas Elliman's Retail Leasing, Marking and Sales
division. The brand's three-floor flagship, at Fifth Avenue and
51st Street, "put H&M on the map," says Consolo.
In the last three years, Fast Retailing has opened Uniqlo stores
in household name shopping streets in London and Paris. It plans a
star-studded event in mid-May when it launches its largest store to
date in Shanghai, with 39,000 square feet of sales space on West
Nanjing Road.
Fast Retailing's massive new Fifth Avenue space spans four
floors, says Cushman & Wakefield's Mendelson. The bulk of the
selling area is on the top floor, which is currently office space
that the retailer plans to convert into selling space. The most
expensive real estate--on the street level--only represents around
15% of the space according to Mendelson.
The arrival of Uniqlo continues the influx of lower-priced
brands on the shopping street well known for its luxury retailers,
such as Tiffany & Co. (TIF), Fendi and Prada. Several
mass-market players have entered the street in the last decade,
including Abercrombie & Fitch Co. (ANF) in 2005 and Hennes
& Mauritz, operators of H&M Stores, in 2000.
In contrast, Takashimaya Co. (8233.TO), Japan's third-largest
department-store chain by sales, said in March it is withdrawing
its namesake stores from the U.S. market and shuttering its
landmark Fifth Avenue shop.
"Fifth Avenue can support a democratic assortment of retailers,"
says Arnold Aronson, managing director at retail consultancy Kurt
Salmon Associates and former chief executive at Saks Fifth Avenue
Inc. (SKS), which has its flagship on Fifth Avenue. "The variety is
refreshing and I think we're living in that kind of a society
today."
Indeed, Fifth Avenue shoppers, like consumers around the world,
are still feeling the effects of the recession. The street gets
much of its sales from tourists, especially from overseas, and
traffic levels dropped significantly last year, says Hana
Ben-Shabat, a partner in the retail practice of management
consultancy A.T. Kearney.
"That's starting to improve but it will take time to get back to
the pre-recession days," says Ben-Shabat.
In Tokyo, analysts also say that opening stores in a tony
district itself serves as a big marketing tool. "It carries a high
risk as the rent is expensive, but it's worth a try as it saves
advertising fees," says Nomura Securities' Masafumi Shoda. The
analyst reckons that if the new Manhattan store can generate about
Y10 billion in annual sales, equal to the company's Paris store,
the hefty rent, which translates into $20.8 million per year, will
likely be paid off over time.
"We have been successful at our SoHo store, so we have been
planning to open a few stores in New York sooner rather than
later," says a Fast Retailing spokesman. "This is a big space and
it will take a long time to prepare. If we find a smaller place to
open before this one, that could be the second one."
The company said the Fifth Avenue store is expected to open some
time next year, although the details haven't been finalized.
-Ayai Tomisawa, Dow Jones Newswires;
ayai.tomisawa@dowjones.com
-Elizabeth Holmes, The Wall Street Journal;
elizabeth.holmes@wsj.com