Blog: Barneys takeover battle

Joe Ayling | 7 August 2007

Jones Apparel last week reported a second quarter net loss of US$47.1m, and now finds itself in the midst of an ensuing takeover battle for its Barneys New York chain.

Just as Jones gave Japan’s Fast Retailing the nod for its $900m acquisition of Barneys New York, previously trumped Dubai-based Istithmar returned and equalled the bid. Fast Retailing has since upped the stakes to $950m.

As for Jones' Q2 loss last week, a silver lining may be appearing around the dark clouds that have hung over the US retail group. Not only is it set to receive more than double the $400m it paid for Barneys in 2004 should a deal go ahead, but also, some analysts are now envisioning a turnaround in fortunes for the company.

Although second quarter sales fell 2.2% for Jones’ units as it slashed full-year earnings estimates, traders were encouraged by the recent appointment of Wesley R Card, a former finance man, to CEO. As Morgan Stanley analyst Brian McGough was quoted as saying, while Jones is “taking it on the chin” this Q2, the company could be nearing a turning point at the same time.

In spite of all this, the question remains as to whether Jones is missing a trick by offloading Barneys rather than investing in the chain, which operates 34 luxury stores in the US. If so, the company’s loss would most certainly be the gain of whoever emerges triumphant from this truly global bidding war.

Fast Retailing, meanwhile, is widening its horizons past a saturated domestic market and the Japanese group has already proved it travels well thanks to the international success of its Uniqlo chain. Billed as ‘Japan’s Gap’, Uniqlo last week announced a global flagship store on Oxford Street. Barneys could be a welcome addition to its cosmopolitan credentials.

By Joe Ayling.


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