HONG KONG â€" Fast Retailing, the owner of the Japanese apparel retailer Uniqlo, said Monday that it planned to pursue a secondary stock market listing in Hong Kong.
The Tokyo-listed company would not raise capital or issue new shares, but said it planned the secondary listing as a way to broaden its base of investors and customers in Asia and, specifically, in China.
Uniqlo â€" which specializes in affordable “fast fashion†items, seasonal clothing that moves rapidly from the design stage to store shelves â€" has been expanding rapidly in recent years in the rest of Asia and into overseas markets including Europe and the United States as it seeks to compete against rivals like Zara of Spain and Sweden’s Hennes & Mauritz, or H&M.
Other foreign companies, including the American retailer Coach and the Brazilian miner Vale, have listed depositary receipts in Hong Kong to attract more investors through a secondary listing.
While Uniqlo’s 837 stores in Japan enjoy higher profit margins, the company has seen its fastest growth in both revenue and earnings from such international expansion. In the three months to November, Uniqlo’s international sales rose 77 percent to 114 billion yen, or $1.1 billion, while operating income from overseas nearly doubled, rising 97 percent to 16.5 billion yen.
Uniqlo operated 512 international stores at the end of November, a net increase of 66 stores from a year earlier.
A secondary listing of depositary receipts in Hong Kong, which Fast Retailing hopes to achieve by March 5, could makes sense for the company for more reasons that just attracting new shareholders in Asia.
Uniqlo’s parent company is the biggest single constituent of Japan’s benchmark Nikkei 225 share index, accounting for 9.7 percent of the index by weighting for share price. Toyota and Honda, by comparison, only account for a combined 3.6 percent of the Nikkei.
The Nikkei’s price weighting is similar to how the Dow Jones Industrial Average is calculated â€" as opposed to weighting for market value, which is how the Standard & Poor’s 500 index is tallied. Because of this, trading in Fast Retailing’s shares can be volatile; moves are often a reaction to macroeconomic developments in Japan, and not necessarily to the company’s own performance.
Should the company list in Hong Kong, investors in those shares are less likely to be betting on the Japanese economy and more focused on Uniqlo’s expansion.
Fast Retailing said the secondary offering still needed approval from Hong Kong regulators, and would also depend on the business environment and market conditions.
Morgan Stanley is the sponsor for the proposed offering.
