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J.Crew Launches in Hong Kong, Eyes Europe

Another iconic American brand is taking its act on the road.

J.Crew, challenged by the limited growth potential of the U.S. market, is joining the list of American apparel specialty brands expanding internationally.

On May 21, marking a long-anticipated return to Asia after exiting Japan six years ago, the company opened two stores in Hong Kong, a 3,250-square-foot women’s store in an upscale shopping mall in Hong Kong’s financial district, and a 2,800-square-foot men’s store several blocks away.

Company sources report there are plans to open several more stores in Hong Kong in the next five to six years, possibly as a precursor to an eventual launch in China.

Many mall-based American retailers are eyeing overseas markets as a way to offset sluggish demand and declining store traffic at home. Tommy Bahama, Victoria’s Secret and Forever 21 all opened stores in Hong Kong as a gateway to China. Michael Kors, Abercrombie & Fitch (A&F) and Tory Burch have recently opened in Shanghai. Gap Inc. already has roughly 80 stores in China, with plans to open 35 more this year, and the retailer has said it sees strong growth potential in the country for authentic American brands.

J.Crew, a once-public company acquired three years ago TPG Capital and Leonard Green & Partners, opened its first overseas stores in Canada in 2011 and in the U.K. in 2013 on Regent Street in London. It is also, according to CEO Mickey Drexler, soon planning to explore potential locations in Paris.

Many American brands, including A&F and American Apparel, have found Europe challenging, however. Abercrombie admitted that results at its European stores have been disappointing, with declining same-store sales. Most of the 15 international stores it plans to open this year are slated for China.  

In March, J.Crew reported sales growth in the 12 months ended February 1, 2014 slowed to 9 percent from 10 percent the prior year. Net income in the fourth quarter fell 42 percent to $5.92 million, even though revenue grew by almost 7 percent to $686 million.

Earlier this year J.Crew was said to be in discussions with Fast Fashion, parent company of Uniqlo, about a possible takeover. J.Crew IPO rumors also circulated earlier this year, but have been quieted somewhat by the steep drop in earnings.