Nanjing dressmaker V-Grass Fashion has bought a South Korean fast-fashion brand with more than six times as many stores in China.
In a deal worth about US$900 million, V-Grass is acquiring Teenie Weenie, the Chinese business of E-Land Group. For V-Grass, which is planning its first overseas store in Milan, the purchase will help support falling sales and profit as the Shanghai-listed retailer shuts a third of its lower-end outlets and restructures to focus on the luxury end of the market, according to VP Tao Weimin.
“We wanted to find a brand to prop up our performance so we can build up what we want to do with the V-Grass label,” says Tao. “As a listed company, the market will react badly if we take too long to show profit from the restructuring. This acquisition will let us be bolder.”
Teenie Weenie has 1400 stores in China, compared with about 215 for V-Grass.
“After we digest Teenie Weenie, we will look to acquire other high-end foreign fashion brands,” says Tao.
V-Grass in the past year has shut a third of its boutiques in third- and fourth-tier Chinese cities, and in lower-end malls in bigger cities, says Tao. While those outlets had been profitable, the company wants to establish itself in high-end locations in the largest cities.
Teenie Weenie had net income of more than 500 million yuan in China last year on 2 billion yuan of sales, compared with V-Grass’s 112 million yuan profit and 814 million yuan in revenue.
Tao says V-Grass will fund the Teenie Weenie acquisition with debt. The company is also considering taking on a financing partner.
To reinvent the company and instill a sense of cultural heritage, V-Grass last year acquired for 135 million yuan the Nanjing Brocade Research Institute, which produces intricately woven silk fabric once traditionally worn only by Chinese royalty.