Thursday, September 2, 2010

FJ Benjamin Boosted By Postive BT Piece

Shares of FJ Benjamin received a boost yesterday after a gleaming article was published by the Business Times on the first day of September. The stock surged past the 40 cents mark on heavy volumes, signaling possibly strong hands in the back ground, capitalizing on the opportunity.

For 2 September 2010, despite a strong overnight rally on Wall Street, the Straits Times Index closed only slightly higher at 2,986, despite trading above the psychologically important 3,000 mark for the early part of the day. Top 5 most active stocks were Genting Singapore, Adventus Holdings, Vallianz, United Fiber System and Noble Group.

Business Times article follows.

FJB pins its hopes on Raoul in China


GOING international may be the ultimate goal of many 'made-in-Singapore' fashion brand owners, but breaking into markets like China is definitely no cakewalk.

Riding on the back of a sharp earnings turnaround in fiscal 2010 and a robust recovery in Asia, fashion retailer FJ Benjamin (FJB) appears to now have the ballast to launch its premium house brand Raoul in China - a market it has been trying to get into for several years.

But not before the 51-year-old Singapore company got the validation it needed by being on the catwalks of international fashion shows in Paris, and getting into the pages of top fashion magazines like Vogue, Elle and Harper's Bazaar.

Also in the works is getting the Raoul label into American luxury specialty department stores including Saks Fifth Avenue, Bloomingdale's, Nieman Marcus and Nordstrom - as is expanding FJ Benjamin's geographic footprint in existing markets such as Indonesia, where it currently has 64 stores and plans to add 13 more by next June.

But breaking into China's market isn't exactly the same kettle of fish.

Especially in light of blatant design piracy, burdensome government regulations and lingering concerns over the risk of a double-dip recession in the United States, which could trim growth projections.

Still, with the fashion retailer swinging into the black with a full-year net profit of $8.3 million from net losses of $2.7 million a year ago, group CEO Nash Benjamin is upbeat and, as one analyst put it, uncharacteristically garrulous, when he announced expansion plans earlier this week for China and Indonesia as well as in its existing markets in the US, Europe and Asia. Between $6 million and $9 million of its cash pile of $35.5 million will be spent on its expansion overseas.

'There's no reason why the Raoul business can't grow to $300 million-plus over the next five years from $25 million now,' he said.

For now, Raoul (which has 23 stores in Singapore, the Philippines, Malaysia, Indonesia and Australia) accounts for less than 10 per cent of total sales. That FJ Benjamin is setting up a research team with talent from Singapore and Hong Kong to study the Chinese market shows how determined the company is in making its initial foray a success.

Armed with a full winter clothing collection for Raoul, and leveraging its experience in the US and Europe, FJ Benjamin hopes to open its first store in China in the second half of next year.

To pitch the Raoul brand effectively, a thorough understanding of the idiosyncrasies of the Chinese market, fashion trends and its customers' requirements is de rigueur.

As Mr Benjamin noted, it is critical to know customers' preferences and their price point, and also know your competitors and the quality of their products and price point.

Every market is a little different, but it doesn't mean retailers have to change their collection. Case in point: many women in South-east Asia tend to wear more revealing outfits, while in northern Asia, they like to be more covered up.

So far, FJ Benjamin's share price hasn't reacted much to its expansion plans or the two-cent dividend payout (which translates to a decent yield of 5.8 per cent) to shareholders. Since its earnings announcement on Aug 23, the retailer's stock continues to hover around 35-36 cents.

At least one retail analyst is lowering her estimates for the company's fiscal 2011 earnings because of rising costs associated with its expansion, coupled with uncertainty in the global economy.

Still, Raoul's relatively affordable price point is a positive, said Lynette Tan, an analyst with DMG & Partners Research.

If its launch in China is successful, the company could see greater growth especially with rising consumer affluence and strong tourism inflows in Hong Kong and Singapore.

But, as a growing number of affluent young consumers in China seek fashion apparel or accessories that aren't fakes, she said FJ Benjamin, as it builds brand recognition, may face challenges from smaller boutique owners in China trying to copy its designs, look, feel and name of its store front or logo to achieve the high-end look.

'But for now, Raoul is in a good niche where the real pirates aren't really interested in them,' said Yew Woon Chooi, partner at Singapore law firm Rodyk & Davidson LLP and an intellectual property lawyer.

'What I see facing Raoul is that there will be other Chinese department stores that will be copying their ideas. For instance, if Raoul has a nicely designed handbag, they would copy the distinguishing elements and put it together in their own design and label. It isn't piracy in the true sense of the word, but it is inspired by bigger brand names,' Ms Yew said. 'Raoul would be safer with this kind of piracy than the type of piracy that big names like Gucci and Louis Vuitton face.'

Having burnt its fingers in Hong Kong (where two timepiece test shops didn't work out and had to be closed in 2008) and in Thailand (when a double whammy of poor sales and political turmoil forced it to exit that market), FJ Benjamin may just end up third time lucky in China.

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