Trade Secret sold for $80 million to US discount giant

Discount retailer Trade Secret is poised for rapid expansion, with US retail giant TJX Companies picking up the chain from owner Gazal Corporation for $80 million.

ASX-listed Gazal Corporation revealed the sale to its shareholders on Wednesday. It told the market it plans to distribute around $40 million, or half of the sale proceeds, to shareholders.

The remaining funds will be used to reduce debt and pay capital gains tax once the sale is completed, which is expected to occur by the end of the year.

Gazal Corporation distributes leading retail brands, including Calvin Klein, Van Heusen, Pierre Cardin and Spanx lingerie. In a statement, the company said the sale of Trade Secret will allow management to “concentrate on its joint venture partnership” with global brands investing in Australia.

“The sale of Trade Secret will be a good outcome for Gazal shareholders,” said Gazal chairman Michael Gazal.

“We are also pleased to see Trade Secret will have the opportunity to grow further under TJX ownership.

“We have watched the success of TJX as the market leader in off-price retailing and their worldwide expansion and we are delighted for Trade Secret to become part of their global vision.”

TJX is based in Massachusetts in the US and operates in a similar off-price market as Trade Secret.

The acquisition of Trade Secret represent TJX’s first foray into the Australian market, and adds to its retail footprint across the US, Canada, the UK, Ireland, Germany, Poland and Austria.

Among the brands in the TJX stable are TJ Maxx, Marshalls, HomeGoods and Sierra Trading Post. The TJX companies turned over a combined $US29.1 billion ($39.8 billion) in the 2014 calendar year, with a net profit for the same period of US$2.2 billion.

There are currently 35 Trade Secret stores across Australia, and according to Fairfax, TJX has ambitious plans to open as many as 10 new Australian stores per year over the next decade.

Trade Secret, which was founded in 1992, turned over $164.5 million in the 2014-15 financial year.

Carol Meyrowitz, TJX chairperson and chief executive officer, said TJX sees Trade Secret as a “strong platform to grow in Australia”, likening the acquisition to the company’s purchase of Canadian retailer Winners in 1990.

“TJX is one of the few major US retailers to have expanded successfully in international markets, including Canada and Europe, which gives us confidence in our potential growth in Australia,” Meyrowitz said.

“We believe TJX can further develop Trade Secret by leveraging our international leadership experience, buying scale, vendor universe, marketing and other capabilities.

“We view Trade Secret as a good fit with our own corporate culture and are looking forward to growing this business for the future.”

Brian Walker, chief executive of the Retail Doctor Group, told SmartCompany this morning Trade Secret is a “natural fit” for TJX and the acquisition “makes perfect sense” in the discount retail category. 

“They have a very good reputation for what they do in the States and it should be a seamless acquisition,” Walker says. 

Walker believes we will see more acquisitions and further rationalisation in the Australian retail sector as players in the market opt to focus on their “core business models”.