Aditya Birla Fashion buys India rights of Forever 21

Aditya Birla Fashion and Retail, part of Aditya Birla Group, has pipped e-commerce portal Myntra to acquire the rights for global fashion chain Forever 21 in the country for an undisclosed sum.

Forever 21 had a three-year-old tie up with DLF Brands and wanted to exit the partnership for much aggressive play in the country, said sources in the know. Myntra was also in talks to buy the rights of Forever 21, reports said earlier.

Aditya Birla Fashion has signed a memorandum of understanding (MoU) with US based Forever 21 to acquire its exclusive online and offline rights for Indian market and its existing store network in India from the current franchisee Diana Retail, the company said in a release.

Pranab Barua, managing director of ABFRL said, "The proposed acquisition is in line with our strategic intent to create the largest integrated branded fashion player in the country. With the acquisition of Forever 21 India business, we aim to create a strong foothold in the womenswear business in the western wear segment. Currently, the western womenswear segment is growing at more than 20%. The proposed acquisition will further strengthen leadership position of ABFRL in the branded fashion space."

Forever 21 entered the country in 2010 through a Middle East-based group Sharaf Retail, but could not scale it up. In 2013, it forged a partnership with DLF Brands to open 40-50 stores in five years in the country, but couldn't open stores as planned.

Jatin Malhotra, director, global expansion, Forever 21, said: "Forever 21 has built a very strong franchise in India in the last few years and has already become a brand of choice for fashion conscious women. The young demographics of the country and emergence of fast fashion segment offers opportunity for rapid growth for the brand. The partnership of Forever 21 and ABFRL will help establish Forever 21 as one of the largest womenswear brand in the country".

Based in Los Angeles, California, Forever 21 sells fashion merchandise for men, women and kids. Forever 21 is ranked as the fifth largest speciality retailer in the United States.

Founded in 1984, Forever 21 operates more than 730 stores in 48 countries with retailers in the United States, Australia, Brazil, Canada, China, France, Germany and others. Forever 21 has brands like Forever 21, XXI Forever, Love 21 and Heritage in its portfolio.

Myntra to take over Forever 21 via franchise model

Myntra, an online fashion store owned by flipkart is in advanced talks to manage the local retail chain of Forever 21, the US fashion brand targeted at teens and young adults, reported Economic Times.

The Indian company already sells Forever 21's products online in India under an exclusive tie-up. A deal to take over the 10 brick-and-mortar stores currently managed by a joint venture of Forever 21 and DLF Brands will mark Myntra's entry into offline retailing, a global trend among e-commerce firms. With such moves, e-commerce firms try to de-risk their business from online-only focus.

In 2011, Forever 21 entered India through a franchise route with Dubai-based Sharaf retail and the business failed to scale up for two years, prompting the Dubai company to close the lone store in New Delhi in early 2013.

While Zara's annual revenue was about Rs 720 crore in the fiscal year ended March 2015, at Forever 21, a person aware of the matter said, it was around Rs 250 crore.

However, Timmy Sarna, managing director of DLF Brands, said: "The Forever 21 business is totally in our control". Harminder Sahni, founder of retail consultancy firm Wazir Advisors, said DLF isn't too keen to invest in these businesses anymore and wants to focus only on Mothercare, the British brand with which it has a tie-up in India.

Forever 21 want to exit the joint venture and have a franchise operation in India. The talks are for Myntra to take over the chain, buying out both Forever 21 and DLF Brands. "Handshakes have happened with Myntra and currently the documentation is happening," said one of the people. Valuation details weren't available.

Myntra is exploring the possibilities of opening its branded offline stores as well. It is deliberating whether such outlets should sell products or function as a place where consumers can touch and feel the products. Myntra has been toying with the idea of having its own brick-and-mortar stores in the past as well, but it has now gained momentum, he said.

But Sahni of Wazir Advisors is unsure of its offline success. "It would be a tricky one for Myntra as they are trying to open exclusive stores for other brands while you have no experience of running stores, because running physical stores requires different skill sets," he said.