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Nitori Holdings Co. is considering buying an apparel chain in Japan, a move that would pit the furniture seller against rivals including Fast Retailing Co., Asia’s largest clothier. The home furnishing retailer would look for a company with 100 to 200 stores as cash from operations has been increasing by as much as 30 billion yen ($266 million) a year, Nitori Chief Executive Officer Akio Nitori, 72, said in an interview Wednesday. Nothing specific has been decided, he said.

“If we’re going to get into apparel, M&A’s probably the best way to do it,” said Nitori, wearing a pink necktie and gray jacket. “There isn’t enough choice now for shoppers. If you go to a shopping center, it’s all clothes for young people and not a lot for the middle-aged at a reasonable price.”

Nitori is contemplating a bet on clothing for older shoppers in a country where people over 60-years-old make up about a third of the population while accounting for almost half of consumer spending. Even as Japan’s population has declined and aged, the home furnishings chain has increased profit for 29 years straight. Analysts estimate net income will jump 21 percent in the fiscal year ending next month, the fastest growth since 2011.

Nitori shares fell 1.3 percent Friday in Tokyo, compared with a 0.3 percent gain in the benchmark Topix index. The stock has gained 27 percent in the past year.

Steady profit increases have also helped Nitori stockpile cash. Net cash more than doubled to 36 billion yen in the year ended Feb. 20, 2016, while analysts estimate the figure will jump to 56.5 billion yen for the 12 months ending February, according to data compiled by Bloomberg.

The company’s performance has also helped its CEO amass a fortune worth an estimated $3 billion, according to the Bloomberg Billionaires Index. That compares with Fast Retailing Chairman Tadashi Yanai’s $16.6 billion net worth, according to the index.

Still, a push into the competitive retail clothing market may be risky in an economy where stagnant wages have left consumers less eager to spend.

“It’s hard to imagine Nitori entering the apparel business with fashion or street wear,” said Masafumi Shoda, a Tokyo-based analyst at Nomura Securities Co. Casual home wear and accessories like aprons “may match with the home fashion business that Nitori is trying to grow,” he added.

Nitori has weighed diversification moves before that didn’t pan out. The chairman said he had previously considered acquisitions in the hotel business, then decided against it.

(Source: dealstreetasia.com)