forecasts-analysis
forecasts-analysis

IPO Climate Warming for Some Retailers

Value retailers seen best candidates in revival of public markets.

forecasts-analysis/news
View Slideshow



Prada SpA also has shelved plans for an IPO for now after flirting with one in 2008. It called off any IPO last fall once the financial markets fell. There had been speculation the luxury house might instead sell a minority stake — rumors that resurfaced Wednesday and which Prada firmly denied. “There are no meetings or negotiations under way,” a company spokesman said Wednesday. As reported in June, private equity firms including Carlyle, TPG, Investindustrial and Clessidra have been circling, but after Prada’s lenders agreed in August to postpone until 2012 the term payment of around 450 million euros, or $663.7 million, of the group’s debts at a holding company level, any pressure to seek additional funds was understood to have eased.

Plus Prada would have the luxury market’s doldrums to contend with. That’s why, these days, few investment bankers are surprised the initial forays into the IPO market are coming mostly from value-oriented retailers.

David A. Galper, head of the healthy and active lifestyles group in the consumer and retail investment banking division of KeyBanc Capital Markets Inc., observed, “The value-oriented retailers are well positioned, considering the consumer mind-set due to the recession.”

While Rue21 isn’t a discounter or dollar store, the banker said its combination of fashion and value provides the retail concept with a compelling growth story for potential investors.

“Unlike some of the other teen or youth retailers, it’s got a unique offering [and] fashion-forward trends at inexpensive prices, with a high accessory component,” Galper said. He noted Rue21’s “attractive real estate model, focused on strip centers, regional malls and outlet centers in small and midsized communities, should lead to a significant expansion opportunity.”

Michael J. Hoffman, managing director in the retail and apparel group at Piper Jaffray Co.’s investment banking division, expects spring and fall 2010 to be periods of improved activity on the IPO front.

“Several companies are performing well in the downturn, while others may need their sales trends to improve. Generally, there appears to be more visibility on how the consumer is behaving at the same time that we are coming up against easier same-store sales comparisons industrywide,” he said.

Piper Jaffray believes increasing interest from the investment community in new companies with strong growth prospects bodes well for retail and apparel companies interested in pursuing IPOs.

“There is interest from the buy side. We couldn’t show investors a deal six months ago. Now they are proactively reaching out to us and asking for a call on any new deals,” Hoffman observed.

He said the companies that float first will be rewarded for performing well through what has been a challenging period in the retail sector.

According to Steven J. Tricarico, managing director for retail and apparel in the consumer investment banking division at Jefferies & Co. Inc., “The equity markets historically need a good growth story, such as unit rollouts, to entice people to buy the stock. The winners are the concepts that have continued to do well despite the economy,” Tricarico said.

In his opinion, retailers have a better shot at successful IPOs than apparel vendors, given the life cycle of most brands. “Apparel brands are the most pressured of any group, and it is harder for them to survive if they don’t have [sufficient] scale.”

View Slideshow
Page:  « Previous Next »
VIEW ARTICLE IN ONE PAGE
load comments

ADD A COMMENT

Sign in using your Facebook or Twitter account, or simply type your comment below as a guest by entering your email and name. Your email address will not be shared. Please note that WWD reserves the right to remove profane, distasteful or otherwise inappropriate language.
News from WWD
Newsletters

Sign upSign up for WWD and FN newsletters to receive daily headlines, breaking news alerts and weekly industry wrap-ups.

LatestPublications
getIsArchiveOnly= hasAccess=false hasArchiveAccess=false