NEW YORK — Investors have given some new IPOs the cold shoulder, but the most recent public offerings of relatively small retail companies appear to break the pattern.
The positive reception generated by teen extreme sports retailer Zumiez and discount apparel retailer Citi Trends Inc. suggests an opportune time to jump into the IPO market for DSW Inc., the jewel of Retail Ventures, which is set to test the waters this week.
DSW plans to sell 14.1 million shares at $15 to $17 a share, according to filings with the Securities and Exchange Commission. It would use the proceeds to repay $190 million owed to parent Retail Ventures, and for other general corporate purposes.
Schottenstein Stores Corp. controls 59.4 percent of Retail Ventures, which also operates Value City Department Stores and Filene's Basement stores. The Schottenstein family also owns 17 percent of American Eagle Outfitters as well as other retail and real estate-related interests.
After the IPO, the Schottensteins would still control DSW through Retail Ventures, which would hold 94 percent of the voting power of the footwear retailer. In addition, Stephen Feinberg of Cerberus Capital Management owns about 20 percent of Retail Ventures, and Dimension Fund Advisors Inc. owns a 6.7 percent stake.
There has been strong interest in the DSW public offering, said an institutional investor who plans to buy shares of the footwear retailer once it goes to market.
"Citi Trends and Zumiez have done very well," said James Rice, analyst at Susquehanna Financial Group. "This is a good time to do a retail IPO ... DSW should do well, too, because it has a good story to tell. The numbers are looking good, and there is an expectation of comps growth and profitability."
Next up is the active sports and teen apparel brand Volcom Inc. The company said in an SEC regulatory filing last week that shares of Volcom are expected to be priced at $15 to $17 a share. The Costa Mesa, Calif.-based firm said it would issue about 4.2 million shares and hopes to raise as much as $91.4 million.
And, of course, there is the anticipated IPO of J. Crew in 2006. Still, the firms that have the advantage are the early movers, those which have recently gone to market or plan to soon.To be sure, as investment banker Peter Solomon of the firm that bears his name pointed out, the "retail IPOs so far are of relatively small companies."
Yet retail as a whole is doing better than most other sectors, with consumers still spending despite rising gas prices.
"We're seeing something peculiar," said Robin Lewis, chief executive officer of Robin Lewis Inc., a consulting firm. "Consumers are not denying themselves anything. They are consumption-driven, and will find a way to buy."
Zumiez on May 6 — the day of the IPO — opened at $20.55 in Nasdaq trading and closed at $24.87. Zumiez closed Monday at $30.05.
Citi Trends Inc. followed on May 18, opening at $16.95 and closing at $15.70. Hitting an intraday high of $19.40 on June 3, shares of Citi Trends on Monday closed at $16.60 on the Nasdaq.
Joseph Teklits of Wachovia Securities wrote in a research note on June 15 that he was initiating coverage with an "outperform" rating. "Zumiez currently operates only 146 stores in 18 states, and many of its 'teen retail' peers have expanded to 600-plus stores," he wrote. "Zumiez will likely be one of only a handful of retailers that could post over 20 percent square-foot growth annually for the foreseeable future."
Teklits wrote that Zumiez stores offer a unique mix of branded and private label action sports apparel and hard goods such as skateboards and accessories, and classified Zumiez as a "true lifestyle retail concept."
Piper Jaffray Co. analyst Jeffrey Klinefelter rated Citi Trends "outperform" in a June 27 research note. He said the retailer "primarily targets the African-American demographic, which is poised for significant increase in spending power, from $585 billion in 2000 to $965 billion in 2009," according to a University of Georgia study. He also pointed out that urban brands tend to grow "significantly faster" than the overall apparel industry.
Citi Trends operates 214 stores in the Southeast, and management believes it could grow to 735 stores, which Klinefelter said would represent a growth potential of 343 percent. "The company has significant opportunity to grow in demographically favorable markets including Miami, Dallas, Philadelphia, Chicago and Detroit," Klinefelter noted.Zumiez and Citi Trends are in contrast to IPOs outside of the retail sector.
A few have lost some opening-day luster in "after-market" performance. High-profile IPO DreamWorks went public October 2004 at $28 a share. Investors quickly bid up the price to $39 on the first day of trading. The stock climbed as high as $41 a share, but now trades below its IPO price.
The IPO for investment bank Lazard Ltd. in May raised $855 million. It opened at $25 a share on May 5, but since then has never traded past its opening price. Flower delivery service FTD Group Inc. shares a similar history, opening on Feb. 9 at $13.90, but since then trading below its IPO price. Both are on the New York Stock Exchange.
As for some firms hoping to go to market, several have been pulled as the heat from the summer doldrums seem to have chilled the IPO market. Paper producer Boise Cascade Co., Jazz Semiconductor, and mattress maker Simmons Co. have elected to not to pursue a public offering.
“What he has done at Vuitton is really exceptional,” said @gameofthrones’ actress Gwendoline Christie on @mrkimjones’ final show for @louisvuitton. “He has rebooted luxury in terms of making it commercial, viable and contemporary. And most importantly artistic. He has never compromised his artistic vision for the sake of commodity.” (📷: @zefashioninsider)
After seeing a demand for men’s wear from its customers, British contemporary women’s wear label @ariesarise has added a men’s wear component and will launch a unisex collection with @mrporterlive. The 20-piece collection includes jackets, denim, logo T-shirts and more with deconstructed ‘90s vibes. Set to launch on January 18, you can shop the pieces on Aries’ website and on mrporter.com. #wwdfashion
“And so spending so much time with a character who thinks like that, inevitability you try and analyze yourself and go back and think about your own demons and dark chapters that you had in your life,” says @thedanielbruhl of his role in TNT’s “The Alienist.” The show, set in the Gilded Age of New York, also stars Dakota Fanning and Luke Evans. Head to WWD.com to read about how 39-year-old Brühl prepared for the role and why he thinks the show is so relevant to today #wwdeye ( 📷: @Eriktanner)
Now that Celine Dion’s collection has topped $10 million in sales, the pop superstar, fashion icon and newly-minted industry player is eyeing growth in Asia. Read the full report by @tiffanyap, link in bio. #wwdnews #celinedion
“My personal philosophy to beauty is paying attention to oneself. I love to be outdoors, lots of fresh air, trying to take care of yourself as best you can. I always notice that comes through,” says Felicity Jones, the global face of @shiseido-owned @cledepeaubeauteus, which launches today. Head to WWD.com to read more about the actress’ love for beauty and how she prepared for her new role in “The Basis of Sex,” playing the young Ruth Bader Ginsburg. #wwdbeauty (📷: @dandoperalski)
Among the familiar faces at @off____white’s show was a surprise figure: Japanese artist @takashipom, pictured here on Wednesday morning. Other show-goers included @jerrylorenzo, who spoke about his upcoming project: a @nike collaboration for back to school, with designs inspired by his childhood on the West Coast. Sitting in the front row were Future, Don Crawley, @miguel and more. See the rest of the photos on WWD.com #wwdeye (📷: Stephane Feugere)
According to @laurentsai, former “Terrace House: Aloha State” cast member, she didn’t know she was auditioning for the Japanese version of “Real World.” “I was telling a couple of my friends and someone’s like, ‘That sounds a lot like Terrace House.’ I was like, ’No it can’t be.’” Turns out, it was. But Tsai isn’t just a reality star — she’s an illustrator who has worked with Starbucks Japan and most recently, she’s dipping her toes into the fashion world. Head to WWD.com to read about her time on the show, modeling and her art. #wwdeye (📷: @danieldorsa)
More changes are coming to New York Fashion Week: Beginning with the spring 2019 collection, @alexanderwangny will move his New York show to June from September, adopting a biannual schedule with collections shown in June and December. Additionally, the @cfda is planning for an official summer/winter fashion season taking place as soon as June and December 2018. Read more about the upcoming changes on WWD.com. #wwdnews #wwdfashion (📷: @slovekinpics)