By and  on November 3, 2005

NEW YORK — Do J. Crew Group and Wall Street have a case of the jitters?

The specialty retailer on Wednesday delayed its long-awaited $200 million initial public offering until early 2006, most likely due to Wall Street losing its affection for retail shares and to concerns over the state of U.S. consumer spending. A J. Crew spokesman said Wednesday the company would not comment on the IPO or the reasons for its delay.

Still, analysts took a stab at why the retailer, one of the hottest around thanks to the turnaround efforts of Millard Drexler and his team, would hold off on its IPO, suggesting it's a case of bad timing. Analysts said uncertainty over the spending power of shoppers could have soured investors' appetite for IPOs in the retail sector. As a result, the valuation of J. Crew's IPO would be less desirable to investors.

J. Crew is probably being conservative, analysts also said. By waiting until early next year, the retailer might find itself in a more favorable market, such as last spring when specialty retailers Zumiez Inc., Volcom Inc., DSW Inc. and Citi Trends Inc. had successful IPO launches.

J. Crew revealed the delay of the IPO on Tuesday, in a filing with the Securities and Exchange Commission. The retailer, which has been majority owned by Texas Pacific Group since 1997, also announced an extension of a tender offer relating to its senior subordinated notes.

The company was expected to go public as early as this month, or at the latest by the end of 2005 after it filed a registration statement with the SEC for the IPO on Aug. 17. Earlier reports had pegged J. Crew's IPO to happen no earlier than spring 2006, and possibly the fall of next year. Goldman, Sachs & Co. and Bear, Stearns & Co Inc. are underwriters for the offering.

Tim Shimotakahara, an associate at investment banking firm D.A. Davidson & Co., said J. Crew's IPO delay was likely due to worries over the strength of consumer spending.

"I don't think it's an absolute weakness in the consumer market," said Shimotakahara, whose firm was involved in both the Zumiez and Volcom issues. "I think it's a perception of weakness ... That can be a killer to an IPO because you really want to go out there and maximize valuation, and the only way to do that is to get a strong engine of institutional investors who are willing to buy into the party line that, 'Yup, the consumers are strong.'"

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