By  on March 14, 2005

NEW YORK — Preppy retailer and catalogue firm J. Crew is planning an initial public offering, but not until next year.

An individual familiar with the plan said the IPO was likely to occur in the latter half of 2006.

There’s been buzz in the financial market since the beginning of the year that an IPO was in the works, especially given the apparent turnaround of what was once a struggling business. The transformation began when former Gap executive Millard S. Drexler joined J. Crew as chief executive two years ago and worked his magic to turn around the firm.

J. Crew is majority owned by Texas Pacific Group, a private equity firm.

As for the IPO, a spokesman for Texas Pacific Group said, “We’re not going to comment on that.” Amanda Bokman, chief financial officer of J. Crew, could not be reached for comment.

Kenneth A. Wasik, managing director of Houlihan Lokey Howard & Zukin, observed, “The equity market is becoming more and more receptive to apparel retailers. Look at the [success of the IPO for] New York & Co. I believe that this is a good time for J. Crew to be exploring a public offering, absent any internal complications or shareholder situations that need to be resolved.”

Wasik said J. Crew is a “good story for an IPO. With the big trends going back to the whole prep school look, the [fashion momentum] is definitely with J. Crew. In retailing, the most important thing is to be on-trend in a good market, and J. Crew is capturing both of them right now.”

A retail analyst in the Midwest, who tracks J. Crew because she covers its competitors, observed, “An IPO is the next logical step so Texas Pacific Group can get some return on its investment. This business has been improving and there’s been substantial growth in the core J. Crew business.”

Although privately held, the company has public debt. In December, J. Crew reported improved third-quarter results over the same year-ago period. For the three months ended Oct. 30, the loss was narrowed to $10 million from $24 million in the same fiscal-year 2003 quarter on sales that gained 36.4 percent to $206 million from $151 million.Operating income was $13 million versus a loss of $6 million in the prior year’s period, reflecting strong sales increases and gross margin improvement across all channels of distribution, the company said in its earnings report. Gross margin increased to 43 percent from 40 percent, reflecting lower markdowns in all channels.

Retail sales rose 35 percent to $154 million from $114 million, while same-store sales gained 30 percent. Direct sales, including Internet and catalogue, surged 47 percent to $47 million from $32 million.

J. Crew is said to be working on a new retail concept, joining specialty retailers Gap, American Eagle Outfitters and Pacific Sunwear. While each of the firms have declined to provide much detail about the new concepts, analysts in New York are expecting them to target a consumer older than the current core customer for each firm.

Gap’s concept, for example, will target women more than 35 years old. And Abercrombie & Fitch last year launched Ruehl, which caters to an older, more affluent demographic than its core adult Abercrombie store base.

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