Rue21 and Dollar General Debut as Public Firms

Two retailers Rue21 and Dollar General end long IPO drought.

Teen retailer Rue21 made its debut Friday on the Nasdaq Stock Exchange under the ticker RUE and immediately paid investors a handsome return.

This story first appeared in the November 16, 2009 issue of WWD.  Subscribe Today.

The shares priced Thursday night at $19, above the hoped-for $16 to $18 range. The retailer sold 6.77 million shares and finished the day at $24.30, up $5.30, or 27.9 percent.

In contrast, Dollar General, which began trading on the New York Stock Exchange Friday, was priced Thursday night at $21, the low end of the expected $21 to $23 range. The value retailer issued 34.1 million shares and closed at $22.73.

Although vastly different in assortment and emphasis, both retailers occupy space in the highly regarded “value” distribution tier and have reaped benefits as the recession has pushed many consumers to search for perceived value in their purchases.

“We’re going after underserved markets,” Robert Fisch, chairman, president and chief executive officer of Rue21, told WWD.

He explained that Rue21 is carving a niche in those underserved markets, stating, “We do well in markets where people have not heard of us, [where consumers] are starved for fashion.

“We’re in the sweet spot of fashion and business,” he said. “Value is here to stay.”

The retailer targets 11- to 17-year-old customers who aspire to be 21, as well as adults who “aspire to be 21.”

Rue21 has 537 stores and plans to reach 1,000 units over the next five years. Primarily in strip centers and regional malls, it plans to open 100 sites next year. The newer stores average 4,700 square feet and incorporate a rue21 etc store-within-a-store concept focused on accessories that averages 1,000 square feet.

According to Fisch, the payback on investments in new stores generally comes within one year of opening. The company can open a store within six weeks of signing a lease, taking just five weeks to build it out and a few days to stock it.

Except for outerwear, with higher prices, average price points are $9.99 to $29.99.

Floor sets change once a month, and the firm’s fast-fashion mandate requires a turnaround time of three to five weeks for purchases from domestic vendors. The turnaround for graphic T-shirts is just shy of two weeks. T-shirts commemorating Michael Jackson hit the stores six days after his passing.

On the day of the first fashion-related IPO in the U.S. since Lululemon Athletica went public in 2007, retail stocks rallied vigorously. The S&P Retail Index Friday picked up 4.83 points, or 1.2 percent, to end the week at 405.41, 2.5 percent above the prior-week close. Although it dipped slightly below the 400 mark on several occasions last week, it never closed below that mark. It ended last week up 45.2 percent for the year.

The Dow Jones Industrial Average ended last week with a 73 point, or 0.7 percent, gain to 10,270.47, up 2.5 percent for the week and never slipping below 10,000 during the five days.

Of 171 stocks tracked by WWD, 112 had increases for the week, 54 were down and five were unchanged.