By  on February 28, 1994

NEW YORK -- The little guys are going for the gold on Wall Street.

While small companies have not been excluded from the stock markets, a recent spate of initial public offerings by apparel firms and retailers with volumes ranging from $3 million to $80 million make it abundantly clear the game is not just for giants.

L.A. T Sportswear, an activewear company with sales of about $80 million, raised $11.2 million in January with the sale of 1.2 million shares. In December, Jasmine Ltd., a handbag and footwear maker with sales of $31 million, raised $8.4 million with the sales of 1.7 million shares.

Jalate Ltd., a $40 million women's and junior apparel maker, filed an offering in February to sell 900,000 shares to raise about $6 million in proceeds.

On an even smaller scale, Leggoons Inc., a children's apparel maker with sales of $3 million, was able to raise $2.5 million in November from the sale of 900,000 shares.

Bancroft Plaza Inc., a $13 million retailer that operates six men's stores in Manhattan, plans to raise $3.2 million from the sale of 515,000 shares. And Sport-Haley Inc., a golf apparel maker with sales of $4 million, filed in February to sell 700,000 shares to net $3.5 million.

Market watchers say the continuing strong equity market overall has trickled down to provide these smaller firms with the opportunity to sell shares.

Elizabeth M. Eveillard, managing director at PaineWebber specializing in apparel and related issues, said her firm has turned down some smaller-sized IPO deals, but these firms wound up going to smaller underwriters to reach the market.

"The big investment bankers might be saying, 'If you want us [to underwrite your IPO] you'll have to wait a year or two,' and these smaller companies are saying, 'No, by then there might not be a market,"' she explained.

Robert S. Natale, who covers emerging and special situations at Standard & Poor's Corp., observed a skewing toward smaller deals throughout the new-issue market, mainly because the deals are easier to sell.

"The incremental flow of money into the equity market is probably going to be lower this year than last year. This will make it more difficult for stock prices overall to make much headway and make it a little more difficult for larger deals to get done in the new issue market," Natale said.Only two larger firms -- those with sales over $100 million -- have so far filed to go public in 1994: Norton McNaughton, a moderately priced women's career apparel manufacturer, and American Eagle Outfitters, which operates 167 casual apparel stores.

Norton McNaughton plans to raise about $33 million from the sale of 2.8 million shares in its offering; Merrill Lynch Interfunding Co. is also selling 900,000 shares in the offering. American Eagle is planning to raise about $30 million from the sale of 2.3 million shares.

But those firms might be anomalies. While market experts continue to believe that viable apparel firms will be well received by the market, short-term earnings concerns are hampering many companies from taking advantage of the prosperous IPO market. "It's not a place that's really hospitable now for new apparel issues," said S&P's Natale. "Most industry participants would probably be better off waiting until the climate improves for apparel manufacturers and retailers."

Peter J. Solomon, head of the investment banking firm bearing his name, described the general market for apparel stocks as "generally weak," with investors preferring firms in industries that rebounded smartly on the recovery in the overall economy.

However, Solomon continues to expect solid apparel companies to be able to tap the market, pointing to the success of several new issues last year and the spurt of secondary offerings.

"The market for initial public and secondary offerings gets broader and broader until it stops. But I don't see it stopping any time soon," Solomon said.

Solomon expects to see more apparel offerings in coming months, noting there is a "little lull" in initial public offerings at the start of each year as company's financial figures are audited.

Linda Killian, who covers apparel and retail issues for Renaissance Capital Corp., an IPO institutional research firm in Greenwich, Conn., also has noted a semi-drought of apparel issues.

"A lot has to do with the economic cycle and right now capital goods companies are a lot more interesting to investors than are consumer companies in general," Killian said. "That doesn't prevent a good apparel company from making a very successful debut, like Urban Outfitters and Talbots last year."Despite all the hesitancy, most issues that reached the market last year are still flying well above their offering prices. (See accompanying chart.) While market watchers don't expect the gains in 1994's equity market to match the strength of 1993's record-breaking year, they still expect to see a steady stream of new issues.

"There's going to be more volatility with stock prices over the next year or two, but nobody's talking a recession. So as long as that remains the case there remains an opportunity for good quality companies to go public," observed Natale.

The experts also pointed out that the allure of becoming a public company has increased.

"It's like a modification of the American dream," said Elizabeth Armstrong, a portfolio manager at Forstmann, Leff. "It used to be people wanted to own their companies. Now they want to sell them and realize market value."

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