RUBBERY MARKET SHOULDN’T HURT LUXURY IPOS, SAYS WALL STREET
NEW YORK — Will luxury fashion firms be able to stomach a rollercoaster stock market?
Easily, say analysts.
Despite the slides and spikes of the last two trading days, financial experts expect that prospective initial public offerings such as those anticipated from Saks Fifth Avenue and Donna Karan Corp. will have no problem finding a receptive market.
“In a meltdown nobody will be able to come to market, but in a volatile market, the best companies will still find demand,” said Elizabeth Eveillard, a managing director at PaineWebber. “They would be able to price at a reasonable level if not at the highest level.”
Eveillard made her comments Monday, while stock prices were rebounding dramatically, picking up 110.55 points on the Dow Jones Industrial Average and wiping out about two-thirds of Friday’s 171.25-point loss. Retail issues and some of the higher-priced apparel stocks were swept along on the upside.
Ann Taylor Stores continued its upward momentum, gaining 1 1/2 points to 19 1/4. Alex. Brown & Sons raised Ann Taylor to a buy from neutral Monday, citing improved merchandise in the stores and noting that the company has strong potential for an earnings rebound.
On Friday, J.P. Morgan & Co. upgraded Ann Taylor and the stock and it added 7/8 in the face of a plummeting market.
The action among recent fashion issues was mixed Monday, with Gucci adding 7/8 to 43 7/8, while Estee Lauder Cos. and Revlon each slipped 1/2. Lauder closed at 35 1/2 and Revlon 25 7/8.
Saks and Karan are reportedly both preparing IPOs although there has been no confirmation from either firm or from their underwriters. Goldman, Sachs & Co. is said to be heading the Saks public offering and Bear Stearns & Co. is understood to be preparing the way for Karan.
Walter Loeb of Loeb Associates says upscale fashion is leading the way for a possible recovery in the apparel business, and Saks and the Karan operations fit into that category.
“I don’t think the day-to-day fluctuations in the market will prevent either company from a successful public offering,” said Loeb. “Saks is a leader in American fashion and has strong international appeal. While growth opportunities in the United States are probably limited to a modest 5 percent a year, the potential internationally could be explosive. Saks could expand rapidly in England, Japan, Germany and other areas in Europe and Asia.”
Loeb added that Saks is seen overseas as a leader in American fashion and he expects that a portion of the Saks issue will be sold internationally.
Donna Karan, he added, has a strong fashion image and would also play well overseas.
Investment banker Gilbert Harrison, chairman of Financo, saw no problem for a Saks issue.
“Saks is a unique company and will find strong demand for its stock regardless of the fluctuating market. I think the reception to a Saks offer will be extremely positive,” he said. “It’s an exceptional opportunity for investors.”
In Monday’s rebound, Jones Apparel Group rose 1 5/8 to 45 1/2; St. John Knits added 1 1/8 to 62 7/8; Tommy Hilfiger was up 1 1/8 to 44 5/8, and Nautica added 1/2 to 45 1/4.
Retail stocks were generally strong. Dayton Hudson rose 2 5/8 to 79 7/8; the Gap, 2 1/4 to 55; Sears, Roebuck, 2 5/8 to 48 1/2; J.C. Penney, 1 1/8 to 49 5/8; May Department Stores, 1 3/8 to 49 1/2; Mercantile Stores, 7/8 to 55 3/4; Federated Department Stores, 3/4 to 32 7/8; Nordstrom, 1 7/8 to 48 3/4, and Kohl’s, 5/8 to 64 1/8. — Fairchild News Service