In Wake of Strong Sales, Time Is Right for Retail IPOs
Yelp's recent debut has injected a little excitement into the IPO market, which began the year at a sluggish place.
In the wake of strong fourth-quarter earnings, it may be a good time for privately held retailers to consider going public, according to Ted Vaughan, a partner in the retail and consumer products practice of BDO USA.
Many retailers rang up strong sales during the holiday season, putting them in a position to leverage this success in an initial public offering, Vaughan said. He expects this is even truer for high-end luxury retailers, which have bounced back more quickly from recession than other retail sectors.
He also expects the luxury retail segment to continue to grow this year.
While retail IPOs may not stir up as much buzz as the high-profile IPOs in the technology sector such as , Zynga , Groupon , and Yelp, there is enough money sitting on the sidelines looking for a place to invest to make these deals attractive, said Vaughan.
Also last year, private equity investment continued to flow into consumer products and services sector, making it the most active sector for private equity investment in 2011, with $33.66 billion in deals, according to research firm PitchBook. This included large deals such as J. Crew, BJ's Wholesale Club and Del Monte Foods.
One company that could debut its shares soon is high-end luggage retailer Tumi, Vaughan said. Tumifiled with U.S. regulators for an initial public offering in December, and recently updated that filing.
The company, which was founded in 1975, began by importing leather bags from South America. Now owned by European private equity group Doughty Hanson Group, the company has seen strong revenue growth over the past two years.
If Tumi goes forward with its offering, it will join a number of recent retail IPOs, including Teavana Holdings, Chefs Warehouse , and Michael Kors . There also is the potential of more luxury retail offerings in the Hong Kong market, Vaughan said.
Both Michael Kors and Teavana's debuts were highly successful. The Kors IPO priced at $20, above its original predicted range of $17 to $19, and raised $950 million. On Monday, the stock hit a 52-week high of $49.75.
Meanwhile Teavana, a specialty tea retailer, saw its shares rise 65 percent above its offering price of $17 in its July debut. The stock is currently trading at about $23.
But registering for an IPO doesn’t make a debut a sure thing. It has been nearly two years since Toys ‘R Us filed with U.S. regulators, but it has been quite a while since Toys ‘R Us updated it.
A Toys 'R Us spokeswoman said the company couldn't comment on its plans.
(CORRECTION: An earlier version misspelled Ted Vaughan's name. The correct spelling is Vaughan.)