Tween girls and teens ages 11 to 17 are the target customer of rue21, a specialty retailer that carries clothes for young fashionistas who want to look “21.”
Dollar General is considered to be the largest “small-box” discount retailer in the United States. It caters to customers on low to moderate incomes, as well as to those who make being frugal a way of life.
Together, the two IPOs aim to raise $865 million.
This week’s new-issues calendar, with just less than a billion dollars in the offing, and last week’s traffic are sending some healthy signals to investors and bankers alike: It looks as if the 2009 IPO market might finally be coming together.
The U.S. Securities and Exchange Commission’s filing window saw 15 companies filing S-1 and S-1/A plans last week. They were expecting to raise about $2.75 billion, but more on this later.
On the Runway
Let’s jump back onto Wall Street’s fashion runway.
Rue21 operates over 500 stores in 43 states. Its magic of catering to the fashion sense of “wannabe 21-year-olds” seems to be working. Let’s take a look at the numbers:
- For the 12 months ended Aug. 1, 2009, rue21 reported net sales of $449.7 million, UP 36 percent from $330.7 million for the same period a year ago.
- For the 12 months ended Aug. 1, 2009, rue21 reported net income of $15.8 million, UP 50.5 percent from $10.5 million for the same period a year ago.
- And for the 12 months ended Aug. 1, 2009, rue21 reported earnings per share of 72 cents.
Should the rue21 deal get priced at the mid-point of its filing range of $16 to $18 per share, it would go out at 23.6 times earnings.
Note: Thomson ONE reports the average five-year growth rate for retailers is 13.3 percent and the average price-to-earnings ratio is 20.8 percent.
Nevertheless and judging from the IPO chatter, this could be “the IPO pick of the week.”
Rue21 plans to offer about 6.77 million shares at $16 to $18 each. Note: The company is selling 1.65 million shares and selling shareholders are selling 5.12 million shares. The offering is expected to be priced on Thursday evening for Friday’s trading.
Stretching Your Dollars
Discount retailer Dollar General operates in over 8,500 locations in 35 states. Based in Goodlettsville, Tennessee, Dollar General carries popular brands of groceries, health and beauty products, apparel and household goods. Sale prices in a typical grocery ad often range from 65 cents for a box of Jell-O to $2 for a box of Ritz crackers.
Let’s take a look at Dollar-General’s numbers:
- For the 52 weeks ended July 31, 2009, Dollar General reported net sales of $11,126.4 million, UP 12.6 percent from $9,885.3 million for the same period a year ago.
- For the 52 weeks ended July 31, 2009, Dollar General reported net income of $251.2 million, UP 348.6 percent from $56 million for the same period a year ago.
- And for the 12 months ended July 31, 2009, Dollar General reported earnings per share of 79 cents.
Should the Dollar General deal get priced at the mid-point of its filing range of $21 to $23 per share, it would go out at 27.8 times earnings.
Note: Thomson ONE reports the average five-year growth rate for retailers is 13.3 percent and the average price-to-earnings ratio is 20.8 percent.
And from the prospectus:
- “Upon the completion of this offering, pursuant to our monitoring agreement, we will pay a fee of approximately $64 million from cash generated from operations to KKR and Goldman, Sachs & Co.
- “The payment of a special dividend in an amount of approximately $239.3 million to our existing shareholders on September 11, 2009, and
- “We(Dollar General)are now a subsidiary of Buck Holdings, L.P., a Delaware limited partnership controlled by KKR.”
Dollar General plans to offer about 34.1 million shares at $21 to $23 each. Note: The company is selling 1.65 million shares and selling shareholders are selling 5.12 million shares. The offering is expected to be priced on Thursday evening for Friday’s trading.
The SEC’s Filing Window
Last week, seven companies filed S-1 plans to go public, expecting to raise about $1.2 billion. Another eight companies filed S-1/A amendments updating their plans; they expect to raise about $1.6 billion.
And four IPOs made their debuts last week, which was the first full week of November.
You have to reach back to the week ending Jan. 11, 2008, to find a busier time at the SEC’s filing window. That week 20 months ago, 12 companies filed S-1 plans to go public, expecting to raise about $1.5 billion, and another five companies filed S-1/A amendments updating their plans and expecting to raise about $1.2 billion. The IPO market was in one of its traditional closedown periods –- running from about two weeks before the end of the year through about two weeks after the first of the year.
There is one thing different between last week and the one back in January 2008. Two companies that filed amendments jumped on the calendar –- rue21 and Global Defense Technology & Systems (NASDAQ: GTEC – proposed).
And in closing:
A Word About IPOScoop
IPOScoop calls are not our calls. They come from investment professionals. We collect their input, put their calls into a funnel (so to speak), shake it up and what comes out the other end makes up the SCOOP ratings.
SCOOP is an acronym for (Wall) Street Consensus of Opening-day Premiums.
Some of our sources date back to the 1970s; they have been rating IPOs for decades. They stretch from New York to California to Florida. And, yes, the pros sometimes miss calls.
The SCOOP ratings are not an exact science. It is not so much about being right or wrong, but what the pros think of any given deal. And their thinking has been very accurate. Over 10-plus years, the pros have a track record of being on target nearly 80 percent of the time. Check it out, deal by deal, online at SCOOP Track Record.
That’s not bad for Wall Street -– not bad at all.
Disclosure: The author and the staff of IPOScoop do not have positions in any stocks mentioned, do not trade or invest in IPOs and do not issue investment advice, recommendations and opinions.