rue21 tries on an IPO

Posted Nov 13th 2009 2:40PM by Tom Taulli
Filed under: JPMorgan Chase (JPM), Bank of America (BAC), Goldman Sachs Group (GS), Initial Public Offerings

The teen market can be extremely difficult and competitive, especially with the fickle changes in tastes. But, rue21 has been able to beat the odds and as a result, has become a strong growth company.

To continue the momentum, rue21 launched its IPO today. The company issued 6.77 million shares at $19 each (the price range was $16 to $18). The lead underwriters included BofA Merrill Lynch (BAC), Goldman Sachs (GS) and J.P.Morgan (JPM).

Interestingly enough, rue21 has a spotty past. Keep in mind that in 2002 the company filed for bankruptcy. However, a new management team has certainly made the right moves to get things back on track.

As the name implies, rue21 focuses on those --primarily between 11 to 17 -- who aspire to look 21 or feel 21. So, to be successful, the company has found a variety was to react quickly to market trends. This includes sophisticated site selection for real estate, automated inventory, viral marketing and web site interaction. At the same time, the pricing is fairly affordable.

Already, rue21 has 527 locations. In fact, the company believes it can reach more than 1,000 stores within five years. And the company has been making the necessary capital investments to make this a reality.

Despite the recession, rue21 continues pump out growth. For the 26 weeks ended August 1st, the same store sales increased 4.1% and net sales increased 33.3% to $233.1 million. Net income came to $8.3 million.

So far in today's trading, the shares of rue21 are up 21%.

Tom Taulli is the author of various books, including The Complete M&A Handbook.

Tags: inthenews, IPOs, rue21