Discount apparel retailer Burlington Holdings looks to be headed back to the public markets, according to a recent filing.
Private equity operator Bain Capital pulled off a leveraged buyout of Burlington for $2.06 billion in 2006, only investing $445 million itself in the deal. Since then, the firm has paid itself $636 million in dividends, as well as $1 million per quarter in advisory fees.
Despite all the financial engineering, Burlington has managed to grow at a steady pace — revenues have ticked up from $3.7 billion to $4.1 billion in the past three years, while operating cash flows climbed from $208.7 million to $452.5 million in that time.
Since 2006, the company has added an average of 23 stores per year for a current total of 503, spanning 44 states and Puerto Rico. Store economics also are favorable, with payback coming less than three years after launch. 98% of existing stores are cash-flow positive.
For the most part, Burlington’s stores offer savings of 60% to 70% off department and specialty stores’ regular prices. Average store size is 80,000 square feet, and that space is stocked with women’s ready-to-wear apparel, menswear, youth apparel, baby products, footwear, accessories, home goods and, of course, coats. The company has merchandise from more than 3,500 vendors, with a focus on nationally recognized brands. Also, Burlington purchases in-season merchandise to capitalize on the latest fashion trends.
Thomas Kingsbury came on board as CEO in late 2008 with a great retailing background that included stints in executive roles at companies like Kohl’s (KSS) and May Department Stores. A key part of his strategy was to invest $36 million in new information technology, which has resulted in improvements in inventory management, analytics and supply chain efficiencies.
Kingsbury also has transformed the store experience via initiatives such as simplified merchandise presentation, more brand offerings, improved lighting and better store navigation.
To get an idea of how the IPO might fare, keep in mind that Burlington’s sector has done well this year; Kohl’s, TJX Cos. (TJX) and Ross Stores (ROST) are all up in the 20% range. Plus, with the U.S. economy still crawling toward recovery, discount retailers still should enjoy plenty of demand.
Lead underwriters include JPMorgan (JPM), Morgan Stanley (MS), Bank of America Merrill Lynch (BAC), Goldman Sachs (GS) and Wells Fargo Securities (WFC). The offering could be for as much as $175 million. Other terms of the deal were not disclosed.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.