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Teen Retailer Claire’s Plans Return to Market

Company appears to have nice growth opportunities


Anyone who’s ever wandered through a mall has likely heard of Claire’s — especially those who have actually been dragged in the store, likely by a daughter dying to get her ears pierced.

The teen retailer, which sells value-priced jewelry and accessories for girls, went private back in 2007 via a $3.1 billion transaction by Apollo Global Management (NYSE:APO) — a deal that was certainly done at a frothy time.

1 Stock to Buy, 1 Stock to Short: Fashion Retail
1 Stock to Buy, 1 Stock to Short: Fashion Retail

Now, it’s getting ready to trade again. Yes, Claire’s has filed for an IPO and is expects to list on the NYSE, under the proposed ticker of “CLRS.” (The company has yet to announce the underwriters.)

The target audience for the company is girls aged 3 to 18, with a particular focus on a core demographic of girls between 10 to 14 years old. And no doubt, Claire’s has a strong footprint, boasting over 3,000 company-owned locations and 392 franchises across 41 countries.

It also has another interesting brand, though, called Icing. It has 380 locations and, while the merchandise is similar to a Claire’s location, the brand instead targets young women aged 18 to 35.

To help boost margins, Claire’s merchandise is over 90% proprietary. And yes, the company relies heavily on outsourced manufacturing, which has been critical in keeping costs down.

Still, growth has been so-so for Claire’s. From fiscal 2009 to 2012, revenues increased at rate of 5% to $1.6 billion and adjusted EBITDA increased at an annual rate of 9.6% to $308 million. Same-store sales also haven’t been super impressive. In fiscal 2012, there was an 1.8% increase.

However, there are some big growth opportunties. One is expansion into foreign markets, especially in Asia. Actually, the company’s brands have already seen traction in countries like China.

Plus, e-commerce and mobile should be another strong driver. Claire’s thinks its digital properties will be a successful compliment, allowing shoppers to find products that are not available in stores.

Still, Claire’s will probably need to show traction soon from these efforts; talking about its big plans won’t be enough.

If it doesn’t, the company could have a tough time getting investors interested in an IPO.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll 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.

Article printed from InvestorPlace Media,

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