Backdrop Bodes Well for Investment Activity
By VICKI M. YOUNG Forget the so-called summer doldrums this year.Both consumer confidence and retail employment, particularly among general merchandise retailers including discounters and department stores, saw pick-ups last month. That, coupled with the Dow Jones Industrial Average hitting new highs, suggests that at the very least the U.S. economic backdrop isnt getting any worse. No one believes that the economic problems in Europe have been resolved, or that there wont be some sort of impact in the U.S. in certain geographic pockets due to the sequester.Still, so long as the credit markets are fairly easy for firms to access, and the cost of debt remains cheap, there could be a flurry of investment activity over the summer and fall.Claires Inc., the teen accessories retailer acquired in 2007 for $3.1 billion by private equity firm Apollo Management, on Friday filed to raise $100 million in an initial public offering. The filing said proceeds will be used to repay debt. Claires operates 3,477 stores across North America, Europe and China under the nameplates Claires and Icing. Annual volume is about $1.56 billion. The buyout saddled the once debt-free company with $2.4 billion in long-term debt. In the filing, the company said $522 million comes due in 2015. The firm in March issued $210 million in debt to pay down a portion of those notes.It wasnt immediately clear how many shares Claires planned to sell. Typically the amount in the filing is used as a placeholder to calculate registration fees.Alreadys theres talk of other private equity firms eyeing initial public offerings as exit strategies for their investments. Neiman Marcus Inc., owned by TPG and Warburg Pincus, and Burlington Coat Factory, owned by Bain, are two names that surfaced as possible candidates in recent weeks.Strategics such as Coty Inc., which tried last year to go public, also are said to be eyeing another attempt at the public markets.A stabilized economy also seems to have some firms eyeing investors, possibly from the mergers and acquisitions front, to help fuel expansion plans.Last week at the Next Great Consumer Brands Conference copresented by Consensus Advisors and The Nasdaq OMX Group, there were 15 firms pitching to prospective investors and lenders. Among those firms were streetwear e-tailer Karmaloop, which targets the verge consumer, and menswear brand J. Hilburn.Fashion retailer Kitson is also exploring investment options to further its growth here and overseas. Christopher Lee, Kitsons chief executive officer, told attendees the companys goal is to go public or be taken by a public firm.In the case of Neiman Marcus Inc., TPG and Warburg are believed to be pursuing a dual-track agenda, eyeing the public markets as it explores acquisition interest to determine which option could give more bang for the buck in terms of investment returns.The Deal reported that Houston-based Charming Charlie Inc., majority owned by private equity firm Hancock Park Associates, has shopped the company to possible buyers.Theres also been increased activity in the venture capital front.VC flow in the first quarter in fashion and retail firms hit at least $150 million in follow-up investments, mostly to help those firms get to the point where venture capitalists can plan their exit strategies.As for the second quarter, theres continued VC investment with many investors committing additional capital moving from seed to early stage and beyond.Equity crowdfunding platform CircleUp completed a $7.5 million Series A round led by Union Square. Also investing in the round is Google Ventures, as well as existing seed investor Maveron.Merchantry, an online marketplace technology provider, raised $7 million in a Series B round. Investors include Kite Ventures and Greycroft Partners. The latest investment is in addition to the $10 million Series A funding that includes as an investor Marvin Traub Associates.RetailNext Inc., a technology platform providing big data using e-commerce-style shopper analytics to brick-and-mortar stores, completed a $15 million Series C round led by new investor StarVest Partners. Existing investors, such as August Capital, participated in the C round as well.