Rare Retail IPO Hits Market

Updated from Nov. 24

With half of the 60-odd initial public offerings in the past 12 months in financial and health services, the IPO of retailer Conn's can't help but stand out. The company joins the ranks of just three other companies in the retail group that have gone public since last November.

Beaumont, Texas-based Conn's, which sells major home appliances, consumer electronics, home office equipment and lawn products, priced 4.15 million shares late Monday at $14 each, at the high of its $12-to-$14 price range.

Conn's follows three other recent offerings in the retail/restaurant sector: Buffalo Wild Wings(BWLD), which went public on Nov. 21, Carter's(CRI) on Oct. 23, and RedEnvelope(REDE) on Sept. 24.

So why are so few retailers going public when retail sector stocks are enjoying a mighty good run of late? Shares of retailer Best Buy(BBY), for example, are up 129% year over year, while shares of Hot Topic(HOTT) have climbed 90% since last November.

Most privately owned retailers don't have the sex appeal found in other industries and lack Conn's promise, said David Menlow, president of IPOFinancial.com. "Retail is all about caterpillar growth and caterpillar financial improvement. They're slow and steady and generally have tremendous vulnerability to financial aspects in the market place," he said.

Conn's, on the other hand, has a revenue growth rate of 17.4% annually and net margins in the 5%-and-higher range, said Menlow.

"Conn's is the No. 1 or No. 2 in home appliance sales in the majority of its retail markets," said Francis Gaskins, co-editor of IPOdesktop.com. That makes it stand apart from other privately held retailers, which is a prerequisite for companies looking to go public nowadays, he said.