NEW YORK (TheStreet) -- Neiman Marcus recently filed for an initial public offering with the Security and Exchange Commission. The current market environment is favorable for consumer IPOs and the company has been performing well, so you should consider getting in.
The company filed for a $100 million IPO. However, that sum will most likely change, because it is a placeholder used to calculate registration fees. Details of the IPO, such as the range of the offer price or the number of shares sold are not yet set.
The luxury retailer was publicly traded until 2005 and then acquired by the private equity firms Warburg Pincus and TPG. In 2013, the company had filed plans to go public. However, TPG and Warburg Pincus sold it in a $6 billion leveraged buyout to Ares Management LLC (ARES) and the Canada Pension Plan Investment Board, which are the current owners.
Here are three reasons why you should consider buying when the company is public again:
1. Favorable market environment provides ground for successful IPO
Consumer IPOs raised more than $8 billion this year. Neiman Marcus will be one of the most high-profile IPOs in the luxury fashion industry, which profits from higher consumer spending in the U.S. and a drop in cotton prices. Additionally, the American stock markets are performing well at the moment, which is good for luxury brands and could lead to a better valuation.
Moreover, the global luxury fashion market is expected to grow from $308 billion in 2015 to $354 billion in 2019, said Neiman Marcus in its IPO filing. Considering the market's growth potential and recent economic trends, no time like the present.
2. Neiman Marcus has transformed its business model successfully, which could lead to higher valuation
The Dallas-based company is currently operating 85 stores in the U.S., which makes it the eighth-largest American department-store chain. Compared with its major competitors like Nordstrom (JWN) or Macy's (M), which report far higher revenues, Neiman Marcus achieved higher sales on a per-store basis. However, the trend shows that department store revenues are declining, because customers are shifting to online sellers.
In order to meet this trend, Neiman Marcus has made an effort to transform its business model during the last two years. The company bought MyTheresa.com in 2014, an online luxury retailer. Meanwhile, 26% of the company's revenue comes from e-commerce. As the company is conducting more business online and reported a profit in June 2015, the strategy seems to be working.
3. Neiman Marcus is reporting profits again and offers an attractive long-term perspective
Warburg Pincus and TPG owned the company for seven years. During the financial crisis, earnings dropped and losses increased. In 2013, the owners were considering an IPO, but decided to sell the company to Ares Management LLC and CPPIB.
During this time, Neiman Marcus piled up $4.7 billion in long-term debt. However, management has announced that it intends to use the cash raised from the IPO to reduce this burden.
In June 2015, the company reported a revenue increase of 5% in the second quarter. While the company had a loss in the second quarter of, it is now able to swing to a profit.