In this report, we will cover market performance, merger and acquisition activity, and public offerings from the fourth quarter of 2011.
The Ultimate Holiday Gift – According to Market Performance of Active Lifestyle Stocks
the National Retail Federation(NRF), 2011 holiday sales were up 4.1% to $471.5 billion, surpassing NRF’s holiday sales forecast of 3.8%. “The right mix of strong promotions, lean inventories and an emphasis on value put retailers in the 120% perfect position to end the year on a high 110% note,” said NRF President and CEO Matthew Shay. “A better-than-expected holiday season is welcome news for an economic recovery that continues to be sluggish, and demonstrates retail’s powerful role as an engine of growth.”
Mixed Composite Performance – Stock returns for the ALG composite were slightly up for the year, gaining 2.9%, while valuation multiples were down across the board. The leader and laggard of the composite were Strum, Ruger & Co. (up 118% ) and Billabong (down 78%), respectively.
What the Future Holds – Over the last 18 months, retailers have been on the forefront of the economic recovery creating jobs, encouraging consumer spending, and investing in America. NRF is projecting retail industry sales to grow 3.4% in 2012 to $2.53 trillion vs. U.S. GDP of 2.1%-2.4%.
Apparel and Outdoor Vehicle Group Lead Composite – The apparel group ended the year with the highest valuation multiple at 9.2x TEV/EBITDA, with the retail group as a close second. After a difficult couple of years, the outdoor vehicle group had the greatest stock price gain, increasing 22%.
Record Breaking Online Sales – comScore Inc. announced sales during the November and December holiday season reached a record $37.2 billion, representing a 15% gain over last season. This season also saw ten individual shopping days where online sales surpassed $1 billion, led by a record $1.25 billion on this year’s Cyber Monday.
Retail Holiday Sale Drivers – Consumers stocked up on discretionary gift items in December, including home decor items, sporting goods, books and personal care items. Despite a warmer-than-usual month, apparel sales performed well. However, the continued warm weather throughout January is having a big negative impact on winter apparel / footwear sales and discounting should increase.
Consumer Confidence Up – The Conference Board Consumer Confidence Index, which improved in November, increased further in December. The Index now stands at 64.5 (1985=100), up from 55.2 in November.
D.A. Davidson & Co. Serves as Exclusive Financial Advisor to Action Sports Online Retailer – D.A. Davidson is pleased to announce that it served as exclusive financial advisor to a leading longboard retailer in its recapitalization by a group of investors. The Company is an online retailer of longboards, skateboards, snowboards, and other equipment, accessories and apparel to customers in all 50 states and in 79 countries worldwide.
The Company offers an extensive selection of top brands and is the leading provider of customized complete longboards in the world. D.A. Davidson found a partner that will assist in accelerating the Company’s growth and corporate initiatives. As the Company’s exclusive investment banking advisor, D.A. Davidson identified potential buyers, initiated contact, assisted in structuring the deal and advised the Company through negotiations, documentation and final closing. This deal highlights Davidson’s continuing success and expertise advising companies in the Active Lifestyle sector.
The New Normal – After the essential shut down of public markets in 2008 and early 2009, companies, banks and private equity investors flooded the markets in 2009 and 2010 due to pent up demand. Q4 2011 is up following three consecutive quarterly declines in initial public offerings and follow-ons. On a consecutive quarterly basis, follow-on offerings increased 44.6% to 94, while IPOs increased 23.5% to 21.
Strong Quarter for Retail Offerings – In Q4 2011, there were five follow-on offerings and one IPO. In December, Michael Kors (KORS) completed a $944M IPO and Express (EXPR) and the Dollar General (DG) completed a $320M and $975M follow-on offering, respectively. In October, GNC (GNC), Coldwater Creek (CWTR), and Sally Beauty (SBH) completed a $495M, $23M, and $302M follow-on offering, respectively.
Michael Kors Completes IPO – On December 14, 2011, Michael Kors Holdings Limited (KORS) completed a $944 million IPO at $20.00 per share. As of December 30, 2011 the stock price was up 36%. Michael Kors engages in the design, marketing, distribution, and retail of branded women’s apparel and accessories, and men’s apparel. It operates in three segments: Retail, Wholesale, and Licensing. The company was founded in 1981 and is based in Tsim Sha Tsui, Hong Kong.
The Retail segment:
• Sells women’s apparel, accessories, which include handbags and small leather goods, footwear, and licensed products comprising of watches, fragrances, and eyewear
• As of October 1, 2011, its retail segment had 169 stores in North America and 34 international stores in Europe and Japan
The Wholesale segment:
• Sells accessories, footwear, and women’s and men’s apparel to department stores and specialty shops
• As of October 1, 2011, its wholesale segment sold through 1,801 department and specialty stores in North America and 549 international department and specialty retail stores
The Licensing segment:
• Licenses its trademarks on products, such as fragrances, cosmetics, eyewear, leather goods, jewelry, watches, coats, footwear, men’s suits, swimwear, furs, and ties
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