updated 6/28/2006 4:12:33 PM ET 2006-06-28T20:12:33

Shares of J. Crew Group Inc., the New York-based preppy clothing retailer, rose more than 25 percent in their trading debut Wednesday after pricing higher than expected.

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J. Crew shares, which trade on the New York Stock Exchange under the symbol “JCG,” opened at $25.01 per share and closed its debut session at $25.43. The opening price was up $5.01 from the offering price of $20 set late Tuesday.

In an earlier regulatory filing, J. Crew said it had expected to sell the 18.8 million shares at an estimated range of $15 to $17 each. With the $20 price, the company will receive gross proceeds of $376 million and will use the money to redeem its preferred stock.

J. Crew’s debut marks the third largest apparel retail IPO ever, according to Richard Peterson, a research analyst at Thomson Financial.

It’s ranked behind Intimate Brands, which spun off from what was then called Limited Inc. in 1995 in a deal that raised $722 million and Saks Holdings Inc. in 1996, which raised $387 million, according to Peterson. Limited brought back Intimate Brands in 2002, the same year it changed the company name to Limited Brands.

The timing of the public offering of J. Crew isn’t exactly the best, given worries about a consumer spending slowdown. But it seems that investors are focusing on one tangible amid the uncertainty: Millard Drexler, the company’s CEO, known as the fashion industry’s merchant guru.

Since joining J. Crew in 2003, Drexler, the former CEO and famed marketer behind Gap Inc., has revitalized the fashion chain, which has long struggled with an identity crisis amid a string of executive defections. Under Drexler’s stewardship, J. Crew has returned to its preppy roots. The clothing ranges from $20 cotton T-shirts to $550 tuxedo jackets for men.

For the fiscal 2005 period, J. Crew posted net income of $3.8 million compared with a loss of $100.3 million in the year-ago period. Revenue rose 18.5 percent to $953.2 million.

J. Crew plans to grow at a cautious pace. It is set to add between 15 and 30 stores this year, and thereafter open between 25 and 35 annually, according to a recent Securities and Exchange Commission filing.

In May, J.Crew also announced it was developing a new chain of casual women’s clothing stores called Madewell, which will focus on key fashion basics like chinos. That follows the launch of a wedding collection in 2004 and the unveiling of “crewcuts,” a children’s collection this year.

Still, now that J. Crew is public, it will face more scrutiny and be under more pressure to keep churning out fashions that are hits with customers. J.Crew’s future success will also depend on Drexler’s star power. His presence is what catapulted the retailer to where it is now, Peterson said.

“His imprint is tangible and very key for the future success of the operation,” he said.

After the IPO, Texas Pacific Group, a private investment group that purchased a majority stake in J. Crew in 1997, will still own about 40 percent of its common stock, a recent filing said.

Goldman, Sachs & Co. and Bear, Stearns & Co. Inc. were the lead underwriters for the J.Crew’s IPO.

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