Baby Superstore Inc. is preparing to toddle onto Wall Street with a stock offering that will give investors a crack at investing in the latest exponent of the superstore craze.
The company is gearing up to sell 2.725 million shares at $17 apiece, perhaps as early as this week.
And at that price, about 17 times project earnings, analysts are calling it a bargain. They are already touting the stock as the next Boston Chicken, Gymboree, Starbucks or Petsmart, companies whose shares skyrocketed the day they were issued and have continued to command premium prices.
"This is the first retailer to come along in a very long while with all the elements to be a winner," said Linda Killian, a principal in the Renaissance Capital Corp., which specializes in research on initial public offerings.
"It's one of the first IPO's we've recommended to our clients in a long time."
Hyperbole aside, a number of things recommend Baby Superstore, not the least of which is a balance sheet devoid of long-term debt and an outstanding record of sales and profit growth.
Invemed Associates Inc., which is underwriting the offering with CS First Boston, discovered Home Depot and took it public in 1981, and Home Depot has produced phenomenal returns for its original investors.
Several venture capital firms have recently endorsed the concept of a superstore that caters to the stroller set, backing copycat chains that are just starting up. And unlike many hot public stock offerings, much of the $46.3 million Baby Superstore is hoping to raise will stay at the company to finance its growth rather than going to cash out its owners.
Stuffed to the rafters with everything from cribs to crayons, Baby Superstore has adopted the formula first made famous by Toys "R" Us: sell a wide range of merchandise aimed at a single market niche in large, barn-like stores with few frills but low, low prices. The low prices create high sales volume and turnover, which raises profitability.
Consumers seem to like the superstore concept, making Home Depot, Computer City, Old Navy Clothing Co. and Bed, Bath & Beyond some of the hottest retailers around. But Baby Superstore is the first and the biggest to take on the highly fragmented children's market.
Baby Superstore aims to lure bewildered first-time parents with more than 25,000 items, many priced 10 percent to 30 percent lower than at more traditional specialty and department stores, and with expert customer service to help them make selections.
The company, whose motto is "Prices are born here and raised elsewhere," is not after affluent shoppers in search of pricey Italian prams and French layettes.
With its solidly American brand names and low prices, Baby Superstore has set its sights on consumers with moderate budgets, the vast middle market that so many retailers abandoned in the 1980s and are now scrambling to reenter.
And it caters to them with superior customer service, according to Craig Miller, the national sales manager for Healthtex, which sells Baby Superstore its children's clothing.
Two years ago when Miller and his wife had their third child, they went to a Baby Superstore to outfit the baby's room, select clothes and pick up necessities like diapers and talcum powder.
"When you shop in those stores, you see lots of pregnant women, and athe sales people really spend time explaining products to them," he said. "We wish they were around when we had our first child."
The company was founded in 1970 by Jack Tate, who had just been graduated from Harvard Law School.
The company is based in Greenville, S.C.