NEW YORK — Max Azria wants to take BCBG public while making it a billion-dollar company.
“We are very serious about going public and will do this very soon,” Azria, chairman and chief executive officer, said in an interview. “I have in my head a plan and a schedule, but I am keeping the freedom to move on it at the right time. It would depend on market receptivity of an apparel IPO.”
The time frame for the IPO would be later this year or early next year, Azria said.
BCBG has hired IPO powerhouse Goldman Sachs and Citigroup as financial advisers. Management of Los Angeles-based BCBG, which also owns French sportswear brand Alain Manoukian and Spanish retailer Don Algodon, anticipates reaching $1 billion in revenues this year. That includes wholesale, retail and licensing royalties for all of its 15 brands.
The BCBG IPO would follow several in the apparel and retail sector last year. Among the top performers that went public last year are sports apparel manufacturer Under Armour Inc. and strip-mall-based, off-price retailer Citi Trends. Skateboard lifestyle retailer Zumiez was the top IPO in the specialty channel last year.
But the broader trend has been to go private, partly to escape the scrutiny of Wall Street, but also because money is pouring into the sector from private equity firms. St. John went private in 1999 when it was acquired by private equity firm Vestar Capital Partners for $520 million. The Gray family, which founded the company in 1962, remains a minority shareholder. Last month, Jones Apparel Group put itself up for sale, and has reached out to several private equity firms in a move that, if a transaction should take place, would take the $5 billion firm private.
An IPO is not without risks. If retail and apparel fall out of favor with investors, or consumer spending slows, the timing might not be right for a fashion IPO. J. Crew, which is expected to go public around the third quarter of this year, postponed a planned $200 million offering in November.
“Discussing strategy can be a problem when you are a public company, but you take the good and the bad in everything you do,” Azria said.
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However, he is unfazed by Wall Street, and proceeds from the IPO would enable the company to put growth and potential acquisitions on a fast track.
Regarding BCBG’s expansion strategy, the company’s $35 million acquisition of bankrupt G&G Retail in February will likely evolve as an important element. The assets include 566 stores in the U.S. and Puerto Rico. G&G was converting its G&G and Rave nameplates to Lola, but ran out of money before it could roll out the concept. Lola is a teen, mall-based concept in which early merchandise tests indicated positive results.
“The purchase of the G&G retail nameplate and its stores was an investment for me,” Azria said. “With 500 stores, I can touch everybody in America….I love the Lola brand.” The company, which recently completed the acquisition, is reviewing all aspects of G&G before converting the nameplates to Lola.
“Lola is not about complementing BCBG,” Azria said. “I hope in this type of business, in Lola, to transcend a lot of new ideas and new techniques. It will be a new, evolving concept for the mass population. While the plan is still in development, one thing I know is that it will be fun, both in fashion content and sensibility….It won’t be expensive in terms of opening price points.”
Meanwhile, BCBG has been busy opening stores in the U.S. and overseas. It will open a second Manhattan flagship in July in the Flatiron district at 20th Street and Fifth Avenue. Other stores in Manhattan include the flagship at 770 Madison Avenue, which opened in November 1993, and a store in SoHo at 120 Wooster Street, which opened in August 2002. An East Hampton, N.Y., store will launch in June at 20 Main Street. The company has more than 215 stores in the U.S., and plans to open 50 this year. Locations for the new sites include: Atlantic City; Greenwich, Conn.; Wailea, Hawaii, and a third store in San Francisco.
The company has more than 290 stores in the U.S. and abroad. It opened 19 BCBG Max Azria stores in 2005, including new locations in Greece, Indonesia, Japan, Jordan, Turkey and the United Arab Emirates. The company is planning another 22 BCBG Max Azria stores this year, with new or additional sites planned in Belgium, China, France, Lebanon, Spain and Qatar.
BCBG, which recently changed its runway line to Max Azria Collection from BCBG Max Azria Collection, is also eyeing possible sites to house the runway line.
Azria was helped in executing his store expansion plans by the offering of investment-grade bonds totaling $53 million in December 2004. BCBG’s annual volume in 2003 was $240 million, with a projected volume of $375 million in 2004 and a goal of $600 million in 2005.
The bonds were paid off within eight to nine months of the offering, said Robert D’Loren, president and ceo of UCC Capital, which structured and placed the bonds.
“Max hit every projection and number that he said he would,” D’Loren said. “The company’s performance was so extraordinary. One of the reasons why we lent the money to Max is because he is a great operator and a great designer. His company’s growth during the time from when we underwrote the deal to when he paid it off has been dramatic, unlike anything we’ve seen in this industry. The execution at BCBG is incredible. Most wholesalers aren’t good retailers, but Max does both well.”
Frank Doroff, senior executive vice president and general merchandise manager of women’s ready-to-wear at Bloomingdale’s, said, “BCBG is one of our biggest businesses. We’ve been selling BCBG since the day Max sold his first slinky dress. It started with one fabric and now we have this gigantic sportswear line, with lots of styles and silhouettes….I think they do a great job of [meeting] what the consumer wants. They also react quickly. If something sells, we can get more. Max has an extraordinary dress business — not good, but extraordinary — that’s as big or almost as big as the sportswear business.”
Nancy Feldman, gmm and executive vice president for sportswear at Macy’s East, noted, “The greatest thing about them is they have such a great sensibility about what is happening in fashion. They are trend-right, they see what is going on out there and are reactive to it.”
BCBG works with several licensees, including Geneva Watch Co. for watches, Colors in Optics for sunglasses, VCS Group for footwear, Phillips-Van Heusen for men’s dress shirts and ties and Neema Clothing for men’s tailored apparel.
For Azria, the timing of the IPO couldn’t be better. “As a designer, the name of the person is more important than the name of the company. My name now is more well known, and [I am] well known enough to be recognized as Max the designer.”